Despite semicon revival, Malaysia still seen needing E&E ecosystem boost to climb value chain
04 Oct 2023
Malaysia must further develop its electrical and electronics (E&E) sector to fully capture the benefits of a surge in approved investments related to their manufacture, said Socio-Economic Research Centre executive director Lee Heng Guie.
Malaysia recorded an impressive RM44.9 billion in approved investments in the manufacturing sector between January and June this year and out of this, RM10.9 billion were from the E&E industry, according to Malaysian Investment Development Authority (Mida).
This is in line with an anticipated 2024 demand recovery as projected by the World Semiconductor Trade Statistics (WSTS) Forecast of Global Semiconductor Sales.
This opens up potentials for the country to move up the E&E value chain to attract high value investments, create jobs, and raise salary levels that have remained stagnant.
According to Lee, Malaysia’s E&E products and sector play a pivotal role in global semiconductor supply chains, having developed its local industry and ecosystem over the past five decades.
“The E&E industry is one of the major industries that contributed to Malaysia’s exports of manufactured goods, jobs creations as well as income growth,” he said.
As outlined in the New Industrial Master Plan (NIMP) 2030, he said the E&E sector was identified as one of the high-growth, high-value industries (HGHV).
“Malaysia is ranked as the seventh largest semiconductor exporter, with a global market share of seven per cent and Malaysia is now supplying approximately 13 per cent of the demand for packaging and testing, along with certain levels of wafer fabrication, such as 200nm,” he said.
He said Malaysia needs to continue to enhance its ecosystem to seize the opportunities arising from the US-China strategic rivalry.
“In particular, we need to attract foreign direct investment in wafer fabrication facilities and leading-edge technologies,” he told Malay Mail.
He said the production of chips is simultaneously very globalised and extremely specialised, so it necessitated large investments to produce output at the different stages of production.
This would lead to strong global interdependencies, he added.
“The proposed mission project to attract one globally competitive wafer fabrication company to set up local operations, and to expand capabilities to produce 28-40nm wafer fabrication from current 200nm is a strategic move to keep pace with future demand; build competency and strengthen the semiconductor ecosystem as well as to ease the supply chains disruption arising from geopolitical shocks,” he said.
Lee said the development of high value and high growth industries in Malaysia will increase demand for skilled manpower, which then leads to better wages and compensation for Malaysian employees.
Kenanga Investment Bank head of economic research Wan Suhaimie Saidie concurred that the hike in investments in the E&E sector is a sign that the country is moving up the value chain.
“It is a much-awaited progression that Malaysia is buying for and hopefully it will trickle down to the wider ecosystem benefitting the SMEs,” he said.
He said this will also help boost the salary scales and job opportunities for local talents.
According to Mida, among the high value E&E investments is from Texas Instruments Malaysia Sdn Bhd.
The approved investments by Texas Instruments, that totalled RM7.4 billion, was in semiconductor devices and high-performance integrated analogue circuits.
In August, it was reported that German semiconductor giant Infineon Technologies AG announced that it would invest up to €5 billion (RM24.9 billion) to expand its manufacturing facilities in Kulim, Kedah, over the next five years.
Mida also stated that a total 48.1 per cent of the recorded FDI in the country for the first half of this year consisted of new projects, reaffirming foreign investors’ confidence in Malaysia as a preferred investment destination.
The approved investments in the manufacturing sector is expected to create a total of 26,759 potential job opportunities, out of which 10,892 (40.7 per cent) are high-impact jobs.
Source: Malay Mail