As the global supply chain undergoes restructuring, Malaysia and Singapore have emerged as attractive destinations for semiconductor companies seeking to establish manufacturing operations in Southeast Asia (SEA). Both countries have implemented their own strategies to capitalize on this opportunity, leveraging their respective strengths to enhance their value within the semiconductor industry chain.
Malaysian Prime Minister Anwar Ibrahim has repeatedly emphasized that Malaysia will remain neutral and not take sides in geopolitical conflicts. Anwar believes that if businesses want to engage in trade with China, Malaysia is the top choice for setting up factories. Both the Financial Times and the New York Times have commented that Malaysia stands to benefit from the supply chain shift amid the US-China trade and tech wars.
Malaysia: Expanding beyond IC packaging and testing
Malaysia is renowned in the semiconductor industry for its backend packaging and testing segment. According to data from the Malaysian Investment Development Authority (MIDA), Malaysia's market share in the global chips testing and packaging market reached 13% in 2023. The country now accommodates prominent semiconductor players like Intel and Infineon.
However, Malaysia is not satisfied with just the packaging and testing market and is actively advancing into upstream areas such as IC design and advanced chip manufacturing. Recently, Malaysia proposed the National Semiconductor Strategy (NSS), aiming to attract more foreign investments and cultivate 60,000 high-end semiconductor professionals, with the ultimate goal of supplying advanced chips.
This strategic initiative may face the dilemma of "Which comes first, the chicken or the egg?" Should a good ecosystem be built first to attract businesses, or should businesses be attracted to invest first to create a thriving environment?
The Malaysian government's subsidy support may be limited. The Edge Malaysia pointed out that current subsidies for wafer fabs in some countries are about 30% of investment funds, but Malaysian Minister of Investment, Tengku Datuk Seri Zafrul Abdul Aziz, admitted that Malaysia does not have such deep pockets. He said that even with only a 10% subsidy, many enterprises are still willing to set up factories in the country. Malaysia should take it step by step, first aiming at advanced packaging and IC design.
Malaysia is currently facing a serious brain drain problem. Reports indicate that many Malaysians working overseas are high-level talents, and the recent depreciation of the ringgit has worsened the situation. Amarjit Sandhu, a senior Micron executive for Malaysia and Singapore, has called for Malaysia to develop a good strategy to ensure an adequate supply of semiconductor talent. The Malaysian Semiconductor Industry Association (MSIA) also believes a global talent war is underway.
Singapore: Talent and connectivity as the advantages
Singapore emphasizes its strong talent pool, stable business environment, and robust connectivity as a Southeast Asian hub.
Despite its small land area, Singapore's semiconductor manufacturing accounts for 7% of its GDP and constitutes 10% of the world market, compared to a 20% global share for equipment manufacturing. Recently, major companies such as Micron, GlobalFoundries (GF), and Applied Materials have announced plans to expand their investments in Singapore.
Applied Materials has noted that its production capacity, employment numbers, and R&D activities in Singapore will double in the next few years. Its CEO Gary Dickerson believes that despite possessing comprehensive technology, Applied Materials still needs to collaborate with various partners, affirming Singapore's innovative environment.
Singapore's Prime Minister Lawrence Wong has acknowledged that Singapore cannot subsidize the semiconductor industry on a large scale like the US and China, nor can it participate in every aspect of the semiconductor industry. It is also difficult to squeeze into the ranks of high-end manufacturing. However, Wong believes that Singapore's greatest asset is its talent and it remains competitive in the 5G, automotive, and IoT chip markets. Moving forward, Singapore will continue to develop based on these strengths.
Nevertheless, the high cost of developing manufacturing in Singapore has become a concern. Boston Consulting Group (BCG) pointed out that the total cost of products manufactured and exported from Singapore to the US is the highest among Southeast Asian countries, 15% higher than in Malaysia.
Malaysia and Singapore have their own distinct advantages and challenges in attracting semiconductor manufacturers to set up factories. Malaysia is seeking to upgrade its industry and move upstream, but the actual implementation details of the National Semiconductor Strategy and how to attract foreign investment remain to be seen. Singapore, on the other hand, prides itself on its talent and connectivity, continuing to expand the proportion of chip manufacturing and strengthen research and development, but labor, energy, and other costs are all higher.
