Malaysia set to become preferred location for semiconductor industry


Kenanga Research believes that the semiconductor industry will stay resilient with the global sales continuing to show healthy momentum.

KUALA LUMPUR: Malaysia is poised to become the preferred location for international companies looking to expand their semiconductor businesses, especially in the wafer fabrication (fab) industry.


IGSS Ventures founder and group chief executive officer Raj Kumar said the country has a "multinational companies appeal” that is attractive to international businesses looking to carve a foothold here.


"By this, I mean factors like ready access to a pool of highly skilled manpower for research and development, English-speaking population, business-friendly laws, well-developed infrastructure including excellent transportation connectivity, and integrated telecommunication systems,” he told Bernama.


IGSS Ventures is a technology holding company focused on developing and commercialising mainstream and niche semiconductor technologies.


Additionally, Raj said the industry’s management of intellectual property packaged with growing capabilities in engineering design activities and supporting industries had enhanced the country’s value as the preferred location for semiconductors.


He said for wafer fabrication, the industry needed a cleanroom, a critical component in the production of wafer fab, which requires 100 times purity.


"In the industry, the production of semiconductor wafers are done in spaces that are much more sanitised than operating theatres. This level of high-tech wafer fab production and level of sophistication, which forms the heart of the semiconductor supply chain, is today more prominent in Asia.


"In fact, only Singapore and Malaysia currently have wafer fab infrastructure and capabilities in Southeast Asia,” said Raj, who has been involved in the industry for about 30 years.


Malaysia is growing to be a part of what Raj considers as an elite club of six nations in the world that offers attractive semiconductor ecosystem - from a cost and infrastructure perspective.


Backed by growing know-how to effectively support a semiconductor industry, the nation had the potential to play a bigger role in the semiconductor industry than it does today, especially in specific capabilities and sectors with multiple advantages that can be better optimised and commercialised, he said.


Globally, the semiconductor industry needs viable alternative locations to build their new fabs or relocate their existing niche fabs due mainly to increasing operational costs.


"China is attracting several fabs owned by overseas entities and supported by significant investments by the state or central government in building wafer fabs in the country...it has grown in its appeal,” he said.


Malaysia, on the other hand, has the makings of being a strategic location for companies that are looking for destinations as part of their "dual-source supply” or relocation strategies.


"As a dual supply site, Japanese and Western integrated device manufacturers consider Malaysia’s competitive advantages to be its socio-economic factors and familiarity with the Malaysian culture, coupled by regulatory efforts to protect intellectual properties,” Raj said, adding that this combination had given Malaysia an edge in Asia.


If Malaysia develops an intensive national (sectoral) marketing strategy and further enhance or implements supporting incentives for semiconductor operators, it can very likely attract five to 10 other wafer fabs in the next 10-15 years, besides strengthening the demand for existing fabs in the country.


"The potential is there for Malaysia to be akin to South Korea in branding itself as an ideal ‘fab relocation’ destination in chosen semiconductor fields in the next 15 years,” he added.


Following two consecutive years of double-digit sales growth, the global semiconductor industry is expected to see a sharp slowdown in sales growth in 2019.


The World Semiconductor Trade Statistics has projected global semiconductor sales to expand by only 2.6 per cent in 2019 and this represents a marked difference compared with 21.6 per cent and 13.7 per cent sales growth recorded in 2017 and 2018, respectively.


Raj said local semiconductor companies should penetrate the niche areas of wafer fabs including wafer foundries, semiconductor OSAT (outsourced semiconductor assembly and test) industries or design services for growth and expansion.


These sectors, he said, could help to differentiate the local players from the much bigger global competitors.


"These sectors are already being undertaken in the country and it provides a strong base for new industry players to further tap into them, thus strengthening the country’s position as a dual-source destination,” he added. - Bernama



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