Malaysia is positioning itself as a formidable player in the global technology arena with the launch of its National Semiconductor Strategy (NSS). Unveiled in 2024 by Prime Minister Anwar Ibrahim, the strategy is a bold attempt to transition the country from a hub for chip assembly to a leader in design, advanced packaging, and cutting-edge silicon carbide (SiC) power devices. Backed by RM25 billion (~US$5.3 billion) in incentives and a target to train 60,000 engineers, Malaysia aims to attract RM500 billion (~US$106 billion) in investments. As regional competitors like Vietnam and India ramp up their efforts, Malaysia’s bid to redefine its tech landscape comes at a critical juncture, raising questions about sustainability, inclusivity, and its ability to outpace rivals.
Climbing the Value Chain
Malaysia’s semiconductor sector is already a vital part of its economy, handling 13% of the world’s chip assembly, testing, and packaging, and ranking as the sixth-largest global exporter in this field. Data from the Malaysian Investment Development Authority (MIDA) shows that in 2024, the electrical and electronics (E&E) sector drew RM55.8 billion (~US$11.8 billion) in investments, creating 88,000 high-skilled jobs. The NSS seeks to build on this foundation by pushing into higher-value areas like integrated circuit (IC) design and wafer fabrication, areas traditionally dominated by countries like Taiwan and South Korea.
Regional hubs are at the forefront of this transformation. Kulim, in Kedah state, hosts Infineon’s 200 mm SiC power fab, which is set to supply components for electric vehicles and renewable energy systems. Penang, often dubbed Malaysia’s “Silicon Valley” remains a powerhouse for chip assembly with major players like Intel maintaining a strong presence. Meanwhile, Johor is emerging as a hub for artificial intelligence and data centers, bolstered by a high-profile partnership between Nvidia and YTL. A US$250 million deal with ARM Holdings in 2024, granting access to advanced chip design tools, further underscores global confidence in Malaysia’s potential to ascend the tech value chain. 
A Geopolitical Sweet Spot
In a world marked by US-China tech tensions, Malaysia’s political stability and neutrality offer a unique advantage. Positioned as a neutral party, the country has become an attractive alternative for multinational corporations seeking to diversify supply chains away from geopolitical flashpoints. At the SEMICON Southeast Asia 2025 event, MIDA’s CEO, Datuk Sikh Shamsul Ibrahim Sikh Abdul Majid, emphasized the growing international trust in Malaysia’s infrastructure and strategic location.
Industry leaders echo this sentiment. Amarjit Sandhu, corporate vice president at Micron Technology, spoke at the event about the benefits of local collaboration, stating, “Our collaboration with Malaysian Government and suppliers not only enhances operational excellence but also contributes to long-term economic empowerment.” Similarly, Eduard Stiphout, ASML’s senior vice president for strategic sourcing, noted, “We are working with our suppliers and governmental partners to strengthen our presence in South East Asia” highlighting Malaysia’s growing role in regional tech ecosystems.
Recent comments from the UK’s Trade Commissioner for Asia Pacific, Martin Kent, further spotlight Malaysia’s leadership within ASEAN. Speaking this month, Kent identified the semiconductor sector as a potential priority for cooperation between the UK and ASEAN nations, particularly praising Malaysia’s capabilities. “We know that the semiconductor industry in Malaysia is incredible, likewise across the border in Singapore, as well as other countries in the region” he told local media. Amid concerns over potential US tariffs on the industry, as flagged by recent announcements from US President Donald Trump, Kent suggested that aligning strategies with ASEAN could bolster the value chain for both parties.
Time, however, is of the essence. Malaysia is racing to finalize an ASEAN semiconductor supply chain framework before its chairmanship of the regional bloc ends in 2026. Competitors like Vietnam and India, which have overcome past infrastructure challenges, are advancing quickly. India’s semiconductor market, driven by demand in consumer electronics, IT, and automotive sectors, is projected to reach over US$100 billion by 2030. For Malaysia, staying ahead will require tailored incentives, aggressive talent acquisition, and sustained investment in research and development.
Inclusivity: Bridging the Urban-Rural Divide
While the NSS prioritizes high-tech growth, it also aims to integrate small and medium enterprises (SMEs) into the global supply chain. MIDA’s 2025 Handshake Session facilitated connections between local firms and international giants, a step toward broader economic participation. Yet, challenges persist in ensuring that rural entrepreneurs and communities are not left behind. The strategy’s ambitious goal of training 60,000 engineers focuses heavily on high-skill roles, which risks sidelining lower-skill workers who form a significant portion of the workforce.
Concerns about labor dynamics are not new. Back in 2022, Ding Hong Sing, president of the SME Association, pointed out the heavy reliance of Malaysian industries on foreign labor, stating that SMEs depend on such workers to boost production and efficiency. Meanwhile, unions in the electronics manufacturing sector have voiced worries over wage stagnation and talent shortages, urging stronger protections as the industry expands. Without targeted policies, there’s a risk that the benefits of Malaysia’s tech surge may concentrate in urban hubs like Penang and Kuala Lumpur, deepening regional disparities.
Sustainability: A Balancing Act
The rapid expansion of semiconductor fabrication plants and data centers brings environmental challenges, particularly in resource-scarce areas like Penang. These facilities are notorious for their high water and energy consumption, prompting calls from environmental groups for mandatory water recycling and greater reliance on renewable energy. The NSS includes green mandates to address these concerns, but enforcement remains a question mark. As semiconductor exports surged by 15.7% in early 2025, the pressure to align growth with sustainability has never been more urgent.
Water stress, in particular, is a growing issue in Penang, where industrial demand competes with residential needs. Environmental advocates argue that without robust policies, Malaysia risks replicating the resource-intensive mistakes of other tech hubs. The government’s commitment to green technology is a start, but translating rhetoric into actionable, enforceable standards will be key to maintaining public support for the NSS.
Looking Ahead: Can Malaysia Lead?
Malaysia’s semiconductor ambitions place it at a crossroads. The country’s strategic location, political stability, and proactive policies have attracted global attention, positioning it as a potential leader in the tech race. Yet, success is far from guaranteed. Bridging talent gaps through education and training, ensuring equitable growth across urban and rural divides, and embedding sustainability into industrial expansion are all critical hurdles.
Regional competition adds another layer of complexity. Vietnam’s low-cost manufacturing base and India’s massive domestic market are formidable challenges, pushing Malaysia to innovate continuously. Within ASEAN, the opportunity to shape a unified semiconductor supply chain framework during its 2025 chairmanship could be a game-changer, provided it can rally support from neighboring nations.
As Malaysia forges ahead, the stakes extend beyond economics. The NSS is not just about chips or supply chains; it’s about redefining the nation’s global identity in an era of technological disruption. Whether it can balance ambition with inclusivity and environmental responsibility remains an open question. For now, Malaysia’s trajectory suggests a country determined to punch above its weight—but the road to tech leadership is long, and the world is watching.
