WHILE Malaysia is a critical hub in the global supply chain for automotive-grade chips, there is limited synchronisation or integration between the country’s semiconductor ecosystems and the automotive industries.
Malaysia Semiconductor Industry Association (MSIA) president Datuk Seri Wong Siew Hai told StarCarSifu that there is a need for local companies to design and develop chips, sensors and electronics systems in Malaysia, rather than just manufacturing them.
“The government needs to encourage automotive companies to localise their supply chains, and MNCs (multinational corporations) to provide opportunities for local companies to do design and development in addition to manufacturing the chips” he said.
Wong explained that chips manufactured in Malaysia are exported to countries with advanced automotive industries, where they are integrated with various automotive modules, systems and components.
“Some of these automotive modules and components would be shipped here, for cars that are assembled in Malaysia.
“Despite our leadership in chip packaging and testing, there is very limited integration with our local automotive sector.
“What we need is for the whole automotive ecosystem to be localised, design and manufactured in Malaysia,” he said.
Wong also spoke about the importance of the need to invest in developing local talent to design and develop chips, and attracting top talent from abroad to accelerate the design process and product.
Wong had noted previously that Penang has a strong base for IC design with a headcount of over 7,000 engineers.
“The talent pool is not sufficient for complex designs. You need experienced and top talent for the more complex chip designs,” he said.
Wong pointed out that back in 2020 and 2021, automakers worldwide had been hammered by shortages of automotive chips and other components as a result of plant closures in Malaysia caused by the Covid-19 pandemic.
In August 2021, Ford Motor had temporarily suspended production of its popular F-150 pickup truck at one US plant because of “a semiconductor-related part shortage as a result of the Covid-19 pandemic in Malaysia”.
The average ICE (internal combustion engine) car has about 1,500 semiconductors while an EV (electric vehicle) has about 3,000 chips, according to industry estimates.
SEMI president and CEO Ajit Manocha had noted, “Automobiles have become semiconductors on wheels.”
SEMI is an industry association to advance the global semiconductor supply chain.
Malaysia Semiconductor Industry Association (MSIA) president Datuk Seri Wong Siew Hai
Meanwhile, Deputy Minister of Investment, Trade and Industry (MITI) Liew Chin Tong said recently that there is a pressing need for Malaysia to integrate its thriving semiconductor and automotive industries.
At the recent first meeting of the Council of Automotive Eminent Persons (CAEP), Liew had said there is an absence of meaningful synergy between the two industries in the country.
He noted that Malaysia has a critical global role in semiconductor manufacturing, particularly in chip packaging, testing, and assembly.
A recent article by aseanbriefing.com noted that the recent US$250mil (RM1.05bil) investment by British chip giant ARM in Malaysia serves as a potential catalyst for growth.
“ARM’s investment aligns with Malaysia’s long-term vision of attracting high-tech semiconductor design and research, moving beyond its traditional role in backend chip manufacturing.”
This opportunity must be met with strategic planning, workforce development, and sustained government-industry collaboration, noted aseanbriefing.com.
The country contributes about 13% of the world’s semiconductor testing and packaging, with increasing investments in integrated circuit (IC) design aimed at establishing a major IC design hub.
Additionally, Malaysia holds about 7% of the global semiconductor market, with aspirations to double this share to 14% by 2029 through strategic investments and advancements in chip design.
Meanwhile, an automotive industry veteran told StarCarSifu that in order for more integration between the country’s semiconductor and automotive industries, incentives such as tax breaks or improved regulatory processes are needed to encourage “final product manufacturers to set up shop here to produce components and technology locally.”
He also highlighted the need for more incentives to encourage further collaboration and technology transfer between foreign partners and domestic automotive players.
“We have to explore ways to incentivise global automotive manufacturers to set up more facilities in Malaysia to produce high-tech vehicle modules and further advance technology transfer, and not just focus on vehicle assembly,” said the automotive industry veteran.
He pointed out that presently, incentives for automotive investors are too short-term, which hampers long-term strategic planning.
“We should provide longer-term incentives (at least five to 10 years) to encourage technology players to plan and invest here, similar to what some neighbouring countries are offering,” he said.
