Government's Latest Incentives For Semiconductor Industry In Malaysia

• Published date: 05 April 2024
• Subject Matter: Government, Public Sector, Government Contracts, Procurement & PPP
• Law Firm: Azmi & Associates
• Author: Mr Nur Insyirah Mohamad Noh and Siti Basira Mohd Rofi

Introduction

Malaysia's semiconductor industry stands at the forefront of technological innovation, shaping the nation's economic landscape in profound ways. Since the late 1960s and early 1970s, Malaysia has emerged as the key centre for the electrical and electronics (E&E) industry, especially notable for the widespread presence of assembly and test facilities catering to the semiconductor sector.¹ With a legacy rooted in precision and advancement, the industry has become one of the cornerstones of Malaysia's economic prowess. As one of the main global producers of semiconductor assembly, packaging and testing (APT),² Malaysia is said to gain benefit from the US-China trade war and geopolitics issues by playing as the neutral party, which resulting in investors diversifying their operations and coming to the country.³

The significance of the semiconductor industry in Malaysia cannot be overstated as it serves as a catalyst for economic growth, driving innovation, creating high-skilled employment opportunities, and fostering a competitive edge in the global market. In 2022, it is reported that Malaysia has produced approximately 32.64 billion semiconductors which include the ones used in the electronic circuits and solar cells such as the silicon and gallium arsenide (GaAs) compared to 29.45 billion in the previous year.⁴ As of 2023, Malaysia commands a notable 13% share in the worldwide market for APT services within the semiconductor sector, securing its position as the sixth largest exporter of semiconductors globally. The significant economy impact of the semiconductor industry is underscored by its contribution to approximately 25% of Malaysia's Gross Domestic Product (GDP). This substantiates the pivotal role of Malaysia in the global semiconductor supply chain, emphasising its competency in providing essential services as well as contributing to the country's economic prosperity.⁵

Additionally, the recently revealed New Industrial Master Plan (2030) NIMP poised to function as the key enabler for the economy, which will also benefit the semiconductor industry.

The plan's strategic initiatives will enhance Malaysia's integrated involvement across the front-end and back-end activities such as the semiconductor equipment manufacturing, wafer fabrication, and integrated circuit design in the semiconductor system.⁶

Fundamentally, the vigour of the semiconductor sector not only signifies its immediate economic influence but also emphasises its...