PETALING JAYA: For Budget 2027, Malaysia must continue attracting strategic investments while creating the right environment for companies already in the country to reinvest, expand, innovate and move into higher- value activities.
Malaysia Semiconductor Industry Association (MSIA) president Datuk Seri Wong Siew Hai said Malaysia continued to attract significant semiconductor investments, including RM16.9bil in approved investments in the subsector last year.
However, he said rapid technological advances, geopolitical developments, shifting supply chains and growing competition for investment and talent were reshaping the global semiconductor landscape.
Wong said MSIA had urged Putrajaya to improve the speed, consistency and predictability of government processes while addressing rising operating and compliance costs.
“Competition for investment, technology and talent is intensifying, and Malaysia’s policies must continue to evolve with the needs of the industry,” he said.
MSIA proposed a differentiated, lifecycle-based investment incentive framework for new strategic investments, existing companies undertaking reinvestment and expansion, and Malaysian-owned companies seeking to scale globally.
It also called for stronger research and development (R&D) support, including a 200% tax deduction for qualifying expenditure, broader coverage of eligible activities, R&D grants and shared infrastructure.
Sunway University economics professor Dr Yeah Kim Leng said that with semiconductors identified as a strategic sector in Budget 2027, Putrajaya should shift its focus from simply attracting more manufacturing investment to building local capabilities across the value chain.
He said Malaysia currently concentrates on back-end assembly and testing, accounting for around 13% of global market share, while greater value lies in front-end design, wafer fabrication and advanced packaging.
“Priority measures therefore include raising the automation capital allowance ceiling from RM10mil to RM100mil and offering 200% tax deductions for qualifying R&D expenditure.
“Designing differentiated incentives for new investors, existing firms upgrading and local companies going global are also needed, while focusing the existing RM500mil National Semiconductor Strategic Fund on high value-added activities,” he said.
Yeah said strengthening local suppliers and small and medium enterprises (SMEs) was essential for Malaysia to move up the semiconductor value chain and achieve the New Industrial Master Plan (NIMP) targets of raising export-oriented SME share to 25% and domestic value- added to 65% by 2030.
“Without investing in local supplier capabilities, Malaysia risks remaining ‘manufacturing in Malaysia’ rather than ‘innovation by Malaysia’,” he said.
Universiti Teknologi Mara economist Dr Mohamad Idham Md Razak said Budget 2027 should place greater emphasis on building domestic semiconductor capabilities through stronger industry-academia collaboration and specialised training for future technologies.
He said developing local suppliers and strengthening the wider manufacturing ecosystem would help foreign investments create deeper spillover effects across the domestic economy.
