Malaysia’s Semiconductor Industry Navigates Uncertainty Amid US Tariff Threats

Malaysia’s semiconductor industry, as the sixth-largest global exporter, is concerned about potential US tariffs threatening exports and investments. Despite recent increases in exports to the US, uncertainties remain regarding economic stability. The industry aims to move up the value chain by emphasizing integrated circuit design and fostering local talent while navigating challenges posed by US tariff policies.

Malaysia’s semiconductor industry, currently the sixth-largest exporter of semiconductors globally, is facing uncertainty due to potential tariffs from the United States. The Southeast Asian nation currently holds 13 percent of the global assembly, testing, and packaging market and aims to secure US$115 billion in investments by 2030. Concerns persist regarding how US tariff policies, particularly those proposed by President Donald Trump, could adversely affect exports and deter new investments.

President Trump has threatened universal tariffs of up to 20 percent on imports from all nations, a policy still in limbo. Recently imposed tariffs on the United States’ top trading partners—Canada, Mexico, and China—have already gone into effect, raising tariffs significantly on certain goods. While the rationale behind these tariffs pertains to issues such as drug trafficking, the ramifications could extend to American companies operating in Malaysia and workers in its semiconductor sector.

Chow Kon Yeow, Chief Minister of Penang, expressed that increasing US tariffs would ultimately be detrimental to all stakeholders. He emphasized the interconnectedness of the global economy, stating that any tariffs would impact American companies as well as Malaysian workers in the semiconductor industry. He advocated for timely engagements between the US and ASEAN to discuss these issues and minimize adverse effects.

Industry representatives have articulated their hope for equitable tariff arrangements. Wong Siew Hai, president of the Malaysia Semiconductor Industry Association, commented on the competitive implications of a uniform tariff across all countries versus differentiated rates, with the latter creating unequal advantages.

Despite threats of tariffs, Malaysian exports to the US reportedly rose by 28 percent in January 2023, while imports climbed nearly 30 percent. Nonetheless, if the US aims to rectify its $17 billion trade deficit with Malaysia, tariff hikes could impede the growth of Malaysia’s exports, especially semiconductors, thereby jeopardizing economic stability.

To strengthen its position, Malaysia is attempting to move up the semiconductor value chain, shifting focus towards integrated circuit design. Experts recommend collaboration between the government and industry leaders to support smaller entities and foster local talent. Lee Eng Keat from Lam Research has stressed the necessity for clear strategies moving forward, while industry insiders acknowledged the need for competitive wage packages to curb brain drain and stimulate growth.

Furthermore, the industry is encouraged to increase investments in AI education to promote a shift towards more advanced segments of the supply chain. Suresh Kumar Dass of Intel emphasized the importance of equitable compensation to retain talent, highlighting Intel’s growth from a modest engineering team to a robust workforce.

In summary, Malaysia’s semiconductor industry faces considerable uncertainty due to the potential imposition of US tariffs, which could jeopardize exports and investment prospects. As the nation strives to enhance its position within the global semiconductor supply chain, collaboration among industry leaders, government support, and a focus on advanced technology are paramount to ensuring resilience and growth. Addressing wage competitiveness and fostering local talents remains vital to sustaining progress and mitigating negative impacts from external economic pressures.

Original Source: www.channelnewsasia.com