The Malaysian government has been scoring significant milestones recently, boosting further its strategic shift in the global semiconductor ecosystem. Particularly, the recent deals it entered with global chip firms, such as Arm Ltd., and the establishment of an IC design hub, show the country’s chip grit to move from “Made in Malaysia” to “Made by Malaysia”.

With all these developments, the global semiconductor scene may yet see another viable location through Malaysia, which registered 5.1 percent GDP growth in 2024, its highest point in the last 12 years.

At the forefront of Malaysia’s semiconductor journey is the State of Selangor. Accordingly, the state consistently holds the top spot as the state with highest overall GDP contribution, about 25.9 percent share in 2023.

In an interview with Asia Electronics Industry (AEI), Yong Kai Ping, Chief Executive Officer of Selangor Information Technology & Digital Economy Corporation (SIDEC), said the high contribution of Selangor to Malaysia’s overall economy can be credited to its developed infrastructure, huge population and tourism growth, and strong manufacturing sector, specifically in electronics and manufacturing industries.

Fields Driving Growth

Geographically speaking, Selangor connects several cities not just within Malaysia but also other countries in Southeast Asian region through two major airports, one of which is the Kuala Lumpur International Airport (KLIA), and the Port of Klang in Klang Valley, which is the 12th largest ports in the world.

“In terms of the talent, in terms of the capital, in terms of the business side infrastructure, Selangor, I think is one of the top, not only in Malaysia, but in Southeast Asia,” said Yong.

Selangor also offers several growth fields, that make the state and the country a potential chip hub for the region. One promising field is the automotive industry, which is competing head on with Thailand, another automotive powerhouse in the region. Yong explained Selangor has been the center of electric vehicle (EV) growth in the country and other automotive-related advancements, such as advanced driver-assistance systems (ADAS) and autonomous driving.

Moreover, Yong said the state of Selangor also offers huge potential in data centers. He said the country is likely to install at least 5GW capacity or equivalent to about two million servers by 2030 in Malaysia alone. For that reason, Yong said the country may clinch as among the top 10 data center manufacturers in the world, overtaking Singapore and Japan.

Furthermore, the state of Selangor also offers huge potential in aerospace engineering. In fact, Yong said the Malaysian government is already working closely with firms such as Airbus to build aerospace engineering services. Add to this is the growing tourism arrivals in the country, which would also give the local airline industry a boost.

“I think Selangor will continue to lead (other States) to (Malaysia’s) GDP contribution in the coming years. But the next step now is not the quantity but the quality…the next focus now is to improve the competition,” said Yong, specifically referring to spurring the hardware and software ecosystem in automotive, data centers, and aerospace fields.

First AI Chips Made by Malaysia

To make this happen, Yong said the country is looking at designing Malaysia’s first semiconductor, specifically artificial intelligence (AI)-powered chipsets. This is for the reason the government has set up the Malaysia Semiconductor IC Design Park, and country and Southeast Asia’s first chip design park. This aims to step up the country’s shift from back-end semiconductor processing to front-end.

“I think it’s high time that Malaysia will actually come into IC design…with the rise of data center, with the rise of automotive industry, and also of aerospace engineering (in Malaysia), we now have both the capacity and the market,” said Yong.

The new IC design park will boost Malaysia’s shift to front-end processing, which involves the design and process the creating chipsets, which are more critical and capital intensive processes in semiconductor manufacturing. Yong said front end semiconductor processing can capture about 60 to 70 percent of the supply chain compared to 10 to 20 percent of back end processing, which is currently predominant in Malaysia.

Yong underscored the country’s big potential in the front-end semiconductor market. “If we are going to have 2 million servers (by 2030), may equate to 3 trillion (Malaysian) ringgit. This is just for the servers and this is more than enough to grow the local industry and this is just the first step, we want to export to the world as well.”

The IC Design Park, which can bring huge economic returns to Malaysia, is located in a 45,000 sq ft building initially, will be expanded up to 60,000 sq ft later to accommodate industry needs.

Last week, the Malaysian government has confirmed striking a deal with Arm, the chip design company of the Japan-headquartered Softbank. The deal with Arm involves Malaysia investing US$250 million over a period of 10 years for the access of chip IP designs.

In the US$250 million deal, Malaysia aims to look 25 startups and seven subsystems having access to Arm’s IP library. This will boost the creation of about 7 to 10 chip companies that will yield at least US$15 to 20 billion in combined revenues.