Kuala Lumpur, Malaysia – 01/24/2018: An alien appears with the Malaysian flag as the background. Kuala Lumpur or commonly known as KL is the national capital of Malaysia and is the fastest growing urban area in Southeast Asia. The metropolitan city is also known globally for tourism and shopping. Kuala Lumpur has great public transportation for people traveling around the city. (Photo by Faris Hadzak/SOPA Images/LightRocket via Getty Images)
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Malaysia is not bothered by competition from China or the United States as it moves towards advanced semiconductor manufacturing, according to the country's second finance minister.
“The semiconductor space is now in a development stage — and Malaysia will be a beneficiary of that,” Amir Hamzah Azizan told CNBC's Karen Tso at the IMF Spring Meetings in Washington on Wednesday.
He also noted that the country does not see China – which is Malaysia's largest trading partner today – as a competitor in the sector.
“I think the reality of it all is that there's enough growth that it's going to continue. So, everybody's going to get some improvement on this,” he said.
Amir Hamza explained that recent geopolitical tensions have shown that it is crucial for supply chains to remain strong.
“We're now seeing a lot of end users diversifying their supply chain. Our focus, really, is on providing a very strong and vital connection to the supply chain, and making sure that we build on that.”
Competition with the United States
Malaysia appears to be benefiting from trade tensions between the US and China, which have prompted companies to diversify their operations into semiconductors. The country is now focusing on moving away from the back end of chip supply chain production and moving up the value chain.
The Malaysian Investment Development Authority said in a report issued on February 18 that the country has 13% of the global market for chip packaging, assembly and testing services. The government is also working to enhance efforts to grow the semiconductor ecosystem and attract investments.
While the US is increasing its investment in chips, Amir Hamzah highlighted that Malaysia offers a different value proposition.
“I think where Malaysia competes, we will not move to the high-end end of the competition, where the US will probably bring all the pieces,” he said, adding, “So, I don’t think so.” I think it's a big challenge for us.”
He said the country is focusing on “expanding its value chain” to attract new companies and strengthen its position in this field. “Ultimately, it is about economies of scale,” the minister added.
