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FDI: Chinese Firms Look To Malaysia For Assembly Of High-End Chips

A GROWING number of Chinese semiconductor design companies are tapping Malaysian firms to assemble a portion of their high-end chips, keen to hedge risks in case the US expands sanctions on China’s chip industry, sources said.

The companies are asking Malaysian chip packaging firms to assemble a type of chip known as graphics processing units (GPUs), according to three sources with knowledge of the discussions.

The requests only encompass assembly – which does not contravene any US restrictions – and not fabrication of the chip wafers, they said. Some contracts have already been agreed, two of the sources added.

The sources declined to disclose the names of the companies involved or to be identified, citing confidentiality agreements.

Seeking to limit China’s access to high-end GPUs that could fuel artificial intelligence (AI) breakthroughs or power supercomputers and military applications, Washington has increasingly placed restrictions on their sales as well as on sophisticated chip-making equipment.

Malaysia currently accounts for 13 per cent of the global market for semiconductor packaging, assembly, and testing and is aiming to boost that to 15 per cent by 2030.

Chinese chip firms that have announced plans to expand in Malaysia include Xfusion, a former Huawei unit, which said in September that it would partner Malaysia’s NationGate to manufacture GPU servers – servers designed for data centres and which are used in AI and high-performance computing.

Shanghai-based StarFive is also building a design centre in Penang, and chip packaging and testing firm TongFu Microelectronics said last year it would expand its Malaysia facility – a venture with US chipmaker AMD.

Offering an array of incentives, Malaysia has attracted multi-billion-dollar chip investments. Germany’s Infineon said in August that it would invest 5 billion euros (S$7.26 billion) to expand its power chip plant there.

US chipmaker Intel announced in 2021 that it would build a US$7 billion advanced chip packaging plant in Malaysia.

China Semiconductor Manufacturing in Malaysia
Chinese Firms Look To Malaysia For Assembly Of High-End Chips


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