SELANGOR’S venture into chip design started over a breakfast in January last year.
At that table sat Menteri Besar Datuk Seri Amirudin Shari and Selangor investment, trade and mobility committee chairman Ng Sze Han. Together with them were Datuk Seri Lai Pin Yong and his team.
The 81-year-old Lai was one of the pioneer Malaysian engineers when Intel Corp began operations in Penang in 1972.
He is now a venture capitalist investing in advanced packaging, integrated circuit (IC) design and niche equipment firms.
The breakfast conversation centred on the Malaysian semiconductor industry.
Amirudin was convinced that Selangor needs to look beyond the back-end semiconductor operations that Penang has long specialised in.
And from that point, Malaysia’s wealthiest state set out to turn itself into an IC design hub, with Ng taking the lead.
In less than two years, it has rolled out two IC design parks, securing a combined RM3bil in potential investments and training more than 600 locally sourced chip-design talents.
The pace has been brisk enough with a third IC design park on the cards and it could materialise as soon as next year, Ng says.
The second IC park, launched on Nov 6, features global names such as Arm, AWS, Keysight, IIT Madras and Shenzhen Xinhou Research Centre, alongside Bursa Malaysia-listed QES Group Bhd
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According to the state government, these players will work together to build a “research lab ecosystem” within the park.
It is worth noting that the IC design parks are built with partial funding by the federal government, making it a federal-state collaboration.
Despite the early successes, Selangor still has to prove that its chip-design push is more than a glossy blueprint.
The real test will be about endurance, so this doesn’t become yet another state-backed trophy project that never lived up to the hype.
BioValley in Dengkil is a cautionary tale, the biotech hub championed by Tun Dr Mahathir Mohamad in the early 2000s which never took off.
Another example is Cyberjaya. Billed as Malaysia’s answer to Silicon Valley, Cyberjaya has scored some successes but is still widely seen as falling short of its original promise to lure global tech titans and spark the kind of innovation boom once imagined.
For Selangor’s chip-design push to endure, it will need more than subsidies and industrial parks.
It must cultivate deep local know-how and build a meaningful bank of intellectual property (IP) designs, patents and proprietary tools – that anchors talent, attracts capital and gives its firms something they can sell to the world.
Some critics, including industry players that StarBiz 7 spoke to, are still sceptical about the actual potential of Selangor’s chip designing hub plan.
And the concerns are valid. More countries are either venturing into chip designing or boosting their existing capability, with Singapore being the latter.
India, which has nearly 20% of the world’s chip design engineers, is also making a big push into chip design.
This means that Selangor – and Malaysia – will have a huge competition to deal with, especially with countries enjoying low-cost bases and existing capabilities.
That leaves the Selangor government with a tall order: to turn early buzz into hard numbers and prove to doubters that this is not just another state-led experiment that flatters in launch speeches but disappoints in execution.
Learning from others
Selangor’s entry into chip-design took off after multiple rounds of consultations and foreign visits, including to China, Taiwan and the United Kingdom.
“We wanted to learn about the way these countries developed the semiconductor ecosystem,” says the engineer-turned-politician Ng in an interview with StarBiz 7.
Selangor’s IC design parks are modelled after the industrial parks of Suzhou and Shenzhen in China, but fine-tuned to local requirements.
“We realised that in order to grow faster, there needs to be a common platform that will house everyone together and we must provide the necessities to the IC design companies for them to have a quick start.”
The first IC design park is based in Puchong and was launched in August last year, some four months after the January breakfast. The space has been fully taken up.
And last week, the second park, located in Cyberjaya, followed suit.
“Park 2 can also be considered fully taken up. We are giving the companies some time to settle down as they need to hire the engineers,” Ng explains.
Following the success of Park 1, Ng says the state received many calls from global companies to participate.
“Many of them did not previously have operations in Malaysia.”
Selangor’s IC design parks are unique, according to Ng, because it has the state’s support “from A to Z”.
“Right from setting up to recruiting talents and organising networking sessions and business matching, the state will give its support. This will help the companies grow faster.”
The facilitation by the government is important as time is of the essence, particularly in catching up to the country’s goal of developing its first locally designed chip by 2027 or 2028.
However, designing a chip alone will not put Selangor on the global semiconductor map.
The chip must be manufactured and be viable cost-wise, before finding its way to the right buyer.
“We are in talks with some foundries like Taiwan Semiconductor Manufacturing Co (TSMC) and SilTerra to fabricate the chips designed here,” Ng tells StarBiz 7.
TSMC is the world’s biggest chipmaker, producing nearly seven out of every 10 chips globally.
SilTerra, on the other hand, was a foundry operator owned by Khazanah Nasional Bhd.
However, following years of losses, the business was sold to a consortium that is 60% owned by Dagang Nexchange Bhd and the rest by its China partner.
“We don’t discount the possibility of setting up a foundry in Selangor to make the chips, but not in the near future,” says Ng.
Buyer available?
Beyond developing a chip, the biggest challenge is to convince the market that Selangor-designed chips are of high quality and worth buying.
Ng is confident that there will be demand.
