Malaysia’s Semiconductor Industry Faces Challenges Amidst…

Malaysia’s semiconductor industry, a top global exporter, is facing uncertainty with potential U.S. tariffs proposed by President Trump. The industry hopes to attract $115 billion in investments by 2030 but fears tariffs could impact economic stability and exports. Industry leaders advocate for fair tariffs and collaboration to enhance competitiveness and move up the value chain, while Malaysian exports to the U.S. have risen despite these concerns.

Malaysia’s semiconductor industry, a key player in the global supply chain, faces uncertainty due to potential United States tariff increases. As the sixth-largest semiconductor exporter globally, accounting for 13 percent of the assembly, testing, and packaging markets, Malaysia is aiming to attract substantial investments totaling US$115 billion by 2030. However, concerns over tariffs, which have become a hallmark of President Donald Trump’s policy, threaten this growth trajectory.

President Trump has proposed universal tariffs of up to 20 percent on imports from all nations, a measure that has not yet been implemented. Nevertheless, tariffs on imports from Canada, Mexico, and China are already in place, with rates of 25 percent and additional duties adding up to a cumulative 20 percent for Chinese goods. These tariffs are a response to perceived failures by these nations to curb the flow of opioids into the U.S.

Chow Kon Yeow, the Chief Minister of Penang, expressed concern that U.S. tariff hikes would not benefit anyone, highlighting that American companies and Malaysian workers in the semiconductor sector would bear the brunt of potential factory closures. Penang, often referred to as the Silicon Valley of the East, hosts numerous high-tech manufacturers, including industry giants like Intel and Infineon, which have invested significantly in the region.

Amidst these tariff concerns, industry leaders expressed hope for equitable tariffs that would not distort competition. Wong Siew Hai, President of the Malaysia Semiconductor Industry Association, emphasized that any global tariff would impact all players equally, but disparities in rates among countries could create an uneven competitive landscape.

In response to fears surrounding the U.S.-Malaysia trade balance, which sees the U.S. with a USD 17 billion deficit, the Malaysian government anticipates that U.S. tariffs could curtail the nation’s trade growth by half this year. Despite these apprehensions, Malaysian exports to the U.S. rose by 28 percent in January, highlighting the resilience of this sector.

To enhance its competitiveness, Malaysia is focusing on moving up the semiconductor value chain, particularly in integrated circuit design. Chow indicated the move aims to create more opportunities and bolster economic resilience. Collaboration between the government and the semiconductor industry is essential for encouraging smaller companies to thrive.

As industry experts call for comprehensive strategies to foster growth, they stress the need for competitive wages and education in advanced technologies like AI. Raising salaries remains challenging without expanding beyond assembly and packaging. Suresh Kumar Dass from Intel highlighted the ongoing discussions to ensure Malaysian talent is adequately compensated based on their contributions to the global supply chain.

In conclusion, Malaysia’s semiconductor industry is currently navigating a precarious landscape marked by potential U.S. tariff hikes. While the industry is strategically aiming to enhance its global competitiveness and attract significant foreign investments, concerns remain regarding how these tariffs might impact both exports and local employment. To thrive amidst these challenges, there is an urgent need for collaboration between government and industry players to foster innovation and ensure sustainability in this critical sector.

Original Source: www.channelnewsasia.com