Malaysia’s Semiconductor Sector to Pick Up Steam?

Malaysia’s semiconductor sector is forecast to shine by the second half of 2024. Malaysia Semiconductor Industry Association’s (MSIA) confidence was based on World Semiconductor Trade Statistics (WSTS) on its prediction that the world semiconductor market would rebound by 13.1 per cent in 2024 to reach US$588 billion (RM2.8 trillion).

MSIA president said the global semiconductor sales dipped 8.2 per cent to US$527 billion in 2023, but the Malaysian market was able to retain its strength throughout the year. The evidence can be seen in last year’s electrical and electronics (E&E) sector, where exports decreased by only 3.0 per cent to RM575.45 billion after 2022’s record year of 30 per cent growth to RM593 billion.

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According to 2023’s full-year print, exports of semiconductor devices and integrated circuits (ICs) attained a growth of 0.03 per cent to RM387.45 billion in 2023. The E&E products dominated Malaysia’s total exports in 2023, accounting for 40.4 per cent share comprising products such as photosensitive semiconductor devices, batteries and electric accumulators, static converters, electric control panels, parts for switching apparatus and electric control panels as well as parts for diodes, transistors, piezoelectric crystals and other semiconductor devices.

The current prolonged geopolitical fragmentations are sending investors in search of new production homes or moving to trusted countries. Many multinational companies (MNCs) in China diverted part of their production and supply chain as a mitigating strategy by selecting Malaysia as their ‘Plus One’ location. The “China Plus One” strategy emerged as a critical policy for companies to reduce their reliance on China by diversifying their supply chain activities to other markets.

WSTS highlighted that all markets are poised for ongoing expansion in 2024 with the Americas and Asia Pacific, in particular, forecast to demonstrate significant double-digit growth on a year-on-year basis. In its December report, WSTS said the industry growth is expected to be primarily fuelled by the memory chip sector, which is set to soar 40 per cent to around US$130 billion in 2024. The majority of other principal segments, including discrete, sensors, analogue, logic and micro, are also expected to record single-digit growth rates.

Malaysia can play a critical role in the global supply chain, riding on its position as the 6th largest exporter of semiconductors in the world. The country also controls 13 per cent of the global market for packaging, assembly and testing services for semiconductors.

Given the importance of the E&E sector to the Malaysian economy and its place in the global supply chain, the need for collaboration among all parties involved to optimise Malaysia’s potential in the E&E sector is important. The country needs to improve its world competitive ranking, improve ease of doing business (some programmes are ongoing), enhance the E&E ecosystem including incentives in light of the global minimum tax implementation in 2025. Malaysia should continue to attract companies with state-of-the-art technology and encourage existing companies to go up the value chain. Malaysia could enhance its ecosystem by attracting more wafer fabs, establishing both local and foreign direct investments in IC design companies, advancing packaging in assembly and testing, and creating Malaysian global champions in automation.

Reference:

Malaysia’s semiconductor sector seen to pick up steam in second half, Bernama, 18 February 2024