Malaysia is becoming an overseas packaging hub for Chinese chip design companies

Source: Xinzhixun

    On December 19th, according to Reuters, an increasing number of Chinese semiconductor design companies are collaborating with Malaysian companies to package some advanced chips, including GPUs, in order to avoid the risk of US sanctions on China‘s semiconductor industry. However, the manufacturing process only involves packaging and does not involve the production and manufacturing of chips and wafers. Sources have revealed that some contracts have already been reached.

    According to reports, in order to limit China‘s breakthroughs in artificial intelligence technology, the United States is increasingly imposing restrictions on its sales and production of advanced chips and manufacturing equipment. With the impact of these restrictions and the stimulating demand for artificial intelligence development in China, smaller semiconductor design companies in China are striving to obtain sufficient advanced packaging services externally.

    Insiders added that although not subject to US export restrictions, this field may also require advanced packaging technology. Therefore, Chinese semiconductor design companies are concerned that one day it may become a target of US export restrictions on China. Therefore, by diversifying overseas packaging demand, Malaysia has become a major hub in the semiconductor supply chain.

    Unisem, headquartered in Malaysia, has its largest shareholder, Huatian Technology, a Chinese semiconductor packaging giant. It, along with other Malaysian chip packaging companies, has reported an increase in business and inquiries from China.

    Unisem Chairman John Chia stated that due to trade sanctions and supply chain issues, many Chinese chip design companies have come to Malaysia to establish more supply sources outside of China to support their business in and outside of China.

    But when asked if accepting Chinese orders would provoke American anger, Chia said that Unisem‘s commercial transactions are "completely legal and compliant", and the company doesn‘t have time to worry too much about the possibility. Most of Unisem‘s clients in Malaysia come from the United States.

    Xfusion, a former Huawei subsidiary that has announced plans to expand in Malaysia, announced in September that it will collaborate with NationGate in Malaysia to manufacture GPU servers for use in artificial intelligence and high-performance computing in data centers; StarFive, headquartered in Shanghai, China, has also established a design center in Penang, Malaysia; Chip packaging and testing company Tongfu Microelectronics also stated that in 2022, the company expanded its joint venture factory with American chip manufacturer AMD in Malaysia.

    The reason why Chinese semiconductor design companies consider Malaysia as a foreign choice is not only because the country is considered to have good relations with China, but also because of its low production prices, experienced labor force, and advanced equipment. Moreover, Malaysia currently holds 13% of the global semiconductor packaging, assembly, and testing market share, and plans to increase this proportion to 15% by 2030.

    In addition, Malaysia has also provided a series of incentive measures, attracting billions of dollars in chip investment. German automotive electronics giant Infineon announced in August 2023 that it will invest 5 billion euros (approximately 5.4 billion US dollars) to expand its power chip factory in Malaysia; American chip manufacturer Intel also announced in 2021 that it will build an advanced semiconductor packaging factory worth $7 billion in Malaysia.