Economists: Excellent semiconductor ecosystem drew Infineon’s 5 billion euros investment
07 Aug 2023
Malaysia has established an excellent ecosytem for semiconductor industry, enabling it to attract more investments from global players, economists said.
The latest multi-billion ringgit expansion by Germany’s giant Infineon Technologies AG for its Malaysian facilities will further boost the industry and create more opportunities for technology and knowledge transfer, they added.
Infineon on Thursday announced that it would invest up to 5.0 billion euros (about RM24.9 billion) to expand its manufacturing facilities in Kulim, Kedah over the next five years.
The global semiconductor company said the investment would lead to an annual silicon carbide revenue potential of about 7.0 billion euros by the end of the decade.
Tradeview Capital Sdn Bhd vice president Tan Cheng Wen told the New Straits Times that the investment is a welcome boost for the country and fulfills the increasing demand of electric vehicles.
This, he added, is supported by the Semiconductor Industry Association’s statement that the global semiconductor market is projected to grow at a compound annual growth rate of 8.8 per cent from 2022 to 2027, reaching US$818.6 billion by 2027.
He said Malaysia has the right expertise derived from the established industry value chain especially in the northern region.
“Another favourable factor is that German companies have been pressured to reduce their dependence and reliance on China.
“Infineon clearly has conviction in our nation as this investment is a top up from the previous 2.0 billion euros of investment into its silicon carbon chip fabrication plant in Kulim, bringing the total amount to 7.0 billion euros,” he said.
Malaysian Institute of Economic Research economist Dr Shankaran Nambiar said Infineon has benefitted from an excellent ecosystem which prompted its decision to maintain its presence and eventually opt for expansion.
“Clearly, we can provide the talent and infrastructural support to make it worthwhile to build their presence in Malaysia over other countries. The project will give us the opportunity to benefit from technology transfer and it will also open up opportunities for outsourcing.”
Nambiar added that the decision will certainly benefit local vendors, making it possible in time for the semiconductor sector to emerge as a global leader in the industry.
Independent economist Julian Suresh Sundaram said the investment will facilitate the country in improving the economic headlines which helps in investor sentiments.
“The large investment not only will help to draw industries that support chipmaking but also give notice to large enterprises as to the attractiveness of Malaysia as a capital investment destination.
“Its stable financial markets, strong financial regulation, well capitalised banks, an open economy and a skilful labour force will be noticed more leading towards more serious investment considerations and indeed direct investment,” he said.
He emphasised that improved sentiments will aid in a positive narrative over recent financial market improvements especially for the ringgit.
Improving sentiments will also aid with the positive narrative over recent financial market improvements, especially if the ringgit extends its gains from here.
“It will help Malaysia placing in the future economic landscape when compared to peers given the factory supports overall environmental goals (electric cars and solar) and also raises the know how of the labour force supporting future endeavours,” he said.