Chinese semiconductor design companies are increasingly collaborating with Malaysian firms to assemble a portion of their high-end chips, aiming to mitigate risks in the event of expanded U.S. sanctions on China’s chip industry.
Specifically, these companies are enlisting Malaysian chip packaging firms to assemble graphics processing units (GPUs), emphasising that this request only involves assembly and not the fabrication of chip wafers. Some contracts have already been finalised, according to Reuters.
The move is driven by U.S. restrictions on high-end GPU sales to China, impacting smaller Chinese semiconductor design firms seeking advanced packaging services domestically. Malaysia, a key player in the semiconductor supply chain, is positioned to benefit from this diversification.
Notable companies involved include Unisem, which has experienced increased business from Chinese clients. Chinese chip firms are attracted to Malaysia due to perceived positive relations with China, affordability, an experienced workforce, and sophisticated equipment.
Despite potential concerns about U.S. reactions, Malaysian companies assert that their business dealings are legitimate and compliant. Chinese chip firms are also interested in assembling chips outside China to facilitate sales in non-Chinese markets.
Malaysia, currently holding 13% of the global market for semiconductor packaging, assembly, and testing, aims to increase its share to 15% by 2030.
Several Chinese chip companies have announced plans to expand in Malaysia, supported by the country’s incentives for multi-billion dollar chip investments, including projects by Xfusion, StarFive, and TongFu Microelectronics.
Germany’s Infineon and U.S. chipmaker Intel have also committed substantial investments in Malaysia’s semiconductor industry.
