Malaysia’s semiconductor to gain from US-China trade war

This is as the US imposing export restrictions on China’s largest chip firms

by ANIS HAZIM / pic by MUHD AMIN NAHARUL

THE trade war and geopolitics issues between the US and China are turning Malaysia into an attractive position to capitalise on the semiconductor industry.

PublicInvest research’s analyst Chong Hoe Leong said Malaysia’s technology sector stands to benefit from the US-China trade war with the US imposing export restrictions on China’s largest chip firms.

“As China is being barred from purchasing chips from the US directly, it has no choice but to build its own semiconductor chain in the country for domestic chip consumption,” Chong told The Malaysian Reserve.

He said the issue between the US and China will give an advantage to Malaysia as the main producer of semiconductor assembly.

“This is good news for the Malaysian technology sector which is predominantly in automated testing equipment (ATE) and outsourced semiconductor assembly and test (OSAT) segments,” he said.

He noted that many local players such as Malaysian Pacific Industries Bhd, Mi Technovation Bhd and Inari Amertron Bhd have recently set up their footprints in China.

“This will ride the companies on the technology boom as OSAT and ATE segments are part of the semiconductor chain,” he added.

On the other hand, Aurelius Technologies Bhd (ATech) said although the US-China semiconductor war would benefit Malaysia, there is no direct impact on the company currently.

ATech ED and CEO Lee Chong Yeow said the company does not see any direct benefit for now — but foreign companies such as from the US will gradually come over for electronic manufacturing services in Malaysia.

“So, in that sense, we do see the benefit from that area,” he said during the company listing ceremony recently.

Meanwhile, CGS-CIMB Research said Malaysia remains attractive amid rising nationalism and localisation in the global semiconductor industry.

“This is supported by recent announcements by global multinational companies (MNCs) such as Intel Corp, Infineon Technologies AG and AT&S, which indicated their plans to invest over US$10 billion (RM41.9 billion) for new capacity in Malaysia,” it said in a note recently.

CGS-CIMB was also encouraged to see companies like Skyechip Sdn Bhd taking advantage of the investment from global MNCs to train local talent and build its capabilities in integrated circuit design and silicon intellectual properties.

“We see this is a good stepping stone for Malaysian companies towards playing a greater part in the value-added and front-end segment of the global semiconductor supply chain,” it added.

The Semiconductor Industry Association (SIA) is projecting 9% year-on-year sales growth for the global semiconductor industry in 2022 driven by higher demand.

On top of that, most Malaysia SIA (MSIA) members are currently running at nearly full capacity to fulfil outstanding orders.

CGS-CIMB said the issue of labour shortages could derail growth and new investments into the Malaysian semiconductor industry.

“According to a survey carried out by MSIA at the end of last year involving 70 companies, the Malaysian semiconductor industry needed at least 23,000 new workers across all levels, ranging from engineers to technicians and operators in 2022,” it said.

Nonetheless, citing MSIA president Datuk Seri Wong Siew Hai, CGS-CIMB noted that MSIA is working with the government on a short-term solution to allow a new batch of migrant workers to come and fill in the jobs.

Notably, it said that the industry needed a long-term solution for talent to support sector viability.