22-4-2024 (KUALA LUMPUR) Amidst escalating trade tensions between Beijing and Washington, foreign companies are reshaping their manufacturing strategies, with many opting to shift production bases away from China. This trend, commonly referred to as the “China Plus One” strategy, has significantly benefited Malaysia, emerging as a prime destination for high-tech investments and semiconductor manufacturing.
With a robust semiconductor industry bolstered by a 50-year legacy initiated by Intel’s establishment of its first international manufacturing plant in Penang, Malaysia has positioned itself as a pivotal player in the global semiconductor market. Intel’s recent investment in another advanced 3D chip packaging facility in Penang underscores Malaysia’s attractiveness as a manufacturing hub for cutting-edge technologies.
The ongoing trade tensions between the US and China have spurred semiconductor and electric vehicle companies to relocate to Southeast Asia, particularly Malaysia, to mitigate trade restrictions and fortify their supply chains. The established ecosystem in Penang and neighbouring Kulim in Kedah state has become a magnet for technology companies seeking to diversify their manufacturing operations amidst geopolitical uncertainties.
Samuel Tan, executive director of KGV International Property Consultants, highlighted Malaysia’s strategic advantage in navigating the trade war between the US and China. He noted, “We are friendly to both China and the US. Because of the trade war between them, we become a suitable conduit to balance trade war between these two countries.”
Prime Minister Anwar Ibrahim has actively courted high-tech investments through international engagements, extending invitations to German firms and European businesses to invest in Malaysia during his keynote address at the annual SME Future Day 2024 in Berlin. The country has witnessed a steady influx of foreign direct investment (FDI) in the tech sector, with major players like Intel and Infineon Technologies investing billions to expand their operations.
Despite Malaysia’s efforts to ascend the value chain and attract investment, challenges persist, including competition from neighbouring countries like Indonesia and Vietnam. Issues such as skilled labour shortages and integration within the local supply chain pose hurdles to Malaysia’s aspirations for higher value-added manufacturing.
Former Deputy Minister of International Trade and Industry, Ong Kian Ming, highlighted the importance of integrating local SMEs into the manufacturing ecosystem to maximize the benefits of foreign investment. The Malaysian government is actively engaging local companies and investors, with Minister of Investment, Trade and Industry, Tengku Zafrul Abdul Aziz, emphasising the formulation of a strategic semiconductor plan to enhance competitiveness and update incentive packages.
