Selangor is not trying to surpass Penang in the electrical and electronics sector, with its biggest rival being Vietnam, says Sidek’s Yong.

This article was published in The Edge Malaysia Weekly on 1 July – 7 July 2024.

Many were astonished when it was announced at the KL20 Summit 2024 that Selangor will build the largest integrated circuit (IC) design park in Southeast Asia, with British chip design company Arm Holdings preparing to license its technology.

Why is Penang, nicknamed the “Silicon Valley of the East” with its strong and vibrant electrical and electronics (E&E) ecosystem, losing multi-million ringgit projects to Selangor?

Following accusations from former Penang chief minister Lim Guan Eng and his successor Chow Kon Yeow, Selangor Information Technology and Digital Economy Corporation (Sidec) chief executive officer Yong Kai Ping has downplayed rumours that Selangor is trying to overshadow Penang as the country’s semiconductor hub.

Yong heads the agency spearheading the IC design hub project called Malaysia Semiconductor Accelerator & IC Design Park, housed at the Puchong Financial Corporate Center (PFCC). The project, due to begin operations next month, is part of the country’s efforts to move from back-end chip assembly and testing to higher-value front-end design work.

Amid the furore over who won what, Yong seems clear about his mission and who Malaysia’s “real” competitors are.

He stresses that the “enemy” is not domestic but external, and that Malaysia needs to get more organized. Vietnam may already be the preferred choice for semiconductor investors because it does not have enough human capital in the semiconductor industry, he elaborates.

Semiconductor Corridor Meets Growing Demand

Yong said Malaysia should take note of the development of Vietnam’s Saigon Hi-Tech Park (SHTP), which has ambitious plans to train 50,000 design engineers and should not be taken lightly, given that Vietnamese students and graduates are already far ahead of Malaysia in science and mathematics performance.

Recently, Malaysia announced it would allocate RM1.2 billion to cover the cost of training and upskilling 60,000 skilled local engineers to ease the talent shortage in the industry.

“We must understand that the scale of companies coming to Malaysia through trade diversion is huge. No single state in Malaysia has sufficient capacity to accommodate them. We should not opt ​​for a piecemeal approach and we should not fall into regionalism,” Yong told The Edge in an interview at Sideok’s offices in i-City, Shah Alam.

He said the emergence of SHTP, with its 700-hectare integrated ecosystem covering the entire semiconductor supply chain and focused on developing talented engineers, poses a major challenge to Malaysia’s position in the global semiconductor industry.

“I predict that once the SHTP is fully operational, they will compete with us. Our real competitor is Vietnam. This is a serious situation as many companies are actually considering plans to relocate to Saigon if they cannot find talented people in Malaysia,” he added.

Yong said many Malaysians have never visited a hi-tech park and therefore don’t understand the potential of SHTP, but at the same time, they may be underestimating Vietnam’s capabilities.

“My colleagues and I have been to SHTP so we know what goes on there. Malaysia still has an advantage as it has over 50 years of history and experience in the electrical and electronics sector.”

“But Malaysia should not be complacent. The information we have received from investors from Japan, Taiwan and China shows that every time they come to Malaysia, they will also visit Vietnam.”

Penang has earned the nickname “semiconductor island”, but Yong believes the city is “a bit too conservative”.

He likes the idea of ​​a corridor such as a “West Coast Semiconductor Corridor” that would have the capacity to accommodate the current exodus and shift occurring among global semiconductor companies, mainly due to the U.S.-China trade tensions.

“At present, there is no concept of a ‘corridor’ in Malaysia,” he points out.

Still, Yong predicts that the number of enquiries he has received could see the expansion of the Kulim-Penang corridor double and spill over into northern Perak, while Selangor and Negeri Sembilan could create new corridors, and Melaka and Johor could become new hubs for semiconductor companies.

“In fact, we should explore opportunities to work closely with Singapore as well. Singapore also has a strong E&E ecosystem. Frankly, if you look at other countries in the region, there are not many ASEAN countries that can compete with us in the E&E sector. In my view, our main competitors are [in] “Currently, it is Malaysia and Vietnam that is attracting the most FDI (foreign direct investment) globally,” Yong said.

