On Wednesday, Malaysian officials revealed the country—whose semiconductor industry contributes around 40% of its total exports—will partner with Arm Holdings to move up to the higher-end of the market.

Malaysia already plays an important role in the chip supply chain as a hub for testing, packaging, and assembly. The country commands about 13% of the global market for those backend processes.

The country unveiled a National Semiconductor Strategy in May 2024 that pledged to attract at least 500 billion Malaysian ringgit ($113 billion) in investment, train 60,000 local engineers, and establish at least 10 local semiconductor firms in design and advanced packaging. 

In a Wednesday TV interview with Bloomberg, Malaysia’s economic minster Rafizi Ramli unveiled a “first of its kind” deal with Arm Holdings, suggesting it was the first time the British semiconductor firm is working with a national goverment rather than a private company. The Malaysian government will pay Arm $250 million over the next decade for seven of the company’s high-end chip blueprints.

Malaysia hopes the deal will help foster 10 local chip companies with annual revenue between $1.5 billion to $2 billion each. 

Arm generates revenue from developing and licensing its intellectual property for processors used in devices like smartphones and servers. The company licenses its instruction sets, which partners then customize to make chips for their own purposes. 

It’s not yet clear whether Arm will receive royalties for products designed in collaboration with Malaysian companies using its IP. Arm declined to comment.  

Malaysia’s chip ambitions

In recent years, Anwar has touted Malaysia’s ‘non-aligned’ status and pushed the country as a home for semiconductor companies amidst growing global geopolitical uncertainty.

Possessing the IP behind chip designs could help Malaysia build a supply chain that doesn’t rely on either the U.S. or China.

Malaysia launched an IC design park, the largest in the region, in Selangor last year.

In January, Rafizi told Fortune that Malaysia’s recent surge in data center investments was part of a broader plan to develop the country’s chip ecosystem. 

“Three to four years down the line, these data centers will go into a replenishment phase. They may need to upgrade their chips,” Rafizi told Fortune at the time. The hope, he added, was that those chips will eventually be made by Malaysia. 

Update Mar. 6, 2025: This piece has been updated with Arm Holding’s response.