As Malaysia strives to enhance its standing in the global semiconductor supply chain, it now confronts uncertainty due to concerns over increased United States tariffs on imported chips.
CNA reports that the Southeast Asian nation ranks as the world’s sixth-largest exporter of semiconductors, contributing to 13% of the global assembly, testing, and packaging market. Malaysia has set an ambitious goal to attract RM544 billion (US$115 billion) in investments by 2030.
However, apprehensions have arisen regarding tariffs—a hallmark of US President Donald Trump’s policy agenda, who has lauded them as “the most beautiful word in the dictionary”—potentially impacting exports and deterring new investments in Malaysia.
During his previous campaign, Trump threatened to impose universal tariffs of up to 20% on imports from all countries. Although this has not materialised, his administration has recently enacted tariffs on imports from America’s top three trading partners—Canada, Mexico, and China—which took effect on Tuesday, 4 March.
A 25% tariff is now imposed on goods imported from Mexico and Canada, while an additional 10% duty has been levied on China, culminating in a total 20% tariff. Trump justified these measures by asserting that these nations had not done enough to curtail the influx of fentanyl, a lethal opioid, into the United States.
No Benefits for Anyone: Penang Chief Minister
In Malaysia’s northwestern state of Penang, Chief Minister Chow Kon Yeow expressed that any US tariff increases would be detrimental to all parties involved. He highlighted that American companies would also feel the repercussions, and workers in Malaysia’s burgeoning semiconductor sector could be adversely affected if their workplaces suffer due to these policies.
Penang, often dubbed the Silicon Valley of the East, serves as a pivotal hub for semiconductor manufacturing. It hosts high-tech factories, innovation centres, and research facilities, having already secured substantial investments from technology giants such as Intel, Infineon, Lam Research, and Texas Instruments.
“Whatever tariff policy [the US imposes] should recognise the fact that it is their own people that will be impacted as well,” Chow noted.
With Malaysia holding the chair of the Association of Southeast Asian Nations (ASEAN) this year, the Chief Minister expressed hope for an ASEAN-US summit to be convened either in Malaysia or the United States promptly. Such a gathering would promote amicable engagements and discussions with authorities to mitigate the impact of US-proposed tariffs and restrictions on the semiconductor industry.
Industry stakeholders have voiced a desire for any American tariffs to be equitable and to ensure a level playing field. “We don’t know what Trump is going to do… if he slaps a tariff of, say, 25% worldwide to all semiconductor companies or countries, then it doesn’t really matter, because we are all equal 25% so we compete,” said Malaysia Semiconductor Industry Association president Wong Siew Hai. “But if some countries are 25%, some countries are 10%—of course, if we are 10%, then we will have a big advantage.”
The newly imposed US tariffs on major trading partners could have significant repercussions for Malaysia’s semiconductor industry. As an export-driven economy, Malaysia’s substantial contribution to the global semiconductor supply chain may face challenges, potentially affecting its ambitious investment targets and economic growth projections.
Moreover, the global semiconductor landscape is experiencing shifts due to these trade policies. For instance, Taiwan’s exports surged by 31.5% in February, surpassing forecasts, as buyers expedited orders ahead of anticipated US tariffs. This development underscores the volatility and rapid changes within the industry, which could influence Malaysia’s strategic positioning.
In response to these challenges, Malaysia is proactively engaging with its semiconductor companies, including major US multinationals like Intel and GlobalFoundries, to assess their capacity to absorb the impacts of potential US tariffs. Trade Minister Tengku Zafrul Aziz emphasised the necessity of understanding the extent of these tariffs and determining whether the additional costs would be borne by consumers or companies.
