Malaysia Eyes Leadership In Advanced Packaging As AI Reshapes Global Chip Industry

KUALA LUMPUR, May 8 (Bernama) -- Malaysia is positioning itself to move beyond its long-standing leadership in assembly, testing and packaging towards leadership in advanced packaging as artificial intelligence (AI) reshapes the global semiconductor industry.

Malaysian Investment Development Authority (MIDA) chief executive officer Datuk Sikh Shamsul Ibrahim Sikh Abdul Majid said advanced packaging, underpinned by chiplet architectures and heterogeneous integration, is becoming central to AI compute scaling, placing the country directly within the industry’s next phase of growth.

He said Malaysia’s existing semiconductor ecosystem in Penang, Kulim and the Klang Valley, which today hosts more than 50 multinational semiconductor companies, provides a direct pathway for the country to transition into next-generation manufacturing.

“Our existing infrastructure positions us directly in this transition path, and we intend to invest accordingly,” he said in his opening remarks at the Market and Industry Outlook Forum held on May 6, in conjunction with SEMICON Southeast Asia 2026, here.

Sikh Shamsul Ibrahim said the global semiconductor industry is approaching the trillion-dollar threshold, with revenues rising from approximately US$790 billion in 2025 to a forecast US$975 billion in 2026.

He noted that semiconductors have moved from being a cyclical industrial input to being treated as strategic infrastructure, spoken of in the same breath as energy security and food security.

AI remains the single largest driver of industry expansion, with AI accelerators, high bandwidth memory and the data centres that house them expected to account for the majority of semiconductor growth through the end of the decade, he added.

Sikh Shamsul Ibrahim also pointed to Southeast Asia’s strategic position, with the region on track to capture 25 per cent of global assembly, testing and packaging capacity by 2032.

At the same time, he described the current semiconductor cycle as “not a normal one”, noting that the 2025 rebound was driven principally by AI-related demand and rising prices.

“Investors who built capacity through the last correction are the ones best positioned today. Malaysia’s policy stance is to support firms willing to take that long view,” he said.

Sikh Shamsul Ibrahim acknowledged that much of Malaysia’s semiconductor base remains concentrated in more traditional industry segments, where growth is expected to be more modest compared with advanced AI-related technologies.

“Without accelerated movement up the value chain, our revenue growth will lag the broader market,” he said.

He highlighted that Malaysia recorded its highest-ever approved investments at RM426.7 billion in 2025, including RM131.3 billion in the manufacturing sector and RM28.5 billion in electrical and electronics (E&E), as the Milken Institute’s 2026 Global Opportunity Index ranks the country as the top investment destination in Southeast Asia.

To strengthen Malaysia’s position, he said the National Semiconductor Strategy aims to train 60,000 high-skilled engineers, anchor at least 10 Malaysian companies of regional or global scale in design and advanced packaging, and increase Malaysia’s global semiconductor market share to 14 per cent by 2029.

He said the strategy also focuses on building greater depth in integrated circuit (IC) design and power semiconductors, supported by government-backed design parks in Selangor and Penang, subsidised access to design tools and industry partnerships.

He cited Infineon’s Kulim facility, which is targeting a substantial share of the global silicon carbide power market by the end of the decade, as a key node in the automotive electrification supply chain.

Sikh Shamsul Ibrahim said the New Incentive Framework would provide a more targeted and outcome-based support for investments that create skilled jobs, strengthen local supply chain linkages and contribute to long-term economic complexity.

For the semiconductor sector, he said the framework includes tailored support for advanced packaging, IC design, wafer-level processes and equipment manufacturing.

Meanwhile, he said Malaysia is strengthening its domestic supplier ecosystem through structured supplier development programmes, including the Infineon Vendor Development Programme, to help local small and medium enterprises upgrade capabilities and integrate into global supply chains.

“We want Malaysian companies to be more than vendors. We want them to be partners in the design and delivery of the technologies that the next decade of this industry will rely on,” he added.

Sikh Shamsul Ibrahim said geopolitical developments, including export controls, tariff regimes and investment screening, are expected to continue shaping the semiconductor industry over the next decade as companies build greater flexibility into their supply chains.

He added that energy is also becoming an increasingly important factor in semiconductor investment decisions as AI-optimised data centres and semiconductor manufacturing drive higher electricity demand globally.

“Access to stable, competitively priced, and increasingly green energy is becoming a primary site-selection determinant.

“STMicroelectronics’ long-term solar power purchase agreement in Johor, and Sarawak’s expansion at Sama Jaya, are leading indicators. Together with the Johor-Singapore Special Economic Zone, they are extending Malaysia’s semiconductor footprint,” he said.

-- BERNAMA