Malaysia signs deal with British chip giant Arm to bolster semiconductor ambitions

KUALA LUMPUR: British chip giant Arm Holdings signed an agreement with Malaysia on Wednesday (Mar 5) to bolster the Southeast Asian country's efforts to produce high-end semiconductors amid the US-China tech trade war.

Malaysia is a key player in the vital chips sector but has been largely focused on packaging, assembly and testing services - the lower end of the market.

The agreement will see Softbank-owned Arm provide chip designs and other technology, helping Malaysia to move into more value-added production such as wafer fabrication and integrated circuit design.

The Southeast Asian nation is paying US$250 million over a decade to receive support from the British company, journalists were told at a briefing by Malaysia's economic ministry.

"Through a comprehensive partnership with Arm, we have conceived one of the most ambitious technological plans Malaysia has ever seen - to pioneer Made-by-Malaysia AI chips," Prime Minister Anwar Ibrahim said in remarks before witnessing the signing.

"These chips will be designed, manufactured, tested and assembled here, and sold to the rest of the world."

In addition, Arm will also establish its first office in Southeast Asia in Kuala Lumpur, aiming to expand the company's reach in the region as well as Australia and New Zealand, Anwar said.

"We won't let you down. This is going to be an extremely exciting 10 years and more," said Arm chief executive Rene Haas.

"RED CARPET"

Malaysian Economy Minister Rafizi Ramli said the collaboration would enable Malaysia and Arm "to build a complete supply chain in advanced industries such as AI (artificial intelligence) data servers, autonomous vehicles, IoT (internet of things), robotics and others".

He said that around 10,000 local semiconductor engineers would be trained under the deal.

Dedi Iskandar, Asia Pacific regional director at datacenterHawk, said the agreement would make Malaysia "as one of the elite countries in Asia Pacific that possess advanced AI chip design capabilities other than Taiwan and Singapore."

"Malaysia is laying the red carpet and showing the world that they are serious in this tech war," he told AFP.

Tensions between Washington and Beijing over advanced tech, especially semiconductors, in recent years have forced many firms to look into relocating their manufacturing from China to other countries including Malaysia, Vietnam and India.

"This deal creates equilibrium to the region as Taiwan is always a sore thumb between China and US tech war, and Malaysia are friends to both of them," added Dedi.

A prominent player in the industry for decades, Malaysia accounts for an estimated 13 per cent of global back-end manufacturing, according to German tech firm Bosch.

Malaysia's northern island of Penang, home to a number of facilities, is often dubbed the country's Silicon Valley.

And in April 2024, Anwar announced plans to build a massive semiconductor design park, an effort to move Malaysia beyond chips production.