PETALING JAYA: Malaysia may have arrived late to advanced packaging, but the global chip industry’s growing capacity crunch could finally hand local players a way in.
For years, underinvestment left Malaysian semiconductor companies trailing Taiwan, South Korea and the United States, which now dominate the segment.
Hong Leong Investment Bank Research (HLIB Research) said local outsourced semiconductor assembly and test (Osat) players may now be in position to move higher up the value chain, with advanced packaging capacity becoming one of the industry’s most pressing bottlenecks.
As pressure intensifies, foundries are increasingly prepared to outsource selected work to qualified third parties.
HLIB Research noted that the underinvestment by Malaysian Osats in the past was not for lack of financial capacity, but rather due to structural limitations in their end-market exposure.
“Their customer base remains predominantly analog/radiofrequency-centric, with limited demand for leading-edge packaging.
“In addition, the more advanced 2.5D/3D packaging processes have largely been integrated at the foundry level, structurally disintermediating Osat participation to an extent,” the research house said in a note.
HLIB Research pointed out that advanced packaging capacity is likely to be constrained this year and next, creating a genuine market opening for new entrants.
Moreover, the Malaysia Advanced Packaging Consortium (MAPC) was formed last November to ride on this opportunity.
It comprises SkyeChip Sdn Bhd, FusionAP Sdn Bhd, Inari Amertron Bhd
, Pentamaster Corp Bhd and NSW Automation Sdn Bhd.
The research house said its role will be to accelerate domestic ad- vanced packaging capabilities, align research and development priorities, and establish sector standards.
“In our view, MAPC’s core value proposition lies in improving roadmap visibility and creating tighter feedback loops between local chip designers, Osats and equipment players.
“Its long-term ambition is for Malaysia to capture 7% of the global advanced packaging market by 2035,” the research house said.
FusionAP was also established in 2025, and is positioning itself as Malaysia’s first domestic advanced packaging Osat.
It is striving to be a neutral partner to global semiconductor companies.
“We see FusionAP’s competitive edge resting on three key factors.
“These are Malaysia’s growing status as a geopolitical neutral manufacturing hub, its focus on underserved segments outside artificial intelligence and high performance computing, and a competitive cost base structure supported by MAPC-led localisation initiatives,” HLIB Research said.
According to the research house, upon initial commitments, MAPC’s management will target a pilot line of about RM400mil in capital expenditure (capex) for qualification and sampling.
This will be followed by a scale-up to high-volume manufacturing which will require RM2bil in capex.
HLIB Research believes the read- through for local players is compelling, but the outlook will remain contingent on FusionAP achieving commercial-scale execution.
The research house said from a top-down perspective, successful entry into advanced packaging could drive a structural re-rating of the sector.
This will be underpinned by higher average selling prices and superior gross margins.
“Global Tier-1 Osats are already showing mix-driven margin expansion, while leading equipment suppliers have seen significant valuation re-rating as markets ascribed structural growth premiums to their critical role in advanced packaging,” HLIB Research added.
With that, the research house said it will maintain its “neutral” call on the sector while staying selective.
HLIB Research pointed out that overall, it is cautiously optimistic since MAPC and FusionAP are still in their early stages.
It also said with the geopolitical situation remaining uncertain, it will continue to favour a selective approach to the sector.
It will focus on names with exposure to structural themes.
These include China Plus One relocation, equipment supply chain localisation, optical and power semi plays, and Intel resurgence.
“Our top picks include ITMax System Bhd, Frontken Corp Bhd and UWC Bhd,” the research house said.
Meanwhile, Kenanga Research placed an “overweight” call on the sector earlier this month, stating that foreign exchange headwinds and post-US tariffs are key swing factors.
The research house said the outlook for Osat players remained broadly steady as they recalibrated strategies in line with key customer roadmaps.
