MELAKA: Built by the "baby boomer" generation from a modest operation with a small workforce, the historic city's semiconductor industry has grown into a RM17.6bil economic powerhouse, says Datuk Seri Ab Rauf Yusoh.
The Melaka Chief Minister said the state's semiconductor industry took root in the early 1970s when an international company made the bold decision to invest here, a move that laid the foundation for one of Melaka's most remarkable industrial success stories.
"The company did not begin in a sprawling industrial complex but at the Umno building in Jalan Hang Tuah here before expanding its operations to Batu Berendam following the establishment of Melaka's first Free Industrial Zone in 1976.
"What started with a handful of dedicated workers has since evolved into a world-class industry that continues to drive Melaka's economy and create high-value employment opportunities," he said during a dialogue session with semiconductor industry players at a leading hotel here on Thursday (July 16).
Ab Rauf said he was not merely sharing the history of one company, but the story of how Melaka grew from a small-scale semiconductor operation to a global technology and advanced manufacturing state.
He said the industry had become one of the state's most important economic drivers, with manufacturing now contributing 36.1% to the state's economy and more than 400 manufacturing companies operating across 18 industrial sectors.
He said the industry's growth had created far-reaching economic opportunities over the past five decades, supporting not only multinational manufacturers but also local suppliers, small and medium enterprises (SMEs), skilled workers and thousands of families whose livelihoods depend on the manufacturing ecosystem.
Today, Ab Rauf said, Melaka continues to build on its long-established industrial foundation to contribute meaningfully to Malaysia's semiconductor ecosystem, backed by more than 50 years of experience in semiconductor and electrical and electronics (E&E) manufacturing.
He also attributed the state's continued appeal to three key strengths — its strategic location and competitive operating costs, a pipeline of skilled talent and a proven track record in attracting and retaining global investors.
He said the state nestled between Kuala Lumpur, Johor and Singapore, offers investors convenient access to major markets, ports, airports, suppliers and a broader talent pool, while maintaining competitive land, operational and living costs.
"The state also has more than 2,600ha of industrial land available for future development, providing companies with the flexibility to expand their operations as demand grows," he said.
On talent development, Ab Rauf said the state was strengthening its position as a Technical and Vocational Education and Training (TVET) hub through 61 institutions producing industry-ready graduates with programmes increasingly aligned to the evolving needs of semiconductor manufacturers.
He said another factor behind the state's success was the confidence shown by multinational companies from the United States, Germany, China, Japan and other countries, many of which have continued expanding their operations in the state for more than half a century.
"Their continued presence reflects the stability, reliability and business-friendly environment that the state offers for long-term investment," he said.
"The confidence was further reflected in Melaka recording RM14.68bil in investments across 312 projects in 2025, the highest investment value achieved by the state in 22 years," he said.
However, Ab Rauf cautioned that the semiconductor industry was entering a defining period, with investment decisions made today expected to shape global technology supply chains for decades.
"In the semiconductor industry, decisions made today will determine where technology, talent, suppliers and future expansion will be located over the next 10 to 20 years.
"If Melaka moves too slowly, global companies may choose other locations that can offer faster delivery, stronger capabilities and greater certainty," he said.
Ab Rauf warned that failing to keep pace could see the state lose not only new manufacturing investments but also future expansion projects, supporting industries and thousands of high-skilled jobs, while local SMEs risked being left out of the global semiconductor supply chain.
Nevertheless, Ab Rauf stressed that the state was already positioning itself for the next phase of growth through the Melaka Semiconductor Strategy 2035.
He said the strategy was aimed at securing more high-value investments, strengthening local capabilities and ensuring Melaka remained a preferred destination for global semiconductor players.
Beyond infrastructure and incentives, Ab Rauf said the state government remained committed to working closely with investors by expediting approvals, resolving operational issues and supporting projects from planning through to implementation.
"Melaka offers a complete value proposition from strategic connectivity, competitive costs, world-class talent, a proven industrial ecosystem and a government committed to supporting long-term investment," he added.