Sidec, a subsidiary of Invest Selangor Bhd, is a state government agency tasked with leading the effort to transform Selangor into an Asean digital hub. Sidec comes under the Selangor Standing Committee on Trade and Investment.

For the first nine months of 2023, the state attracted a total of RM41.56 billion in investments into the manufacturing and services sectors. Manufacturing attracted RM16.96 billion, while the electrical and electronics sub-sector contributed the largest amount with RM9.75 billion.

In 2022, Selangor has been approved for investments worth RM3.94 billion in the electrical and electronics industry. These investments have created 3,515 job opportunities in the state.

Aiming to move from “Made in Malaysia” to “Made in Malaysia”, the IC Design Park in Selangor is working with the federal government, international semiconductor companies and venture capitalists to position Malaysia as a potential powerhouse in the global IC design industry.

The project has secured significant support amounting to approximately RM200 million from the central government through the Ministry of Economic Affairs, leveraging a co-investment model with the state of Selangor.

It has also secured commitments from four key partners – Arm Holdings, Phison Electronics Corp, SkyeChip Sdn Bhd and the Shenzhen Semiconductor Industry Association.

ARM Holdings, a Nasdaq-listed subsidiary of Japanese conglomerate SoftBank, is a prominent player in the global semiconductor industry, specializing in providing intellectual property (IP) cores and related technologies for processors. The company licenses its designs to over 1,000 global partners, including Apple, Microsoft and Samsung.

Taiwanese technology company Phison, co-founded in 2000 by Sekinchan-born tech entrepreneur Datuk Pua Khein-Seng, famous for inventing the single-chip USB flash drive (pen drive), is the world’s largest independent provider of NAND flash controllers and comprehensive storage solutions.

Founded in 2019 by Fong Swee Kiang, SkyeChip specializes in the development of unique silicon IP and has already made a name for itself in artificial intelligence and high-performance computing IC solutions.

Meanwhile, the Shenzhen Semiconductor Industry Association represents 587 member semiconductor companies operating in China and provides comprehensive support services to the industry ecosystem, including research institutes and universities, supply chain management, financial services, and IP management.

Yong emphasized that the IC Design Park will be equipped with common public service tools and facilities, including affordable electronic design automation tools, servers, IP, multi-project wafer services and training programs.

“The main objective of the park is to promote the manufacturing of original designs and encourage local involvement in product design, prototyping and production, moving from ‘Made in Malaysia’ to ‘Made in Malaysia,’” he stressed.

Yong praised the “unwavering commitment” of four key individuals who made this visionary project a reality – Phison’s Pua, Blue Chip VC Sdn Bhd co-founder Lai Ping Yong, Selangor Governor (MB) Sri Amiruddin Shari and Ng Zee Han, Selangor state government’s executive committee member for investment, trade and mobility – as well as the leadership of Economic Affairs Minister Rafizi Ramli.

“Selangor is fortunate to have two great individuals behind it – Datuk Pua from Phison and Datuk Lai from BlueChip VC. Without their vision, support and guidance, we would not have come this far. Of course, the support from MB, YB Ng and YB Rafizi has allowed us to move forward without any worries.”

Yong emphasises that IC Design Park is not just a property or training centre, but also an accelerator to help businesses expand, and a “business development manager” to help IC design companies grow in Selangor and across Malaysia.

“IC Design Park has received an overwhelming response and has already expanded its space from 45,000 sq ft across three floors to 70,000 sq ft across five floors, an increase of more than 50%.

“We plan to hire more than 300 design engineers with a top-end starting salary of RM6,000-7,000 for fresh graduates. After advertising the job, we have received more than 600 CVs which will be passed on to semiconductor companies,” he revealed.

Yong said Sidek expects another four to five semiconductor companies — local, joint venture and foreign — to set up at the IC Design Park.

“In fact, it’s nearly full, and we’re actively exploring the possibility of expanding into a larger space by the end of this year to accommodate an additional 600 design engineers, bringing the total to 1,000 IC engineers in the first two years.”

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