“Selangor is the country’s biggest automotive hub and most of the manufacturers are here, whether they are local or foreign brands.
“Also, 70% of aerospace-related industries are in Selangor. So these are among the potential buyers for our chips.”
It is worth noting that Proton had in October fully moved its manufacturing facility to Tanjong Malim, Perak, after closing its Shah Alam plant that had been operating for four decades.
That said, Tanjong Malim lies on the Perak-Selangor border.
Asked what kinds of chips are being designed in the IC parks, Ng says that power chips used by gadgets and data centres are potentially being designed.
Other examples are ICs for telecommunications, automotive and aerospace.
“The type of chip will depend on market demand. The design works for these four types have started.”
Ng further explains that the procurement of Selangor-designed chips will get a helping hand from the state’s Local Economy Development policy introduced this year.
The policy, aimed at the data centre industry, sets a 30% local content requirement for all new investments, with a three-year adjustment period for investors to meet the target.
“So, data centres need to procure 30% of the components locally. It can be from Selangor, Penang or Kulim and can be any component.
“This can help create demand for our chips as well,” Ng adds.
Some critics, however, do not share the state’s optimism.
An industry player with experience in sensor chips tells StarBiz 7 that securing buyers is “not that easy”.
“From my experience, it will take at least three to four years from ideation to testing a chip and finally placing it in a final product, especially a complex one like a car.
“There will be many requirements and carmakers already have suppliers that they trust. It is difficult to penetrate especially if you are a small chip developer.”
“If you want carmakers to accept your chips as substitutes to their existing chips, they will ask you what extra advantages you bring to the table. Are the chips more cost-effective, superior in quality or can you provide after-sale services faster than the others?
“These are the questions that the government must also think about.”
The industry player also raises concerns that the Selangor government is still talking to foundries.
“The process should have been firmed up earlier. You can’t simply design a chip and then ask either TSMC or SilTerra to make the chips.”
“In chip design, there’s no such thing as a generic blueprint. A chip must be built around a specific foundry’s process and design rules, so a design tuned for one line at TSMC won’t simply drop into a Silterra fab without substantial rework.”
Rising to the challenge
While there may be obstacles in Selangor’s chip-design ambitions, the state is committed to making it a long-term success.
To achieve this, the patent rights of the chip design must be locally owned and registered, and local companies need to rise to the challenge.
Research and development must pick up its pace, amid the creation of more local engineers specialised in chip design.
QES, which is part of the IC Park 2, says it is involved in helping to build the research lab ecosystem.
“We are not involved in the chip design works but we have placed some of our equipment in the lab to train local talents.
“When there is a need, our staff will be there to help guide the students.
“We consider this as part of our nation-building process,” managing director Chew Ne Weng tells StarBiz 7.
Chew says QES does not intend to venture into IC design, preferring to focus on expanding in the growing advanced packaging segment.
It is noteworthy that Ng has also said Selangor will look into building the advanced packaging ecosystem once the IC design efforts have shown promising deliverables.
For now, the focus will be about addressing the talent shortage for semiconductors and chip design.
Park 1, for example, employs 200 engineers although it can host up to 400. This is largely due to talent shortage, which the state is working to address.
State-backed Advanced Semiconductor Malaysia Academy (ASEM), an advanced training hub, aims to produce 20,000 semiconductor engineers over the next 10 years.
Last month, ASEM forged a collaboration with IIT Madras Global of India for capacity building and also, according to an official statement, “expand market access and reduce over-reliance on the United States, China and Taiwan semiconductor industries”.
Under the collaboration, ASEM and IIT Madras Global will roll out two flagship initiatives next year.
The first initiative, Graduate Skilling Programme in Computer Architecture and RISC-V Design, seeks to equip Malaysian engineers with cutting-edge design and verification skills.
For the second initiative of the Joint Certificate Programme, University Selangor and IIT Madras will co-develop an enhanced Electrical and Electronic Engineering curriculum.
Luring talent
Graduates will receive both a local degree and a joint certificate from IIT Madras.
Beyond universities, Ng says the state government is also approaching secondary school students to inculcate awareness on the huge opportunities in the semiconductor industries.
“This will spur the students’ interest in relevant studies,” he believes.
Also, the fact that the IC Design Park offers a salary of RM5,000 to RM6,000 for undergraduate engineers, while Master’s degree holders can earn upwards of RM7,000, is also expected to garner more interest.
As good as the overall IC design initiative sounds, it can only sustain if there is a strong capital flow to back.
The Selangor government, in collaboration with Artem Venture Fund (Ehsan Capital), has established the Selangor Semiconductor Fund, targeting over RM100mil in capital.
The fund will focus on strategic investments in at least seven high-potential local start-ups.
While RM100mil is a decent start, more funding is crucial in building the research and innovation ecosystem.
More importantly, any funding or grants must be well monitored to prevent misaligned or failed deliverables.
If Selangor hits its numbers, the result will be a clear game-changer for Malaysia’s tech-industrial trajectory.
At the same time, the industry must resist over-selling the narrative.
Real leadership will come not just from park launches and headcounts but from market-tested chips, export-line items, and deep-IP portfolios.
