Malaysia moves up value chain with first semiconductor park

KUALA LUMPUR – Malaysia formally opened its first semiconductor integrated chip (IC) design hub on Tuesday, the latest step in its attempt to move up the sector’s value chain.

Southeast Asia’s third largest economy is currently the biggest supplier of semiconductors to the U.S. — meeting about 20% of its demand — but wants to become more prominent in innovation and design.

Rafizi Ramli, Malaysia’s economy minister, said in his opening address at the Malaysia Semiconductor IC Design Park in Selangor state that the country must seize this “once in a generation” chance, given the current global geopolitical tensions, to become a semiconductor champion.

“Today is the first step for us to get everyone in Malaysia to reimagine where we want to be,” Ramli said. “The difference is the understanding that great plans do not become a success if we wait for everything to be perfect to fall into place. It has to happen in parallel with the perspective we have known all along that we have to move up the value chain.”

Spread over some 60,000 square feet, the park is located at the Puchong Financial Corporate Centre, some 25 kilometers from the capital, Kuala Lumpur.

It can accommodate more than 400 chip design engineers from both local and joint venture companies. Anchor tenants include Taiwan’s Phison subsidiary Maistorage, French-Malaysian partnership Weeroc, Taiwanese-Malaysian joint venture AppAsia, China’s ChipsBank and local players like Skyechip and Sensorem Tek.

Among key ecosystem partners are BlueChip VC, ARM Holdings, Cadence Design Systems, Synopsys, Siemens EDA, Keysight and Shenzhen Semiconductor Association that will provide essential support and resources. 

All the space has been rented but some of the tenants have yet to move in. 

The Puchong Financial Corporate Centre park was unveiled in April during the KL20 Summit 2024 to support Malaysia’s ambition to become a global leader in semiconductors. Official policy is a national repositioning from Made in Malaysia to Made by Malaysia.

The following month the government announced an allocation of at least 25 billion ringgit ($5.33 billion) over the next ten years under the National Semiconductor Strategy. 

While Penang is known as Malaysia’s main semiconductor hub, Selangor is pushing to lead in the semiconductor IC design space, Amirudin Shari, the state’s chief minister, said at Tuesday’s opening ceremony. 

Selangor’s state government is already working on another semiconductor park in Cyberjaya, about 30km from Kuala Lumpur, and hopes to open up to five such centers in the next five years.

Malaysia’s exports to the U.S. increased 12.1% year on year in the first six months of 2024. Most were in the electronics sector with growth driven by the soaring global demand for chips.

Hafidzi Razali, a director at the Malaysia office of Consulum, a British business management consultancy, said the park could help attract more chip design projects to Malaysia.

“This initiative not only trains local talent to meet high-value industry demands, but also provides them with competitive pay and opportunities, encouraging them to stay in Malaysia,” he said.

But Geoffrey Williams, an economics professor at Malaysia University of Science and Technology, said it would take much more than design parks to see Malaysia move up the electronics value chain because intellectual property rights will remain with foreign investors and domestic human resources are still underdeveloped. 

“While it sounds like a good idea, the role of the government in pushing it rather than the organic evolution through market forces is a limitation,” he said. “There is also a danger that this will be a distraction from the structural problems of low incomes for most Malaysians who will not benefit from these investments.”