KUALA LUMPUR: The Malaysia Semiconductor Industry Association (MSIA) has submitted its Malaysia Budget 2027 Recommendations to the government, outlining industry proposals aimed at strengthening Malaysia’s competitiveness as a global semiconductor hub and enabling the sector’s next phase of growth.
The recommendations were developed through a consultation process with MSIA members to identify key industry challenges, priorities and practical measures for the government’s consideration.
The submission comes ahead of the tabling of Budget 2027 scheduled on Oct 9. The Finance Ministry’s pre-budget statement has identified high-value investment, business competitiveness, innovation and quality employment among the priorities informing the preparation of Budget 2027.
MSIA’s recommendations are anchored on a central principle: Malaysia must continue attracting new strategic investments while creating the right policy environment for existing companies to reinvest, expand, innovate and move into higher-value activities.
Malaysia continues to attract significant investment in the Electrical and Electronics (E&E) sector, driven mainly by semiconductor investments. In 2025, the sector recorded RM16.9bil in approved investments, underscoring Malaysia’s strategic role in the global semiconductor and E&E value chain.
However, rapid advances in artificial intelligence, geopolitical developments, changing global supply chains and intensifying competition for investment and talent are reshaping the global semiconductor landscape. MSIA believes Malaysia must respond by strengthening the policy enablers that support long-term industry competitiveness.
Six priorities for Budget 2027
MSIA’s Budget 2027 recommendations are structured around six key pillars:
1. Ease the cost and friction of doing business
MSIA recommends measures to improve the speed, consistency and predictability of government processes while addressing rising operating and compliance costs.
Among the proposals are improvements to Customs procedures under the Licensed Manufacturing Warehouse (LMW) and Free Industrial Zone (FIZ) frameworks, including greater flexibility for the movement of qualified materials and equipment in line with the evolutions of semiconductor manufacturing. Appropriate duty and sales tax exemptions for movement of qualified materials such as raw materials, components, semi-finished goods, finished goods and manufacturing equipment between different entities helps improve Malaysia's competitiveness. MSIA also recommends reviewing the broader business cost and tax environment to ensure Malaysia remains as an international E&E hub. A suitable framework is also needed to help companies move towards higher value chain activities such as semiconductor design and R&D.
MSIA also recommends reviewing the broader business cost and tax environment to ensure Malaysia remains internationally competitive.
2. Enable continuous reinvestment and scaling
Beyond attracting new investment, MSIA proposes a differentiated and lifecycle-based investment incentive framework that recognises the different requirements of new strategic investments, existing investors undertaking reinvestment and expansion and Malaysian-owned companies seeking to scale globally.
The recommendations include strengthening reinvestment incentives through mechanisms such as Accelerated Capital Allowance and Reinvestment Allowance, alongside enhanced support for automation and advanced manufacturing.
MSIA also proposes increasing the qualifying expenditure limit under the Automation Capital Allowance from RM10mil to RM100mil to better reflect the scale of automation and advanced manufacturing investments undertaken by the semiconductor and E&E industry.
3. Accelerate R&D and higher-value activities
MSIA recommends stronger support across the full research and development (R&D) lifecycle to encourage companies to locate more R&D, engineering, design, testing, validation and technology-development activities in Malaysia.
Among the proposals is a 200% tax deduction for qualifying R&D expenditure, with broader coverage of eligible R&D activities and expenditure relevant to the semiconductor and E&E industry.
MSIA also proposes targeted semiconductor and E&E R&D grants, shared R&D infrastructure and stronger industry-university collaboration. These measures are intended to enable Malaysia to capture more higher-value engineering, design, innovation and technology-development activities while strengthening domestic R&D capabilities.
4. Build, retain and access critical talent
Talent remains fundamental to Malaysia’s ability to capture higher-value semiconductor activities. The industry’s rapid technology transition is increasing demand for specialised engineering, R&D, AI and leadership capabilities.
MSIA proposes stronger industry-led training and greater flexibility in the utilisation of HRD Corp funds. This includes a proposed 65:15:20 HRD Corp levy allocation model, comprising 65% for company-led training, 15% for industry-led training coordinated through HRD Corp and 20% for strategic localisation and capability-development projects.
MSIA also calls for policies to attract the world’s best talent to Malaysia to support innovation, design and development, as well as specialised expertise in other critical fields. This includes facilitating access to specialised global talent in niche disciplines where sufficient local expertise is unavailable, supported by structured knowledge transfer to strengthen Malaysian capabilities.
The recommendations also call for practical mechanisms to enable companies undertaking qualifying R&D and innovation activities to access specialised global talent while ensuring structured knowledge transfer to Malaysians.
MSIA further proposes allowing eligible international graduates in critical disciplines from Malaysian universities to remain and work in Malaysia for up to two years after graduation, alongside stronger artificial intelligence (AI) education, semiconductor skills development and leadership development for Malaysian small and medium enterprises (SMEs).
5. Modernise the stamp duty framework
MSIA recommends modernising the stamp duty framework to reduce unnecessary compliance costs and improve tax certainty for businesses.
The proposals include reviewing the scope of dutiable instruments, introducing targeted exemptions or more proportionate treatment for appropriate low-risk and intra-group transactions, and providing clearer and more consistent implementation guidance.
6. Strengthen the local semiconductor ecosystem
MSIA emphasises that Malaysia’s long-term competitiveness must be supported by a deeper and more resilient domestic semiconductor ecosystem.
The association recommends targeted support for Malaysian companies to upgrade their capabilities and participate in higher-value semiconductor supply chains, particularly in advanced manufacturing, test engineering and automation solutions.
MSIA also proposes expanding semiconductor-focused incubators and shared R&D, testing, engineering and technology facilities, building on existing platforms such as MIMOS and NTIC, so that Malaysian companies can access capabilities and infrastructure that may be costly to develop independently.
The recommendations further address supply-chain resilience and geopolitical readiness, including trade diversification, localisation, industry-Government coordination and measures to help companies respond to global supply-chain disruptions.
Industry-government collaboration
MSIA president Datuk Seri Wong Siew Hai said: “Malaysia has built a strong foundation in the global semiconductor industry, and we must continue to grow and excel. Competition for investment, technology and talent is intensifying and our policies must continue to evolve with the needs of the industry.
“While attracting new strategic investments remains important, we must also create the right environment for companies already in Malaysia to continuously reinvest, expand their operations, undertake more R&D and move into higher-value activities.”
Budget 2027 is an opportunity to strengthen these fundamentals. With the right policies, closer industry-government collaboration and continued investment in technology, talent and our local ecosystem, Malaysia can further strengthen its position in the global semiconductor value chain and create greater value and opportunities for Malaysian companies and talent.”
MSIA believes Budget 2027 presents an opportunity to reinforce Malaysia’s position in the global semiconductor value chain by creating an environment where companies can invest with confidence, continuously reinvest, develop technology and talent, and build deeper capabilities within Malaysia.
The recommendations are intended to complement Malaysia’s broader push towards a higher-value and technology-intensive economy while ensuring that Malaysian companies and talent participate more meaningfully in the sector’s growth.
MSIA looks forward to continuing its engagement with the government, relevant ministries and agencies to further develop and implement measures that strengthen Malaysia’s semiconductor competitiveness.
