Issues Plaguing Penang’s Semicon Industry, Talent Capacity And Growing Local Champions

Local think tank, Penang Institute and Research for Social Advancement (REFSA) in a recent study tour attended by top dignitaries including the Deputy Minister of International, Trade and Industry Liew Chin Tong identified key issues that need to be addressed urgently in the vibrant semiconductor industry in Penang.

One of the most pressing matter and a recurring theme is on talent capacity which is impacting the smaller players especially the smes.

Visiting over ten industry players cutting across the entire semiconductor ecosystem, from companies focusing on integrated device manufacturing to companies working on integrated circuit designs, wafer fabrication, companies in test, assembly and packaging, to metal fabrication & precision engineering. Companies originating from the USA, Europe as well as Malaysia were included for example OSRAM, Lam Research, Intel, Micron and AT&S. Local champions visited include ViTrox, Inari, Penang automation cluster and Greatech. Early in the trip it became obvious to participants that Malaysia is in a unique position to take advantage of semiconductor businesses looking to expand their manufacturing capabilities and develop new sourcing and supply strategies. The tour highlighted several recurring themes, most crucially the urgent need to secure talent capacity and grow local champions.

MNCs cited a mature ecosystem as the number one reason why they chose to locate their facilities in Malaysia, with many of them choosing to locate some of their largest and most sophisticated manufacturing capabilities in Penang and Kulim. To capture this momentum, the nation’s priority must be to strengthen its existing ecosystem by deepening the integration between MNCs and domestic companies, improve the local content of our exports and expand research & development (R&D) capabilities and activities. However the biggest challenge faced by this tech crunch worldwide is the availability of good talent. It is heartening to see big companies working together with academia to address this issue.

The most successful companies address this problem with proactive recruitment activities in higher learning institutions as well as having their own in-house training programmes to bridge the gaps. This is however sadly out of reach for many of our smaller SMEs and insufficient to meet current demand. Given that Malaysia does have the supply of good talent but many leave the country, we need proactive steps to transform Malaysia from a low-cost semiconductor hub into a nation that provides value for money, is a reliable, secure and highly capable chip player.

The study tour identified several opportunities provided by firstly, the gaps within the current supply chain in Malaysia in the test, assembly and packaging space in the materials sector; and secondly, in the front-end of the semiconductor chip making process that involves chip design as well as wafer fabrication. The main reason for the underdevelopment of these sectors are the high barriers to entry in terms of capital, knowledge and knowhow. However in the packaging, assembly and test space, companies together with the government and academia are working on building an advanced packaging ecosystem. This calls for extremely rare talent as well as leading edge R&D capabilities.

Ultimately, the study tour offered participants considerable food for thought, particularly in terms of adapting these strategies. Through observations, participants were encouraged to jointly rethink policies and implementation considerations in their respective work.

-Published in Business Today on 10 May 2024.

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