CEO Morning Brief

Govt Wants Semicon Sector to Move Up Value Chain From OSAT Forte

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Publish date: Thu, 30 May 2024, 10:05 PM
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TheEdge CEO Morning Brief
Minister of Investment, Trade and Industry Tengku Datuk Seri Zafrul Abdul Aziz said the country has to enhance its capabilities in IC design and embedded software. (Photo by Sam Fong/The Edge)

PUTRAJAYA (May 29): The government aims to move up the semiconductor value chain from outsourced semiconductor assembly and test (OSAT) to focus on high-end value chain opportunities such as IC design or embedded software, high-end manufacturing and manufacturing equipment, according to Minister of Investment, Trade and Industry Tengku Datuk Seri Zafrul Abdul Aziz.

“Our current situation in the [semiconductor] value chain, our strength is OSAT. Many companies in Malaysia are heavily involved in third-party IC packaging and services.

“The country has to enhance its capabilities in IC design and embedded software. We want to focus on local companies especially to move the IC design, not just focusing on lower complexity designs but higher complexity designs,” Zafrul told reporters during the briefing for the National Semiconductor Strategy (NSS) on Wednesday.

On Tuesday, Anwar unveiled the RM25 billion allocation under NSS, earmarked for targeted incentives. NSS comprises three phases aimed at expanding existing semiconductor fabrication plants and enticing foreign direct investment, particularly from purchasers associated with tech giants Apple, Huawei and Lenovo.

For the first phase, Miti is leading several agencies and other ministries in a quest to attract at least RM500 billion in investments. This includes both domestic direct investment (DDI), focusing on advanced packaging, IC design and manufacturing equipment, as well as foreign direct investment (FDI), targeting wafer fabs and manufacturing equipment.

Out of the RM25 billion allocation, RM5 billion is slated for phase one, according to Zafrul. However, he did not disclose further details when queried about the breakdown for the allocations.

"The breakdown of the RM25 billion allocation is anticipated to span five years, with approximately RM5 billion allocated for phase one. If you ask me, across these three phases, I estimate a timeframe of around 10 years," he stated.

"On the investment front, our goal is not only to attract FDI but also to promote DDI. Malaysia boasts prominent companies like Vitrox (Corp Bhd) and Inari (Amertron Bhd), which stand to benefit significantly from this allocation. We aim for these local companies to ascend higher. However, in terms of value, FDI will likely dominate due to the substantial capital expenditure requirements," he added.

Malaysia trails behind Singapore in AI venture capital investments

Zafrul also admitted that Malaysia is trailing behind Singapore in terms of artificial intelligence (AI) venture capital investments. He responded to an East Asia Forum report revealing that 75% of AI venture capital investments are concentrated in Singapore, surpassing other major Asean economies including Malaysia, Indonesia and Thailand.

“I do admit that we are just building the infrastructure on AI, so I think we need time to compete with Singapore. In terms of data centres and security, we need a little bit of time to pass the Cyber Security Bill 2024 in the last parliamentary session, to expect the investments to come in quickly.

The Cyber Security Bill, aimed at bolstering the nation’s cybersecurity through compliance with specific measures, standards, and processes in managing cyber threats, was only passed last month, according to him.

“For example, in the case of Microsoft, it was one of the concerns raised before they (Microsoft) made their investment announcement (worth US$2.2 billion [RM10.35 billion]) in cloud and AI transformation.

In April, Digital Minister Gobind Singh Deo was quoted as saying that the Cyber Security Bill could help the government ensure the viability and efficiency of the Critical National Information Infrastructure in handling cybersecurity incidents.

Source: TheEdge - 30 May 2024

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