Malaysia-Arm Deal To Drive Semiconductor Growth
KUALA LUMPUR, March 6 (Bernama) -- Malaysia's partnership with United Kingdom-based Arm Holdings Plc (ARM) will help to elevate Malaysia into a high-value economy, igniting the front-end semiconductor ecosystem while fostering growth of local semiconductor firms over the long term.
According to RHB Investment Bank Bhd (RHB IB), the partnership marks the world’s first collaboration between a sovereign nation and global technology giant in developing proprietary intellectual property (IP) for integrated circuit (IC) design.
It involves a US$250 million (RM1.11 billion) investment by the government on various ARM's cutting-edge intellectual properties (IPs) and licenses over a course of 10 years.
Aside from helping to lower the research and development costs and risk of design errors, RHB IB said it will also allow local firms to focus on product differentiation and prototyping rather than reinvent the foundational technologies.
"Local players will be prioritised with the technology transfer and help from advanced foreign firms through the different collaboration structures," it said, adding that it is maintaining its 'overweight' call for the technology sector.
Meanwhile, MIDF Amanah Investment Bank Bhd expects the deal to accelerate the formation of front-end semiconductor firms by as early as 2030, with ready end-market products which could ultimately boost Malaysia’s gross domestic product (GDP).
The agreement also supports the government’s semiconductor export target of RM1.2 trillion by 2030.
The initiative entails the creation of up to 10 chip companies with total annual revenue as much as US$20 billion, enabling the country to produce its own chip in the next five to ten years.
“The deal is expected to complement Malaysia’s existing stronghold in the chip assembly and testing,” it said.
For context, Malaysia is the sixth largest exporter of semiconductor globally, with an around 13 per cent share in the semiconductor packaging, assembly and testing operations market.
MIDF Amanah noted that the ongoing trade war and soft end-market demand is expected to lead to a bleak near-term outlook for the industry
"As such, we view the move to be timely in view of the ongoing trade war, as it could help to mitigate, to a certain extent, the impact of the US’ plans to roll out wide-ranging tariffs that could affect trade-reliant nations," it said while maintaining a 'neutral' stance on the technology sector.
Meanwhile, Hong Leong Investment Bank (HLIB) maintains its 'neutral' call on the sector given the mixed fundamentals over the short to mid-term, noting that technology stocks are trading at relatively high valuations compared to their regional peers.
Overall, it believes that Malaysia’s partnership with ARM could generate positive spillover effects for the broader technology sector, particularly if it leads to the creation of a new semiconductor value chain.
"We reckon this to be a longer-term, multi-year story, with the sector continuing to operate in a highly cyclical environment," said HLIB.
In a separate note, Kenanga Investment Bank Bhd believes that Malaysia’s fabless (or IC designers) semiconductor companies, including Oppstar Bhd, KeyASIC Bhd, and SkyeChip Sdn Bhd, stand to benefit from privileged access to Arm’s IP and compute subsystems.
The companies will be able to develop artificial intelligence (AI)-powered chips while leveraging government support for IC design talent development.
Meanwhile, CIMB Securities believe that Malaysian companies with established market access are better positioned to successfully tape out their own chips, thereby accelerating the country’s progress in the semiconductor value chain.
"However, the success of this transition will depend on effective execution, industry readiness, talent retention, and the ability to compete in the global market," it said.
-- BERNAMA
