Media Statement by Research for Social Advancement (REFSA) on 10 May 2024
On 6 to 8 May, local think tanks Penang Institute and Research for Social Advancement (REFSA), with the support of Invest Penang, successfully hosted a semiconductor study tour in Malaysia’s northern region focusing on factories and industry players in Penang and Kulim. The study tour aims to understand semiconductor geo-economics as well as the chip-making process and Penang-Kulim’s role within it. It also seeks to deliberate Malaysia’s national policies/incentives to strengthen its position in the semiconductor industry and understand its competitive positioning and centre of gravity in chip-making within ASEAN.
The visit is at an opportune time as Malaysia needs to craft her response and define its active neutral strategy towards the geopolitical trade conflict on chip dominance. The key takeaway is that Malaysia benefits from a 50 year mature ecosystem in the test, assembly and packaging space, giving it a springboard into deepening this area as well as expanding towards other higher value added areas of the chipmaking process. However talent is the main constraint, forcing us to not only need to come together to urgently address this issue, but perhaps to reshape the narrative of Malaysia as a low cost producer into one that of quality talent, ease of doing business and supply chain security. This requires the joint collaboration between multiple government agencies, the private sector and academia.
Joined by Deputy Minister of International, Trade and Industry YB Liew Chin Tong, the study tour brought together a diverse group of policymakers and thought leaders from across the South East Asia, including Professor Tetsuya Watanabe, President of Economic Research Institution for ASEAN and East Asia (ERIA); Dr. Yasuhiko Matsuda, Malaysia Country Manager of World Bank; Dr. Intan Murnira Ramli, Senior Policy Fellow of ERIA; Dr. Francis Hutchinson and Dr. Cassey Lee, both Senior Fellows of ISEAS; Kuik Cheng Chwee Head of the Centre for Asian Studies National University of Malaysia (UKM), Jeong Kwang Jo, Senior Regional Cooperation Specialist of Asian Development Bank and Dr. Angela Tritto, Assistant Professor of University of Brunei. With Lim Li Lian, Deputy Director of REFSA, Datuk Dr. Ooi Kee Beng, Executive Director of Penang Institute and Dato’ Loo Lee Lian, CEO of Invest Penang in attendance, the study tour was also attended by local government agencies and stakeholders including Datuk Hisham Hamdam, Chief Investment Officer of Khazanah Nasional Berhad; Dato’ Indera Ahmad Sabirin Arshad, CEO of SIRIM Berhad; Lim Bee Vian, Deputy CEO of MIDA; Lau Yue Hoong, Programme Director of CREST; Wong Chan Wai, Senior Economist of BNM, Penang; Ben Ibrahim Suffian of Merdeka Centre and various agencies, think tank researchers and academicians from UKM, MIDA Penang, MIDA Kedah & Perlis, MIDF Penang, Bait-al Amanah, ISIS, to name a few. Also joining the delegation in Kulim are YB Prof Dr Haim Hilman, State Exco for Kedah as well as Dato Wira Ku Abdul Rahman, Member of Parliament. The delegates were hosted to a dinner by YB Zairil Khir Johari where InvestPenang also presented a sneak preview of a talent strategy roadmap for Penang.
Over the three days, participants visited more than 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 made during the tour, participants are encouraged to jointly rethink policies and implementation considerations in their respective work. Where Malaysia is concerned, the study tour reinforced the need for the country to continue to build its domestic capacity so as to take advantage of the current opportunities it is afforded.
For enquiries, please contact:
Lim Li Lian
Deputy Director, REFSA
Tel: +6012 403 8813Email: llim@refsa.org