KUALA LUMPUR, Sept 11 -- Steady increases in Internet of Things (IoTs) hardware spending will be a significant source of revenue for the semiconductor industry in the future, as semiconductors are the bedrock of technology, says the Malaysian Investment Development Authority (MIDA).
In its August 2019 e-newsletter, MIDA said these days, it is nearly impossible to find a device that does not rely on semiconductors.
For instance, it said autonomous vehicles, one of the up and coming IoT applications, saw a 58 per cent jump in semiconductor revenues from 2016 to 2017.
"As the IoT continued to materialise, other applications such as cloud-based computing and artificial intelligence (AI) will also see an increase in hardware spending, thus leading to an additional demand for semiconductors," it said.
Citing market research firm Gartner's statistics, MIDA said there would be an estimated 20.4 billion smart devices in 2020, while hardware equipment such as smart devices is expected to account for 35 per cent of the total IoT market in 2020.
Meanwhile, MIDA said the growing demand for AI-based applications from various industries would create new growth opportunities for semiconductor manufacturers.
"The industries include medical devices and imaging technology, life sciences and biotechnology, clean and green technology, as well as information and communications technology," it said.
It said the rapidly expanding automotive market would also provide ample opportunities for automotive semiconductors to improve the connectivity, battery performance in electric vehicles, enhanced sensors, and other technologies.
"Similarly, the introduction of 5G technology, which promises to provide data transmission speeds over wireless broadband networks of up to 20Gbps, 20 times faster than 4G networks, will also benefit the semiconductor industry," it said.
MIDA said it was estimated that by 2025, 5G infrastructure spending would hit US$326 billion (US$1= RM4.18), with nearly 80 per cent spent on network infrastructure, which is essential for 5G networks to operate smoothly.
Besides, it said the transition to smaller and more current nodes in identity card (IC) manufacturing would ensure that companies producing ICs have a competitive advantage by offering components with increased power and performance.
However, it said the move presents a challenge in terms of cost and resources that the semiconductor industry needs to address.
Overall, MIDA noted that the semiconductor industry is challenged with concerns driven by innovation and technological developments moving at a drastic pace.
"It is crucial for the local semiconductor industry to develop a pool of product design talents and address issues such as intellectual property protection, licensing and research and development spending.
"Hence, Malaysia can no longer be playing catch-up but must actively strive to build its expertise and niche," it said.
Moving forward, MIDA said the investment outlook in the semiconductor industry is potentially attractive given its value propositions.
"Market research companies Gartner and Statista estimated semiconductor sales revenue to grow at a compound annual growth rate of 6.17 per cent and to hit US$503 billion in 2020," it added.