by Tan Aik Keong (AK)
At the Kuala Lumpur 20 Summit (KL20), the Selangor state government announced it will work with the federal government, leading international semiconductor companies and well-known venture capital firms to set up the "Malaysia Semiconductor Accelerator and IC Design Park: Selangor Hub" — set to become Southeast Asia's largest integrated circuit design park. It's a strategic move aimed at positioning Malaysia as a genuine contender in global IC design.
Why this matters
I see this as a genuinely valuable, value-adding move for Malaysia's development. Technology trends — smartphones, EVs, IoT, AI — have driven a huge surge in global chip demand. Malaysia has a long history in semiconductors; we've been active in back-end work for 40–50 years, particularly OSAT (outsourced semiconductor assembly and test) — labour-intensive work with relatively low technical and capital requirements that has created a large number of jobs.
According to SEMI (the global semiconductor industry association), nearly 90% of global semiconductor equipment spend goes into wafer fabs — a high-end market Malaysia hasn't broken into, which is a real missed opportunity. Investing in a fab like TSMC's requires capital outlay north of USD 1 billion, a bar only a handful of companies — TSMC, Intel, Samsung — can currently clear.
Why IC design makes more sense for us
So moving toward IC design instead — lower upfront capital, heavier investment in talent — actually makes a lot of sense. In the short-to-medium term, there are two clear benefits. First, it lifts local talent's professional IC design skills. Second, once that talent base exists, it becomes a draw for more FDI, encouraging multinationals to set up IC design centres in Selangor.
Longer term, this could help Malaysia reach high-income nation status, deepen our ties to the global industry, and drive innovation and IP creation toward genuine technological independence — a real long-term economic contribution.
What it'll take to get there
Government will need to take a series of concrete steps to make this work.
First, this is a long game. We need the right talent and the right partners, and government needs to provide real support. Talent is limited, so we'll need to partner with foreign companies to bring in expertise while training and retaining local talent. We can also draw lessons from past experience — the multinational IC design centres in Penang and Kulim — to sharpen our own competitiveness. The good news: the project has already secured four significant partners, including ARM Ltd, Phison's MaiStorage (led by Dato' Pua Khein Seng), SkyeChip, and the Shenzhen Semiconductor Industry Association.
Second, within IC design, we need a clear strategic position. That means doing the market research to find segments with weaker competition but real demand — peripheral ICs, for instance — rather than going head-to-head with giants like Qualcomm and Broadcom on mainstream products.
Third, we need to explore strategic partnerships and investment specifically aimed at drawing multinationals to invest in local IC design companies — which should also make us more competitive on procurement and long-term collaboration.
The end goal: from Made in Malaysia to Made by Malaysia
Our ultimate goal should be becoming an Original Design Manufacturer (ODM). The difference between an ODM and a regular contract electronics manufacturer is IP ownership — an ODM owns its own intellectual property, while a standard contract manufacturer works off a customer's design and IP. If we can encourage local participation in product design, prototyping and production, Malaysia's semiconductor industry can shift its positioning from "Made in Malaysia" to "Made by Malaysia."
In short, I think we've got a good start here — what comes next is a test of government's ability to execute.
Part of the AK AI Corner column. Originally published in Oriental Daily (东方日报) on May 4, 2024.