Semiconductor firms ramp up Malaysia investments

Malaysia continues to attract investment from technology firms building out their production capacity in the southeast Asia-Pacific region, with some semiconductor firms moving output from China.

Malaysia attracted $41.7bn in the January-September 2022 period, according to the Malaysian Investment Development Authority. The electrical and electronics (E&E) sector led investment in manufacturing with a total of $4.9bn. The information and communications sub-sector, including data centre and cloud computing, dominated the services sector with $14.9bn in investments.

Foreign direct investment increased by 15pc to $28.1bn, of which China accounted for $10.6bn.

During the January-September period, major investments included South Korea's Samsung SDI Energy Malaysia building a 7bn Malaysian ringgit ($1.58bn) electric vehicle battery cell manufacturing facility in Negeri Sembilan as its first production location in the region, set to start operation in 2025.

Malaysia-based TF-AMD Microelectronics is investing 2bn ringgit to expand its manufacturing facility in the technology hub of Penang, with a second site for advanced semiconductor engineering, design and process technologies for high-performance computing.

Japan-based Ferrotec Holdings has established a new manufacturing facility at Kulim Hi-Tech Park in neighbouring Kedah for electromechanical assembly and advanced material fabrication for semiconductor equipment.

More recently, US-based semiconductor manufacturer Micron earlier this month said it is investing another $1bn to build a second factory to start production of computer memory and data storage chips in 2023.

On 13 December, Sustio, a Malaysia-based subsidiary of semiconductor packaging and printed circuit board (PCB) manufacturer Simmtech, said it is accelerating its investment of $50mn to double its PCB production capacity in Penang in 2023, following the opening of its first plant in the country in May 2021. The company previously planned to carry out the second phase over five years.

Malaysia-based automated test equipment manufacturer QES Group on 13 December said it plans to invest 20mn-25mn ringgit to expand its manufacturing capacity in Penang. The new plant will double its capacity. The company's Selangor plant is running at 90pc utilisation.

US-based assembly automation firm Lanco Integrated on 8 December opened a $3mn factory in Penang, moving its Asia headquarters from Hong Kong. The company plans to expand the facility in the future as it expands across the region.

In November, Taiwan-based chip manufacturing services firm Advanced Semiconductor Engineering broke ground on a $300mn expansion project at its Penang facility, with Plants 4 and 5 expected to be completed in 2025.

US wafer fabrication equipment supplier Lam Research, which opened a 1bn ringgit facility in Penang last year, is moving more of its Asia operations to Malaysia, partly in response to US restrictions on exports of advanced chip technologies to China. The company had already planned to make the Penang facility the hub for its Asia manufacturing operations and ramp up production to become the highest-volume plant of its global sites. In reporting its third-quarter earnings in October, Lam said it expects the China export controls to have an impact of $2.0bn-2.5bn on its 2023 revenues.

Malaysia is increasingly becoming a regional hub for the semiconductor industry, particularly as companies look to diversify their production and avoid US-China trade restrictions.

Monthly manufacturing data show that Malaysia's sales of E&E products continue to outpace its overall manufacturing sales, rising by 16.6pc on the year in October, compared with overall sector growth of 12.9pc. There were indications of slowing demand for electronic products, as E&E sales rose by 24.7pc in September.

In the January-October period, E&E sales increased by 21.8pc year on year to 479.9bn ringgit, up from a 13.7pc year-on-year increase to 393.97bn ringgit in the same period of 2021.

Malaysia's semiconductor volumes rose to 27.4bn units over the first 10 months of this year, from 24.67bn units in the same period of 2021. The manufacture of diodes, transistors and similar semiconductor devices climbed by 37.3pc year on year, compared with a 15.7pc increase over the same period a year earlier. The manufacture of communications equipment fell by 0.1pc, compared with a 16.1pc drop a year earlier, indicating a slowdown in the decline but a sector still under pressure.

By Nicole Willing