MSIA: Local semiconductor sector to pick up in second half of 2024 - MIDA | Malaysian Investment Development Authority
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MSIA: Local semiconductor sector to pick up in second half of 2024

MSIA: Local semiconductor sector to pick up in second half of 2024

18 Feb 2024

Malaysia’s semiconductor sector is forecast to shine beginning in the second half of 2024 as the so-called ‘new oil’ in its recovery phase at a global scale post-2023’s downcycle.

Malaysia Semiconductor Industry Association’s (MSIA) confidence was based on World Semiconductor Trade Statistics (WSTS) prediction that the world semiconductor market would rebound by 13.1% this year to reach US$588 billion (RM2.8 trillion).

MSIA president Datuk Seri Wong Siew Hai said the global semiconductor sales dipped 8.2% to US$527 billion in 2023, but the Malaysian market was able to retain its strength throughout the year.

The evidence can be seen in last year’s electrical and electronics (E&E) sector, where exports decreased by only 3.0% to RM575.45 billion after 2022’s record year of 30% growth to RM593 billion, he told Bernama.

According to 2023’s full-year print, exports of semiconductor devices and integrated circuits (ICs) attained a growth of 0.03% to RM387.45 billion in 2023.

E&E products dominated Malaysia’s total exports in 2023, accounting for 40.4% share comprising products such as photosensitive semiconductor devices, batteries and electric accumulators, static converters, electric control panels, parts for switching apparatus and electric control panels as well as parts for diodes, transistors, piezoelectric crystals and other semiconductor devices.

The current prolonged geopolitical fragmentations are sending investors in search of new production homes or moving to trusted countries.

Wong said that following this many multinational companies in China diverted part of their production and supply chain as a mitigating strategy by selecting Malaysia as their “Plus One” location.

“The trend is likely to continue as many firms are currently evaluating Malaysia as their ‘Plus One’ location,“ he noted.

The “China Plus One” strategy emerged as a critical policy for companies to reduce their reliance on China by diversifying their supply chain activities to other markets.

He noted that the whole world is looking at enhancing supply chain resiliency.

“There are no simple solutions as the supply chain is very complex. Over the last two years, E&E companies have increased their productivity and acquired land to build factories to increase their capacities,” he added.

Hot competition in the electric car (EV) market is pushing local automakers to increase production and offer more affordable models.

In total, sales are expected to reach 14 million units by the end of 2023 after hitting the 10,000 mark a year before.

Following this everyone is keen on developing their domestic semiconductor ecosystem amid the full-speed race in the EV market, Wong said.

WSTS highlighted that all markets are poised for ongoing expansion in 2024 with the Americas and Asia-Pacific, in particular, forecast to demonstrate significant double-digit growth on a year-on-year basis.

In its December report, WSTS said the industry growth is expected to be primarily fuelled by the memory chip sector, which is set to soar 40% to around US$130 billion in 2024.

The majority of other principal segments, including discrete, sensors, analogue, logic and micro, are also expected to record single-digit growth rates.

Wong said Malaysia can play a critical role in the global supply chain, riding on its position as the 6th largest exporter of semiconductors in the world.

The country also controls 13% of the global market for packaging, assembly and testing services for semiconductors.

With the talent pool of more than 50 years of industry experience and the combined efforts of all stakeholders, Malaysia can succeed in this sector, Wong reckoned.

Given the importance of the E&E sector to the Malaysian economy and its place in the global supply chain, he emphasised the need for collaboration among all parties involved to optimise Malaysia’s potential in the E&E sector, given its significant economic contribution and pivotal position in the global supply chain.

“For a start, the country needs to improve its world competitive ranking, improve ease of doing business (some programmes already ongoing), enhance the E&E ecosystem and be ready to provide incentives in light of the global minimum tax implementation in 2025,” he said.

Wong believed Malaysia should continue to attract companies with state-of-the-art technology and encourage existing companies to go up the value chain.

He also recommended that the nation enhances its ecosystem by attracting more wafer fabs, establishing both local and foreign direct investments in IC design companies, advancing packaging in assembly and testing, and creating Malaysian global champions in automation.

Source: The Sun