Malaysia Emerges: Chinese semiconductor design companies are increasingly engaging Malaysian firms for the assembly of high-end chips, specifically graphics processing units (GPUs). This strategic move aims to mitigate potential risks associated with expanded U.S. sanctions on China’s chip industry. While the requests focus on chip assembly and not wafer fabrication, a crucial distinction within U.S. restrictions, some contracts have already been finalized.
To limit China’s access to advanced GPUs, vital for artificial intelligence and military applications, the U.S. has imposed restrictions on their sales and chip-making equipment. As these sanctions impact Chinese semiconductor design firms, the demand for advanced packaging services has surged. Some Chinese companies are particularly interested in Malaysia’s expertise in advanced chip packaging, a critical technology that enhances chip performance.
Malaysia, a significant player in the semiconductor supply chain, is well-positioned to attract more business as Chinese chip firms diversify assembly needs outside of China. Companies like Unisem, majority-owned by China’s Huatian Technology, and other Malaysian chip packaging firms have witnessed increased business and inquiries from Chinese clients. Unisem Chairman John Chia emphasized that these business dealings are legitimate and comply with regulations.
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Chinese chip design firms perceive Malaysia as an ideal option due to the country’s perceived positive relations with China, affordability, experienced workforce, and sophisticated equipment. Malaysia, currently holding 13% of the global market for semiconductor packaging, aims to increase its share to 15% by 2030. Chinese chip firms, including former Huawei unit Xfusion and StarFive, are expanding their presence in Malaysia, attracted by incentives and a favorable business environment.
It’s noteworthy that Malaysia’s semiconductor hub status makes it an appealing choice for Chinese companies looking to assemble chips outside of China, potentially easing access to non-Chinese markets. While Malaysia gains traction, other countries like Vietnam and India are also exploring opportunities in chip manufacturing services to attract clients concerned about geopolitical risks between the U.S. and China.