Malaysia is aggressively repositioning itself to become a central player in the global semiconductor supply chain. Spearheaded by Prime Minister Anwar Ibrahim, the government launched the National Semiconductor Strategy (NSS) in May 2024, aiming to attract over MYR500bn (approximately $107bn) in public and private investments to fuel the country's chip ambitions, as reported by Reuters back in May 2024.

A strategic pivot: from assembly to advanced tech

For decades, Malaysia has been known for its role in back-end semiconductor processes such as assembly, testing, and packaging. Major players like Intel and Infineon have long operated in the country, leveraging its stable infrastructure and skilled labour pool. However, the NSS marks a significant departure from this legacy by setting Malaysia on a path toward higher-value segments of the industry, such as chip design, advanced packaging, and R&D, ASEAN Briefing reported.

This strategic shift mirrors similar moves by global tech powers racing to secure semiconductor capabilities amid rising geopolitical and supply chain tensions. As noted by The Diplomat in early 2025, Malaysia’s neutrality in US-China relations gives it a unique edge as companies seek to diversify production beyond Taiwan and mainland China.

Investment and fiscal incentives

Central to the NSS is a comprehensive fiscal framework designed to entice both foreign investors and local entrepreneurs. The government has pledged MYR25bn (about $5.3bn) in incentives, which include tax exemptions, grants, matching investments, and facilitated land and infrastructure support, Free Malaysia Today reported in May 2024.

In parallel, the Malaysian Investment Development Authority (MIDA) is courting major semiconductor manufacturers from the US, Europe, and Japan. For example, Intel’s $7bn expansion in Penang and Infineon’s €5bn commitment to scale its power semiconductor capacity in Kulim are early validations of the strategy’s momentum, TIME reported in April 2024.

Training 60,000 engineers: Bridging the talent gap

Malaysia recognises that no amount of capital can compensate for a lack of talent. The NSS includes an ambitious initiative to train and upskill 60,000 local engineers to meet the complex needs of modern semiconductor manufacturing, as reported by Malay Mail. This includes new curriculum alignments with universities, technical certification programmes, and public-private partnerships with firms like ARM and Synopsys to offer hands-on training modules.

The Ministry of Higher Education has also endorsed “dual-training systems,” which combine classroom learning with real-world factory exposure. According to KR Asia, these integrated approaches are designed not only to plug the current skills gap but also to stem brain drain by offering globally competitive wages to top-performing engineers.

Building local champions

To ensure Malaysia does not merely serve as a node for multinational giants, the NSS aims to cultivate at least 10 homegrown companies in advanced packaging and integrated circuit (IC) design. Each of these firms is expected to generate between MYR1bn and MYR4.7bn ($210mn to $1bn) in revenue by 2030.

To support this, Khazanah Nasional and other government-linked investors are creating targeted funding pools to back local deep tech startups. There is also a growing emphasis on commercialising university R&D in semiconductor physics and materials science.

As highlighted by Digital News Asia, Malaysia’s goal is not to recreate Silicon Valley, but to foster a sustainable ecosystem of niche, high-value companies that can plug into global supply chains with specialised solutions.

Leveraging geography and neutral diplomacy

Malaysia’s strategic location at the crossroads of East and West Asia, combined with political neutrality, makes it an attractive destination for semiconductor companies navigating a fragmented global order. The country offers strong infrastructure, competitive power rates, and robust port logistics in places like Penang, Johor, and Sabah, all assets that are especially valuable in a sector where time-to-market is critical, as reported by The Diplomat.

Moreover, Malaysia’s role as a founding member of ASEAN and active participant in regional trade agreements (RCEP, CPTPP) enhances its appeal as a regional semiconductor hub.

A global collaboration model

Rather than competing head-on with Taiwan, South Korea, or the US, Malaysia’s NSS embraces a collaborative model. The government has launched cross-border R&D initiatives and invited foreign partners to co-invest in innovation parks and pilot fabrication lines. Notably, partnerships are being explored with Japan, Vietnam, and Singapore to share expertise and build regionally integrated value chains, as Free Malaysia Today reported.

This regional strategy is complemented by Malaysia’s strong push toward ESG-aligned manufacturing, including the use of renewable energy and carbon tracking tools in semiconductor plants. As more tech firms prioritise sustainability, Malaysia is positioning itself as a forward-looking, environmentally conscious production base, TIME reported.

The road ahead

While Malaysia faces stiff competition from established semiconductor giants and emerging contenders like India and Vietnam, its methodical, well-funded approach under the NSS puts it in a strong position. The government’s ability to execute on talent development, maintain investor confidence, and rapidly scale domestic innovation will determine whether Malaysia becomes a genuine semiconductor heavyweight, or remains a promising regional player.

By betting big on chips, Malaysia is not just investing in factories and engineers, it’s investing in long-term technological sovereignty. As the global race for semiconductors accelerates, Malaysia is proving it intends to play for keeps.