PETALING JAYA: The government’s latest push to uplift Malaysia’s semiconductor firms through industry development programmes and additional investment initiatives has been met with cautious optimism from industry experts.
iFAST Capital research analyst Kevin Khaw Khai Sheng said on a whole, the various measures rolled out for the semiconductor sector reflect the government’s intention to advance the nation’s technological capabilities.
SemiconStart, an incubator programme by Malaysia Technology Development Corp with global incubators, was among the initiatives that were introduced during the tabling of Budget 2026.
Prime Minister Datuk Seri Anwar Ibrahim said this is recognising that semiconductor startups often face entry barriers due to the high cost of prototyping. He noted the incubator programme will help early-stage semiconductor startups access mentorship, global financing opportunities, discounted prototyping and customer networks.
Prototyping refers to the process of creating the first working version of a chip design to test and validate its functionality before mass production.
This process is costly as it involves specialised fabrication at semiconductor foundries and the use of high-end design equipment.
On this programme, Khaw said while it is not expected to be a “game changer” that propels Malaysia into the ranks of top global semiconductor players, it is still a good initiative to strengthen the country’s standing in the semiconductor space.
“I do not expect the programme to be a one-off initiative. In the longer term, perhaps within the next year, the government may have further collaboration with domestic agencies like Selangor Information Technology and Digital Economy Corp and Penang Skills Development Centre for the programme,” he told StarBiz.
Fortress Capital Asset Management Sdn Bhd chief executive officer Thomas Yong said while SemiconStart represents a “step in the right direction”, it may still “fall short of aiding early-stage semiconductor businesses”.
He noted the sector continues to grapple with talent shortages, particularly in specialised areas such as integrated-circuit (IC) design and advanced materials or packaging.
“Notably, the programme does not directly address the challenge of attracting high-caliber foreign talents or Malaysian diaspora currently embedded in global semiconductor supply chains abroad,” he said.
He added that to bridge this gap, potential solutions could include favourable personal income tax incentives, streamlined visa processes for skilled professionals, or targeted relocation grants to make the country a more competitive destination for top expertise.
Yong said the initiative could better support market access by incentivising local companies – such as those in telecommunications or automotive sectors – to become early customers.
This would leverage internal demand to bootstrap new semiconductor businesses and create a self-sustaining cycle of innovation and growth.
“Ensuring sustained funding beyond the initial launch and clear metrics for success will be crucial to avoid it becoming another short-term effort,” he said.
Tradeview Capital Sdn Bhd portfolio manager Ng Tzyy Loon said funding alone would not resolve the challenges facing Malaysia’s semiconductor industry, noting that issues such as talent development, access to advanced technology and the absence of economies of scale were more critical.
“Several factors need to come into play. First is funding, then talent. If you have money and the right people, you cover the basic requirements. Assuming you also have access to equipment, that covers the hard requirements.
“However, there is also the second part of the equation: the ecosystem. Do we have the right market to create a self-sufficient value chain?
“That is much harder to achieve, and it goes beyond engineering or simply setting up a venture programme.
“It requires research, product testing and market demand,” he said, adding that proper execution and oversight are crucial for SemiconStart to succeed.
Malaysia Semiconductor Industry Association president Datuk Seri Wong Siew Hai said the key lies in the scope and reach of the global incubator the country will be partnering with for the SemiconStart initiative.
“This includes access to foundry process design kits (PDKs), multi-product wafer, outsourced semiconductor assembly and test (Osat) services, and the design infrastructure, including the computing and electronic design automation tools.
“This is because most startups will not have any access to foundry PDK, especially those of advanced nodes. Getting it through the incubator programme will address this disadvantage,” he said.
Wong commended SemiconStart as a “positive and timely initiative” to create Malaysian champions in the electrical and electronics (E&E) sector. That said, he noted it is unclear if the programme will also provide packaging solutions to build the prototype, after the wafer is fabricated.
“This needs to be supported by appropriate funding to initiate the project until product design either in IC design or advanced packaging.
“Equally important is the access or partnership with customers to ensure the product is defined correctly and is addressing a real opportunity,” Wong said.
On the other hand, Trident Analytics chief research officer Peter Lim Tze Cheng said while SemiconStart’s focus on access to financing, mentorship and discounted prototyping was positive, it only addressed part of the equation, as access to foundries remained critical.
“Having access to financing and mentorship is one thing. There are many other elements needed to make chip design work. In designing a chip, companies must work closely with foundries to ensure the chip can actually be fabricated, hence access to foundries is important,” he said.
He added that commercial viability was another major hurdle in chip design. “It is not enough to design a chip. You need to ask: is it as powerful as competitors’ chips? Does it consume less power? Is it cheaper to manufacture?
“Even after chip design, significant investment is needed to produce a prototype and verify that it is silicon-proven, and is this included in the financing support?,” he noted.
Apart from the SemiconStart programme, the government also rolled out additional investments for the industry.
Under the National Semiconductor Strategy (NSS), Bank Pembangunan Malaysia Bhd (BPMB) will provide RM500mil in loans to support high value-added activities such as research and development (R&D), especially for Malaysian firms serving the E&E ecosystem.
Another RM180mil from the National Industrial Master Plan Industrial Development Fund will finance programmes in high-impact sectors such as semiconductors, artificial intelligence and digital technology.
Meanwhile, Khazanah Nasional Bhd and the Retirement Fund Inc or KWAP will jointly invest RM550mil to strengthen local-multinational partnerships, while the Skills Development Fund Corp will offer RM650mil for semiconductor-related training.
To this end, Lim questioned whether the loans that will be provided by BPMB under the NSS, will have meaningful impact for the sector, noting that the country’s Osat players are cash-rich with strong balance sheets.
“Our Osat’s are not short of funding. What would be more meaningful is a capital expenditure (capex) incentive, such as a 10% rebate on every RM100mil of capex spent for instance, similar to what China does.
“Rather than loan provisions, this would significantly improve Osat’s return on investment, and encourage companies to upgrade. It would also be better if higher rebates were offered to firms for using local equipment, as the usual pioneer status or early tax breaks are not attractive, given projects may not be profitable in the initial years,” he said.
QES Group Bhd
managing director and president Chew Ne Weng said the BPMB loan of RM500mil is useful for startups and small and medium enterprises moving into the E&E ecosystem.
For the larger public listed companies, Chew noted that funding usually is sufficient unless the R&D is of major scale and extended to a few years prior to commercialisation.
“The Khazanah and KWAP driven investment allocation of RM550mil is relevant for the semiconductor sector. I hope this can generate a good semiconductor ecosystem amongst the players in equipment and IC design.
“For front end wafer fab and advance packaging, this allocated amount may be insufficient as these projects are of more than US$1bil,” he said.
