Things looking up for chip sector

PETALING JAYA: The tide is turning for the semiconductor industry in Malaysia as global data point to a slow but definite recovery on its way, says Malaysia Semiconductor Industry Association (MSIA) president Datuk Seri Wong Siew Hai.

Wong told StarBiz that from January to September this year, exports for the semiconductor industry amounted to RM435bil despite it recording a 0.6% decrease year-on-year (y-o-y).

“Globally, the decrease was registered at 10% so we are more stable if we compare it that way. Right now, the situation isn’t exactly what we expected, but we anticipate things changing next year,” he said during the Malaysia National Electrical and Electronics (E&E) Forum 2023.

“It is only a matter of the rate of growth and timing. Some say it might happen in the second quarter of 2024 or the middle of the year. I think by the first quarter of 2024, we will be able to tell,” he said.

According to Wong, for the growth curve to take place, the inventory must be depleted first, and that too has been recorded globally.

SEMI market intelligence senior director Clark Tseng said data obtained showed that the industry was slowly moving forward, and hopes other countries within the region will follow suit.

“Malaysia maintains a crucial advantage in semiconductor manufacturing. It has attracted significant foreign direct investment (FDI) in recent years, particularly in the E&E sector,” he said.

Tseng added that between the incentives for FDI, the strong ecosystem support and a skilled workforce, things were looking up.

“The industry is projected to hit US$1 trillion by 2030. We forecast it will peak in 2027 then slow down for about two years. I believe this is a realistic forecast and Malaysia will be resilient,” he said.

On that note, Wong said some of the biggest drivers that will accelerate the upward curve is digitalisation in all forms, including the use of cloud computing, artificial intelligence and the Industry 4.0 revolution.

“Like most industries, we see automation being the driving force behind the acceleration. Technology has become a vital part of businesses today,” he said.

On challenges ahead, Wong noted that despite Malaysia leveraging on the geopolitical tensions between the United States and China, the industry must find a way to continue growing the value chain.

He said, for instance, the construction of new semiconductor fabrication plants, also known as fabs, had hit a bump in the road for Malaysia.

“We do have fabs here, but they are the older ones and we want newer ones. In Singapore, we’ve heard announcements of new fabs being built there but nothing so far in Malaysia,” he said.

Wong said the second biggest challenge was the war on talent, something that has been an ongoing concern in the country.

“So for this year, there has been a softening and hiring has taken a backseat. Most companies are on an austerity drive where they are holding on for now and waiting for better times to come. Regardless, we have lost 10% to 15% of our talent to other countries already,” he said.

He explained to mitigate this, the government has announced the Long Term Social Visit Pass which would help businesses acquire talent, even if they are fresh graduates.

“Foreign students who have graduated here should be allowed to remain in the country and work. We don’t have the details yet but we are encouraged by it. Secondly, I am for hiring graduates from other countries who are fresh as well. We can’t always hire those with experience, it is very costly. With the graduates, we can train and build them up,” he said.

Wong added that many industries today were short of engineers, computer and data scientists, and accountants, among others.

“To support the growth by 2030, we must have all this in place – good infrastructure, strong ecosystem and talent,” he added.

Meanwhile, Deputy Investment, Trade and Industry Minister Liew Chin Tong said the semiconductor industry was akin to the oil and gas sector in the world – it was indeed a golden goose for Malaysia.

He said the industry in Malaysia had undergone exponential growth in the last century. “Today, everything with computing power will have chips in it. Malaysia is at the centre of this global chip-making shift,” he said.

Liew said the industry contributes nearly 25% towards the country’s gross domestic product and holds 8% of the global market share.

“I have four observations, one being Malaysia is able to scale higher with more complexity, for example in the backend output of the semiconductor industry. Secondly, precision engineering has become the unsung hero and has successfully launched many local companies in the country, but we are unaware of what they do because they sign non-disclosures with the companies they supply to,” he said.

Liew added that the industry could lead in creating good and competitive jobs for Malaysians as the focus shifts to science, technology, engineering and mathematics (STEM) subjects in schools.

“There needs to be a more robust pipeline in schools and universities to ensure we have graduates who are looking in this direction for employment,” he said.

Lastly, Liew’s fourth observation was the critical importance of having good government-to-government relationships that could help shape policies and drive further growth.

“The semiconductor industry is one of the most important industries in the country. Malaysia has plenty of potential to ride on this. The ideas and products that will come out of our country can impact and change the global landscape,” he said.

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