Under the shadow of US sanctions on China's chip industry, Chinese semiconductor design companies are increasingly turning to Malaysia for the assembly of high-end chips, particularly graphics processing units (GPUs) crucial for AI and military applications. This strategic move aims to mitigate risks and ensure access to advanced packaging services, currently restricted by Washington.

Highlights:

• Partnership Focus: Collaborations solely involve assembly, avoiding US restrictions.
• Malaysian Advantage: Malaysia's skilled workforce, affordability, and established infrastructure entice Chinese firms.
• Global Ambitions: Malaysia targets a 15% share in global chip packaging by 2030, attracting further investments.

Detailed Analysis:

US Pressure, Chinese Vulnerability: The heightened US restrictions on advanced GPUs have left smaller Chinese chip design firms struggling to find suitable domestic packaging services. Fearful of further restrictions, they see Malaysia as a reliable alternative for diversifying assembly locations.

• Malaysia: A Strategic Choice: Malaysia boasts several advantages for Chinese firms:
• Positive Relationship: Perceived cordial ties with China ease concerns over political backlash.
• Cost-Effectiveness: Competitive pricing makes it an attractive option compared to other regions.
• Skilled Workforce: A readily available pool of skilled workers ensures smooth operations.
• Advanced Infrastructure: Established infrastructure eliminates the need for hefty investments.

Industry Optimism: Unisem, a major Malaysian player, reports increased business and inquiries from Chinese clients. Despite concerns about US reactions, Unisem chairman John Chia emphasizes their complete compliance with regulations.

Looking Ahead: This shift towards Malaysia highlights the growing importance of diversifying supply chains in the face of geopolitical tensions. With countries like Vietnam and India also aiming to expand their chip manufacturing capabilities, the global landscape of chip production is undergoing a significant transformation.