KUALA LUMPUR: Malaysia is doing its best to reduce the backlog of orders in the semiconductor industry due to the disruption of operations in the past 12 months, following the imposition of lockdowns to curb the COVID-19 pandemic.
The lockdowns saw many factories in Malaysia and other countries suspending their operations or operating in limited capacities.
The shortages -- mainly involving integrated circuits (ICs) components -- were also compounded by developments around the world over time that had restricted supply flows.
This includes fire and drought incidents involving fabrication factories in Japan, the United States and Taiwan, as well as the Suez Canal incident in March this year when container ship Ever Given was horizontally wedged and obstructed the traffic flow at one of the busiest trade routes in the world for almost a week.
Critical to improve capacity
Malaysia Semiconductor Industry Association (MSIA) president Datuk Seri Wong Siew Hai said as Malaysia plays a significant role in the global semiconductor supply chain, it is critical to expand the sector’s capacity in light of the severe global shortage of ICs.
He noted that the government has allowed factories to resume operations at 100 per cent capacity after 80 per cent of the employees have been fully vaccinated, which helped to ease some of the pressure in meeting customers’ orders.
"We thank the government for understanding that electric and electronics (E&E) is one of the essential service sectors, and with the latest announcement, we are working around the clock to ship as many products as possible.
"We also see more companies getting their employees vaccinated, and based on our survey, some companies are investing more and hiring more workers to boost their productivity as orders are quite high," he told Bernama.
According to the survey, 16 companies said they would invest over RM4 billion in capital expenditure over the next two years, expand their built-up area by 3.4 million square feet, and create about 4,600 new jobs.
Meanwhile, industry research revealed that global demand for ICs is projected to increase by 20 per cent this year and a further 10 per cent in 2022.
Shortage trend to remain in 2022
Meanwhile, Malaysian Pacific Industries Bhd (MPI) group managing director Manuel Zarauza said the company expects the semiconductor shortage trend to persist going into 2022, as strong demand continues to put pressure on global supply chains.
He noted that the chip industry continues to be hampered by the fallout from the COVID-19 pandemic.
He said according to the Semiconductor Industry Association, companies in the semiconductor industry recorded an average growth of 8.3 per cent quarter-on-quarter in the second quarter of this year (Q2 2021), and 29.2 per cent year-on-year (y-o-y).
"The high double digit increase y-o-y is because there was a big slump in Q2 2020 due to the COVID-19 pandemic," he noted.
As for MPI, he said despite external challenges, the company foresees strong performance in the quarters ahead, driven by demand following continuous growth across segments such as automotive, 5G network deployment, data centres and Internet of Things.
"The MPI is not facing a major chip shortage right now, as our suppliers have prioritised MPI due to our long-standing association of over 20 years.
"Having said that, if the chip shortage continues over a long period of time, the entire industry will be impacted," he added.
Malaysia is one of the top ten countries in the semiconductor industry, accounting for about seven per cent of the global semiconductor trade and about 13 per cent of the global capacity in terms of back-end assembly test and packaging.
The Global Outsourced Semiconductor Assembly and Test market has been projected to grow from US$32.5 billion (US$1=RM4.15) in 2020 to US$45.2 billion by 2026, at a compound annual growth rate of over 5.7 per cent.
Malaysia's semiconductor industry involves many sectors, including electronic manufacturing services, automation, precision and engineering, as well as medical devices which uses electronics and global positioning system.
The industry contributes 6.8 per cent to the national gross domestic product (GDP) with over 575,000 employees. - Bernama