An Intel microprocessor made in Malaysia. Investments are flowing into the industry there. Photo: WikiCommons

Malaysia continues to receive investments from around the world despite the pandemic and worries over supply chain disruptions. 

Nevertheless, on November 18, US Secretary of Commerce Gina Raimondo and Malaysian Senior Minister of International Trade and Industry Mohamed Azmin Ali issued a joint statement that concluded with:

“… the US Department of Commerce and the Malaysian Ministry of International Trade and Industry plan to collaborate with industry partners on semiconductor supply chain transparency, security, and resilience. The two countries will also work together with US and Malaysian industry partners to develop more transparency and trust in the manufacturing and manufacturing-related sectors and their supply chains.

“Given Malaysia’s critical role in global supply chains for semiconductors, electronics, health products, and other key goods, this announcement is an important first step in collaborating on current and long-term supply chain challenges for both our nations and the global economy. We intend to begin discussions on a Memorandum of Cooperation with a goal of signature in early 2022.”

A first step for the government maybe, but not for the private sector.

On December 13, the Malaysian Investment Development Authority revealed that Intel, the largest semiconductor maker in the world, plans to build new packaging (assembly) and test facilities at the Bayan Lepas Free Industrial Zone in Penang, as well as at the Kulim Hi-Tech Park in Kedah state, a short distance away. 

The 30 billion ringgit (US$7.1 billion) project is expected to create more than 5,000 construction-related jobs and more than 4,000 jobs at Intel’s subsidiary in Malaysia. 

Aerial view of the Bayan Lepas Free Industrial Zone, as seen from a landing plane on its descent towards the Penang International Airport. Photo: WikiCommons

In a statement issued two days later, Malaysia’s Minister of International Trade and Industry, Azmin Ali, noted that:

“This … augurs well with Malaysia’s National Investment Aspirations (NIA), which looks to ensure Malaysia stays at the forefront as a global hub for quality investments while creating high-value jobs …

“In the Twelfth Malaysia Plan, the Electrical and Electronics (E&E) industry has been identified as among the high impact industries that are key to realign Malaysia’s growth in a sustainable trajectory while strengthening the nation’s position in the global supply chain. 

“The government aims for the E&E industry to move up the value chain through stronger adoption of advanced technologies which fits well into global Intel’s overall growth strategy.”

The previous week, Intel and the Malaysian Investment Development Authority (MIDA) signed an MOU to, in the words of the American Malaysian Chamber of Commerce:

“… enhance talent development within the country’s electrical and electronics (E&E) industry … [It] will include human capital development for the future workforce, research and development collaborations, expansion of local sourcing, driving the adoption of Industrial Revolution 4.0 (IR 4.0) by electrical and electronics ecosystem players, and the deployment of Intel’s digital readiness program.”

Intel established its first overseas production facility in Penang in 1972. Malaysia, where it now employs more than 13,000 people, is the site of its largest packaging and test operation.

Malaysia accounts for about 12% of global semiconductor packaging and test – less than Taiwan or China, but still a vital part of the industry’s global supply chain. 

And Intel has plenty of company. According to MIDA, the following high-tech companies have announced new investments in Malaysia in the past six months:

Nexperia (Netherlands, semiconductors) is building new production facilities fully automated with Industry 4.0 standards to support its growth on essential power products [semiconductor devices] for the automotive industry.

Infineon (Germany, semiconductors) to transfer its silicon carbide and gallium nitride epitaxy production to Kulim Hi-Tech Park in Kedah and expand its manufacturing base in Malaysia. 

AT&S (Austria, semiconductors) is building a new Integrated Circuit (IC) Substrates manufacturing facility.

Taiyo Yuden (Japan, electronic components) is building new facilities for the expansion of multilayer ceramic capacitors production.

Applied Engineering (US, contract manufacturing) establishing a joint venture … to provide high-tech electromechanical contract manufacturing services, from prototyping to high volume production … to cater to the specific needs of clients in the semiconductor equipment manufacturing, life science and medical devices, defense and aerospace market segments, not only in Malaysia, but also to ASEAN countries and China.

Mercedes-Benz A-Class Limousine and Mercedes-Benz C-Class Sedan on display in the Queensbay Mall, Penang. Photo: WikiCommons

In addition, Mercedes-Benz has chosen Malaysia as the site of its Asia-Pacific regional logistics center, German chemical companies BASF and H&R have announced plans to expand production and Turkish Aerospace has opened a new office to carry out joint studies in a variety of areas which includes unmanned aerial vehicles, jet trainers, helicopter projects and modernization programs for the global aviation ecosystem.

While Covid-19 severely disrupted Malaysian business earlier this year and may do so again with the spread of the Omicron variant, and while the current flooding is severe, there do not seem to be any serious organizational or technical problems affecting the resilience of the country’s supply chains. 

On the contrary, Malaysia has remained an attractive destination for a wide range of foreign investment right through the pandemic and – particularly in the case of semiconductor packaging and test – a viable alternative to China and Taiwan.

It will therefore be interesting to see exactly what the US-Malaysian Memorandum of Cooperation will entail. 

And if “transparency,” “security” and “trust” mean something more to the US government than they do to private sector companies that have presumably done their due diligence before investing.

Scott Foster is an analyst with LightStream Research, Tokyo.