In the electrifying modern tech world, semiconductors are central to powering everything from your sleek smartphone to futuristic electric cars. The hot commodity remains the subject of trade wars and is a key economic contributor for most major world economies. Malaysia is making waves in this high-stakes game, evolving from a humble manufacturing hub to a trailblazer in semiconductor innovation. We aren’t just playing catch-up; we are setting the pace.

Semiconductor industry in Malaysia – then and now

Our semiconductor story started in the 1970s with a focus on manufacturing and assembly. Back in the day, the country leveraged its cost-effective labour, sand and silica supply, and prime location to lure in multinational giants. Fast forward a few decades, and Malaysia has upped its game, diving headfirst into advanced integrated circuit (IC) design and research and development (R&D). Malaysia now commands nearly seven per cent of the global semiconductor market with exports hitting a whopping MYR593 billion (US$138 billion) in 2022 and expected to reach MYR1.2 trillion (US$280 billion) by 2030. This tech-savvy transformation, fuelled by hefty investments in infrastructure and technology, has kept Malaysia ahead of the curve.  States such as Penang have played a key role in driving innovation and attracting investment in the semiconductor ecosystem, contributing to Malaysia’s growing global presence in this industry.

One of Malaysia’s secret weapons is its location within the ASEAN region, offering seamless access to major markets across Asia and beyond. Add to that a top-notch infrastructure that ensures smooth production and distribution, and you have got a recipe for success. Just recently, Prime Minister Dato’ Seri Anwar Ibrahim announced a MYR25 billion (US$5.8 billion) allocation in fiscal support to operationalise the three-phase National Semiconductor Strategy (NSS) with targeted incentives.

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At the same time, the New Industrial Masterplan (NIMP) 2030, unveiled in 2023, shows Malaysia’s commitment to bolstering the nation’s manufacturing sector by 6.5 per cent annually. It is expected to contribute a whopping MYR587.5 billion (US$137 billion) to Malayia’s GDP by 2023. That is some serious commitment to staying ahead in the tech race.

The Prime Minister further affirmed this during his speech at SEMICON SEA KL 2024: “Today, I offer our nation as the most neutral and non-aligned location for semiconductor production to help build a more secure and resilient global semiconductor supply chain.”

Thriving local semiconductor ecosystem

Malaysia’s supply chain is rock-solid, thanks to a strong pool of local equipment makers. Now, an emerging cluster of companies specialising in design, AI, and IC design is making waves with global ambitions. This dynamic ecosystem is not just boosting Malaysia’s competitiveness; it is positioning the country as a future leader in the semiconductor industry.

Via the various Malaysian ministries and agencies, including Malaysia Digital Economy Corporation (MDEC) and Malaysia Digital (MD) status companies such as Infinecs, D3 Innovation, MaiStorage and Oppstar, have been pivotal in this transformation, pushing the envelope and setting new standards.

Infinecs Systems

Infinecs Systems is a fast-rising player in Malaysia’s semiconductor industry, focusing on IC/SoC design, embedded system design, and prototyping. Since its inception in 2016, they have supported Fortune Global 500 companies in developing cutting-edge technologies, including sub-7 nm finFET technology, which powers applications across edge computing, automotive, cloud infrastructure, and communications. Infinecs invests heavily in R&D and provides high-income opportunities for local engineers. “We employ 100 employees, with 88 per cent being local Malaysians. Of these, 70 per cent earn more than MYR5,000 (US$1,167), and 90 per cent of our high-income employees are skilled local workers,” said Kalai Selvan, CEO of Infinecs Systems.

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D3 Innovation

D3 Innovation prides itself on being an original design and manufacturing (ODM) player, providing solutions for clients looking to create or upgrade their own Internet of Things (IoT)-enabled products in the industrial, medical, and consumer markets. Its IoT technology enhances smart manufacturing (Industry 4.0), optimises supply chain management through real-time tracking, and helps monitor power consumption for Environmental, Social, and Governance (ESG) compliance. KK Tan, Managing Director, supports this by stating, “We optimise supply chains by providing real-time tracking in the storage system, monitoring building power consumption to achieve ESG and more.”

MaiStorage

MaiStorage, a startup wholly owned by Phison Electronics Corporation, is focused on driving innovation in NAND storage technology. The company designs, manufactures, and delivers advanced NAND controller ICs and storage modules, addressing the high demands of data centres, AI, and the automotive industry. With a mission to lead in NAND innovation, MaiStorage has already set its sights on becoming a successful IPO, serving as a model for industry growth and R&D investment in Malaysia. They recognise that AI is the trend but is often misunderstood; hence, “We have introduced a low-cost on-premise AI solution, aiDAPTIV, to break the entry barrier for AI newcomers,” said KK Yap, GM of  MaiStorage.

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Emerging innovators in the scene

Numerous other contributors who play equally vital roles also drive the ecosystem’s success. One standout example is Oppstar, a pioneer in the IC design industry. As the first publicly listed Malaysian IC design company, Oppstar benchmarks itself against global IC design service providers, showcasing Malaysia’s growing capabilities and ambitions in the semiconductor space.

Malaysia’s semiconductor industry’s growth is bolstered by the contributions of local and international firms, research institutions, higher education establishments, and government agencies working in tandem. Through various policies and incentives, government agencies, including the NIMP 2030, play a crucial role in fostering an environment conducive to growth and innovation.

A collaborative environment is essential for sustaining Malaysia’s competitiveness in the semiconductor industry. Penang, often called the Silicon Valley of the East, is home to several key players that drive this collaborative spirit.

Here are some key players in Penang’s semiconductor ecosystem:

• MITI (Ministry of International Trade and Industry): This key ministry promotes trade, industry, and investment in Malaysia. 
• MIDA (Malaysia Investment Development Authority): MIDA provides comprehensive support to investors, including project development, incentive applications, and regulatory compliance.
• Invest Penang: A one-stop investment promotion state agency that provides comprehensive information on Penang’s investment opportunities and facilitates business setup.
• Digital Penang: State agency accelerating digital transformation in Penang while supporting the Penang2030 vision of a family-focused, green, and smart state.
• CREST (Collaborative Research in Engineering, Science and Technology): Connects industry, academia, and government to boost collaborative R&D and talent development. 
• NCIA (Northern Corridor Implementation Authority): NCIA drives the socioeconomic development of the Northern Corridor Economic Region (NCER)
• PSDC (Penang Skills Development Centre): Talent development institution in Penang, providing industry-relevant training and upskilling programmes

The way forward

With regional competitors stepping up, Malaysia must stay sharp and agile. The key? Doubling down on R&D, supercharging talent development, and beefing up infrastructure. Forming stronger alliances with global R&D powerhouses and spotlighting emerging Malaysian tech stars will also be crucial.

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Together with MD status companies like Infinecs Systems, D3 Innovation, MaiStorage, Oppstar, and the MD national strategic initiative, MDEC is transforming the country’s digital landscape by leveraging technology and innovation to drive sustainable economic growth.

As Malaysia continues to build on its strengths and expand its influence, it is set to shore up the global semiconductor arena with MDEC providing strategic intervention via MD status incentives & the various MD programmes, including market access programmes to broaden their international reach, grants such as Malaysia Digital Export Grant (MDXG) and the MD Founders Center of Excellence (FOX) programme. The FOX programme is dedicated to cultivating high-potential startups by providing interventions in six key pillars – policy, business expansion, investments, amplification, talent and mentoring.

MDEC offers various programmes for Malaysia Digital status companies. Apply for Malaysia Digital status here.

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This article is sponsored by Malaysia Digital Economy Corporation (MDEC).

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