Why Malaysia must claim its place in the Semiconductor Wars

The world has woken up to an uncomfortable truth — we are dangerously dependent on one island — Taiwan — for the chips that power our lives.

From smartphones and cars to artificial intelligence, nearly everything runs on semiconductors.

Yet, a single company, Taiwan Semiconductor Manufacturing Company (TSMC), produces more than 90% of the world’s most advanced chips.

Taiwan’s dominance has been a blessing for technology but a nightmare for geopolitics.

For Malaysia, this is both a warning and a window of opportunity.

Our country has quietly been part of the global chip supply chain for decades.

Penang is celebrated as the “Silicon Island of the East,” hosting global giants like Intel, Advanced Micro Devices (AMD) and Infineon.

About 13% of the world’s chip testing and packaging takes place on our soil.

But let’s be honest, we are still at the periphery of the industry.

The crown jewels, the wafer fabrication plants that create cutting edge chips, remain elsewhere.

That must change.

We cannot be content with being the backroom of the semiconductor world while others write the rules.

Taiwan’s precarious position should push us to ask — where will the world turn if supply chains are disrupted?

Why not Malaysia?

To get there, bold choices are needed.

First, Malaysia must break into the fabrication game.

Even a single advanced fab, co‑invested with a global leader, would shift perceptions overnight.

Singapore has GlobalFoundries, Vietnam is moving into design services and Indonesia is touting its nickel for chip materials.

Malaysia risks being outpaced unless we move beyond testing and packaging.

Second, talent is everything.

TSMC’s edge lies not just in billion‑dollar machines but in an engineering culture of discipline and precision.

Malaysia’s universities produce good graduates, but not nearly enough of the kind needed to run the fabricators of tomorrow.

We need a national semiconductor talent strategy — one that not only trains engineers at scale but also tempts back our brightest minds from abroad.

Without talent, factories are just expensive buildings.

Here, Malaysia must also rethink how it connects industry with academia.

Too often, graduates leave university without the specialised skills demanded by the chip sector.

Industry‑led training centres, joint research labs and international partnerships could close this gap.

The government could also explore offering “semiconductor scholarships” tied to guaranteed employment in local fabs to ensure that investments in education translate directly into national capacity.

Third, we must confront infrastructure realities.

Chip plants devour electricity and water.

TSMC alone uses 8% of Taiwan’s electricity today — a figure that could reach a quarter by 2030.

If Malaysia wants fabs, we must guarantee uninterrupted, affordable and increasingly green energy.

Water management, logistics and land availability must be treated not as afterthoughts but as strategic assets.

Equally crucial is cybersecurity.

Semiconductor plants are not just physical sites but digital fortresses, heavily reliant on secure networks to safeguard sensitive designs and intellectual property.

Malaysia cannot afford to be lax in this area.

A single breach could undermine years of trust and investment.

Building resilience in both physical and cyber infrastructure must go hand in hand.

Fourth, let us not be naive about geopolitics.

Chips are no longer just business; they are national security.

Taiwan calls TSMC its “silicon shield,” a deterrent against invasion.

If Malaysia rises in the chip hierarchy, it will attract more attention from Washington and Beijing.

That will bring new pressures, new bargaining chips and new risks.

The challenge will be to leverage our neutrality without being trapped in a zero‑sum tug‑of‑war.

Malaysia could position itself as a bridge nation, trusted by multiple powers yet aligned with none.

Hosting regional semiconductor dialogues, spearheading ASEAN cooperation on chip supply security and offering neutral ground for joint ventures could elevate Malaysia’s role not only as a manufacturer but also as a diplomatic facilitator in this new “chip age.”

Sceptics will say Malaysia cannot compete with TSMC, Samsung or Intel.

That is true — for now.

But the industry is not only about the bleeding edge.

It is also about reliability, ecosystems and niches.

Malaysia’s 50 years of trust as a semiconductor partner is no small feat.

We can build on that foundation, step by step, from advanced packaging to selective fabrication and eventually to chip design leadership.

What we cannot afford is complacency.

The New Industrial Master Plan (NIMP) 2030 talks about making Malaysia a semiconductor powerhouse.

Good.

But words must become concrete actions: tax incentives, research grants, streamlined approvals and public‑private partnerships that send a clear message that Malaysia is ready.

We stand at a crossroads.

We can either remain the world’s assembly line or rise to become a true semiconductor hub.

The world is searching for alternatives beyond Taiwan.

The question is simple: will Malaysia rise to meet the moment, or watch the opportunity pass us by?

If we are serious, we must act now.

The chip wars will not wait for us.

Muhammad Iman Khidir Bin Tarmidzi

Research Analyst (Economy)

Institut Masa Depan Malaysia (MASA)