Malaysia’s semiconductor industry seeks to remain competitive amid threat of US tariffs

Key Concepts:

• Semiconductor industry in Malaysia
• US-China trade tensions and tariffs
• Reshoring pressures on American multinational corporations
• Malaysia's semiconductor ecosystem (assembly, testing, packaging)
• Competition in Southeast Asia's semiconductor market
• Value chain advancement
• Workforce development and talent programs
• Investment uncertainty
• National Semiconductor Strategy

1. Malaysia's Semiconductor Industry and Potential Impact of US Tariffs:

• Malaysia is a significant global semiconductor exporter.
• The US imposed a 24% tariff on most US-bound exports from Malaysia, excluding semiconductors and some electronics.
• Semiconductors and electronics account for 60% of Malaysia's total exports, so tariffs on these goods could severely impact the Malaysian economy.
• Many semiconductor manufacturers in Malaysia are American multinational corporations (MNCs).
• These MNCs face reshoring pressures from the Trump administration.

2. Historical Significance and Current Position:

• "Intel was here, AMD was here, HP was here... Dell, everybody was here." - Highlighting the historical presence and contribution of major US tech companies to Malaysia's semiconductor industry.
• Malaysia is the sixth-largest semiconductor exporter globally.
• Malaysia has an established ecosystem in assembly, testing, and packaging.

3. Increasing Competition and Opportunities:

• Competition is intensifying in Southeast Asia for a share of the semiconductor market.
• The Asian region is dynamic with rapid technology adoption.
• The current period of uncertainty presents an opportunity for Malaysian companies to enhance productivity and competitiveness.
• Companies should focus on moving up the value chain.
• Companies should evaluate their supply chains and consider alternative options to enhance competitiveness.

4. National Semiconductor Strategy and Workforce Development:

• Malaysia must stay the course and double down on its national semiconductor strategy.
• Having the right workforce is crucial.
• Focus on talent programs and creating the right number of fresh graduates, specifically in engineering and the semiconductor industry.

5. Investment Uncertainty Due to US-China Tensions:

• US-China tensions in trade, technology, and security have dampened the appetite for new investments.
• A "wait and see" approach is expected for new greenfield investments.
• Malaysia's efforts to attract investments in R&D and higher value-added segments of semiconductors may be hindered.
• "We don't invest on uncertainty... we invest on certainty." - Emphasizing the need for stability to attract investments.
• SMEs should not react based on perceived opportunities at this time.

6. Negotiation Window and Potential Trade Deal:

• The US has paused its sweeping tariffs on almost all trade partners for 90 days.
• Malaysia has two months to negotiate a trade deal with Washington to avoid harming its economy.

7. Conclusion:

Malaysia's semiconductor industry faces challenges due to US-China trade tensions and potential tariffs. To mitigate these risks, Malaysia needs to enhance its competitiveness, focus on workforce development, and attract investments in higher value-added activities. The country has a limited window to negotiate a trade deal with the US to avoid significant economic impact.