Malaysia set to gain amid China – US rivalry

Malaysia has emerged as a surprising hub for the semiconductor industry, as companies around the world seek alternatives amid geopolitical uncertainties.

The reason for that is Malaysia’s neutrality. The Financial Times reported that the USA is also jostling with China for global technology supremacy and has enlisted support from allies in Europe and Asia as it restricts sales of the most advanced chips and manufacturing equipment to its geopolitical rival.

“It’s a rush. It’s not only Chinese companies [setting up in Penang]. It’s Korean, it’s Japanese, and it is western. And all of this is related to the tech war between the US and China,” says Marcel Wismer, Kemikon’s chief executive.

Kemikon is an international company that builds parts, such as machine frames, for clients including LAM Research and Applied Materials in the US.

He adds that major Western semiconductor equipment manufacturers cannot sell their most advanced equipment to China because of US restrictions. “But the other part of the story is all of these manufacturers source parts from Chinese companies,” he explained.

“So they tell their suppliers: if you don’t move out [of China], we have to find new ones. Chinese companies are then forced to move or expand to places like Southeast Asia so they don’t lose business. That is where Penang comes in.”

Prime Minister Datuk Seri Anwar Ibrahim deems advancing Malaysia’s semiconductor industry and workforce to higher-value manufacturing as a critical goal.

While acknowledging past complacency, he aims to refocus on the industry, hailing it as a key target in his plans to rejuvenate the economy amid his nation’s leadership transitions.

International Trade and Industry Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz, Malaysia’s dynamic minister for investment, trade, and industry, and leader of the national semiconductor task force, expressed awe at the heightened productivity of Penang’s factories.

“I go to [the US] now and the machinery and tools used to manufacture the chips are from Malaysia,” he exclaimed.

However, Malaysia’s unexpected fortune in the semiconductors industry might prompt action from the US.