(From left) Collaborative Research in Engineering, Science & Technology (Crest) CEO Jaffri Ibrahim, The Edge Malaysia editor-in-chief Kathy Fong, HSBC managing director and head of commercial banking Karel Doshi, Digital Edge editor Pathma Subramaniam, IJM Corp Bhd group CEO & managing director Datuk Lee Chun Fai, The Edge Media Group chairman Tan Sri Tong Kooi Ong and its publisher and group CEO Datuk Ho Kay Tat, HSBC Malaysia CEO Datuk Omar Siddiq, state exco for infrastructure, transport and digital Zairil Khir Johari, Minister of Investment, Trade & Industry Tengku Datuk Seri Zafrul Aziz, Malaysia Semiconductor Industry Association president Datuk Seri Wong Siew Hai, BlueChip VC Sdn Bhd founder Datuk Seri Lai Pin Yong, InvestPenang CEO Datuk Loo Lee Lian, Malaysian Digital Economy Corporation (MDEC) vice president of digital industry acceleration Wan Murdani Wan Mohamad, The Edge Malaysia managing editor Anna Taing and HSBC commercial banking regional head of sustainability (Asia Pacific) Sunil Veetil. (Photo by Low Yen Yeing/The Edge)

GEORGETOWN (Sept 9): Developing talent and cultivating homegrown champions are the key challenges facing Malaysia’s semiconductor industry, as highlighted at The Edge–HSBC New Era For E&E Industry Forum 2024.

As the country rides the next wave of semiconductor innovation, its success will hinge on addressing the twin hurdles of funding and talent development — both critical to ensuring the industry's long-term competitiveness.

The forum, entitled 'Riding the Next Wave', brought together industry leaders and policymakers to discuss the future of the electrical and electronics (E&E) sector, focusing on overcoming obstacles and seizing opportunities.

“As the [crude] oil drove industrialisation and economic growth in the 20th century, semiconductors have now overtaken oil in strategic importance. [Therefore] countries that control semiconductor technologies hold a significant and strategic advantage. And this influence extends beyond mere technological advancements, impacting global relation and supply chains,” said Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz in his keynote address.

“We have our homegrown champions in the likes of Inari Amertron Bhd (KL:INARI), ViTrox Corp Bhd (KL:VITROX), Pentamaster Corp Bhd (KL:PENTA) and Oppstar Bhd (KL:OPPSTAR), to name a few, that have risen to the forefront, not just as participant, but actually as leaders in the global supply chain.

“But if we want to maintain this trajectory, we must shift from being a low-cost manufacturing hub to one that focuses on advanced know-how, intellectual property and advanced IT capabilities.

“Only then can we continue to solidify our position as a key player in the semiconductor industry. We want to drive innovation and growth for the next century,” he said.

Tengku Zafrul also addressed the issue of funding for the semiconductor sector, particularly in relation to the RM25 billion allocated under the National Semiconductor Strategy (NSS). While the funds are earmarked for research and development (R&D), incentives and talent development, the minister said that this amount alone is insufficient to fully drive the industry’s growth.

“We need to work closely with [other agencies] and it’s also why I’m bringing in funds [into this sector]. Many private equity players, pension funds and even government funds are trying to understand this industry because they are not as exposed to this industry as they should be,” he said.

“They are more exposed to traditional portfolios because they want stable returns but when you look at the majority of this sector, there are opportunities as well.”

He added that the semiconductor industry requires capital at various stages of growth, ranging from mezzanine financing to venture capital and bank loans. A nationwide, collaborative approach will be key to advancing the industry and positioning Malaysia as a global player.

“Funders have to come in at different levels, from mezzanine all the way to venture capital as well as the banks. The NSS is looking at collaboration with all relevant stakeholders to get things off the ground faster.”

“It is aggressive, but it is what we actually have in mind. We're also talking to a few companies and trying to work together so that we can develop a global champion too.”

Although the strategy is ambitious, he said the government is already in discussions with several companies to foster the development of a globally recognised semiconductor champion.

Penang, a key hub in Malaysia’s E&E sector, has been at the forefront of this growth.

Penang executive councillor for infrastructure, transport and digital, Zairil Khir Johari, noted the state’s remarkable achievements over the last few years.

“From 2019 to 2023, Penang attracted RM170 billion in investments — more than double the total of the preceding decade. This resulted in the creation of 78,000 jobs, with more than half in the E&E sector,” said Zairil.

The Penang state government remains committed to ensuring continued growth for the E&E sector by providing the necessary infrastructure, land and utilities, he added.

Key initiatives include new transmission power lines and a strategic partnership between Penang Development Corporation and Tenaga Nasional Bhd to redevelop the Gelugor Power Station, doubling its capacity to ensure stable and adequate power supply.

Other initiatives include RM1.18 billion in water supply projects, which have seen the development of four new water treatment plants. Additionally, the state has signed a Memorandum of Understanding with Indah Water Konsortium Sdn Bhd to reclaim wastewater for industrial use. The planned expansion of Penang International Airport will also boost the manufacturing and E&E sectors.

“These efforts will collectively strengthen Penang’s position as a manufacturing and E&E powerhouse,” Zairil added, noting that the success of these initiatives hinges on the cooperation and collaboration of all stakeholders.

As Malaysia continues to ride the next wave of semiconductor innovation, its ability to overcome the dual challenges of funding and talent development, combined with state-driven infrastructure enhancements, will be key to the industry's sustained growth and competitiveness on the global stage.

The full coverage of the event will be published in a special pull-out in The Edge Malaysia on Sept 23.