Semiconductor industry has good chance of attracting investments

Malaysia Semiconductor Industry Association President, Datuk Seri Wong Siew Hai.

WHEN the Covid-19 pandemic hit the global chip supply chain, the Malaysian semiconductor ecosystem came out looking good.

One wouldn’t have expected that as many factories in Malaysia had also closed due to outbreaks.

But according to an official from one of the biggest global semiconductor companies, it was a positive surprise that materials and products from Malaysia’s semiconductor industry were still available.

Soon Kuek, general manager at Lam Research, says that this was one of the reasons why Lam Research, a major wafer fabrication equipment company, set up its manufacturing plant in Batu Kawan, Penang in 2021.

The initial investment of that was to the tune of RM1bil.

“Malaysia’s importance in the ecosystem was definitely highlighted during the pandemic.

“What attracted us to come here was the high availability of semiconductor-related materials and products along with the country’s business-friendly policies,” Soon says.

Soon was speaking at this week’s Invest Malaysia’s panel session on the country’s positioning in the global semiconductor landscape.

Other industry bigwigs who spoke at the panel included Frontken Corp Bhd chairman and chief executive officer, Nicholas Ng Wai Pin, Datuk Sri Wong Siew Hai, the president of the Malaysia Semiconductor Industry Association (MSIA), and Infineon Technologies Kulim Sdn Bhd vice-president and managing director Ng Kok Tiong.

Lam Research is listed on Nasdaq with a market capitalisation of US$58bil (RM263bil).

Interestingly, it was Lam Research which also inspired a homegrown semiconductor company to grow into a big name.

Frontken today services the world’s largest wafer fab, namely, Taiwan Semiconductor Manufacturing Co (TSMC).

Through its 84.6%-owned subsidiary in Taiwan, Ares Green Technology Corp Ltd, Frontken provides the chip giant with high-precision cleaning and maintenance services.

Frontken today has a market capitalisation of RM4.3bil.

“Lam Research helped us a lot when we first started in Singapore, about 20 years ago. At that time chip technology was quite new and it was not known whether there would be a demand for it.

“Together with Lam Research we took a plunge into the industry and set up a new cleaning facility.

“Fortunately, it turned out to be very successful,” says Nicholas.

Another interesting topic that was brought up in the discussions was that Malaysia ought to seriously attract investments into new wafer fabrications plants.

MSIA’s Wong says, “Over the next 10 to 15 years, the total investments that will be made by semiconductor companies in the United States is about RM350bil while in Europe, the amount is about RM140bil.

“In Asia, investments announced by chip companies came up to about RM200bil. Assuming that even one quarter of these investments are realised, the world will still be seeing roughly RM150bil to RM200bil worth of investments in the chip industry.

“If Malaysia can attract five fabrication (fabs) plants out of the lot, it will be fantastic,” he says.

Wong added that Malaysia has accumulated vast experience in the outsourced semiconductor assembly and test or OSAT segment of the industry over the years.

Hence, the country should look to expand its knowhow by attracting chip fabs into its market.

“We need to attract fabs to Malaysia so that we can complete and strengthen our supply chain.

“Additionally, this move will also enlarge the skillset of our talents,” he says.

The panelists agreed with the suggestion, noting that the country stands a good chance to attract wafer fabs not only because of the availability of good infrastructure but also due to the neutral stance the country takes in geopolitical events, like in the case of the US-China tensions.

However, it should be noted that Malaysia had in the past attempted to build its own wafer fabrication plants but with little success.

Despite billions of ringgit having been invested, the two government-owned wafer fabs did not provide any return on investment and had to be sold to third parties at cheap prices compared to what was invested.

That said, attracting foreign parties to invest and bring in the required technology and human resources needed, does have its merits.

One such example is Infineon Technologies, which is a niche wafer fab player that began operations in Malaysia as far back as the 1970s.

Seventeen years ago, it built its first wafer fab line in Malaysia.

Infineon Technologies’ Ng says Infineon has since invested another �2bil (RM9bil) for its third wafer fab module in Malaysia.

The group is well-known for manufacturing wide-bandgap semiconductors that are used in the automotive industry.

“Malaysia has the biggest assembly and testing facility for Infineon and in Kulim, Kedah we have the biggest 200 millimetre fab in Malaysia.

“The trend that we are seeing now is for cars to have more than one computerised system.

“Hence it is not just an increase in the volume of cars manufactured, but in the number of chips per car.

“This is what’s driving demand in the automotive sector now,” he says.

Meanwhile, MSIA’s Wong states that the geopolitical tensions between the United States and China is in Malaysia’s favour.

“Many countries are looking for an alternative site to expand their operations other than the United States and China. We stand a good chance to attract fabs in this sense,” he says.

However, one big challenge for the local semiconductor industry lies in the shortage of talent. Aside from the ongoing brain drain, places like Penang are seeing demand for engineers outstripping supply.

Wong suggests that foreign students in the right fields in Malaysia be allowed to work in the local semiconductor industry. He had previously told StarBizWeek that Malaysia needs to employ talent from other countries to resolve the shortage of engineers in the industry.

“This shortage is also related to the number of students studying science and engineering in the country.

“The government should look into having programmes, like other countries are doing, that allow chip companies to hire students upon graduating to work for at least two years and the suitable candidates can be hired following that,” he had said.