Malaysia plans to accelerate its EV and chip sectors as supply chains shift
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Malaysia is rushing to attract investment into industries producing high-tech goods such as semiconductors and electric vehicles, driving to bolster its position as a manufacturing hub and a key link in global supply chains.
Government officials and business leaders this month highlighted the role the nation could play during the Malaysia-Japan Economic Dialogue, hosted by the Federation of Malaysian Manufacturers (FMM), Nikkei and the Japan Chamber of Commerce and Industry.
Tengku Zafrul Abdul Aziz, Malaysian minister for investment, trade and industry, said the country was looking to expand its market access and build resilient supply chains for manufacturing sectors.
“By leveraging our existing economic ties, we can drive economic growth, facilitate technology transfer, expand market access, diversify our trade sectors and bolster our relations further,” the minister said.
In September, Malaysia announced a new industry master plan that would require RM95bn ($20bn) in investments over seven years to build a more advanced manufacturing sector. Priority industries include electronics, chemicals and EVs. The country also aims to create 3.3mn jobs.
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Zafrul added that the plan aimed to “position Malaysia as a preferred investment destination with the right ecosystem in place” to support high-tech and value-added manufacturing.
Under the scheme, the government aims to boost the value of high-end manufacturing to RM587.5bn by 2030, up 61 per cent from 2022. Malaysia’s manufacturing sector accounts for more than 20 per cent of the country’s gross domestic product and contributes 80 per cent of its total exports.
Sikh Shamsul Ibrahim, senior executive director of the Malaysian Investment Development Authority, said at the forum that Malaysia aimed to take advantage of the realignment and redistribution in the diversification of the global supply chain amid the ongoing trade war and geopolitical tensions.
“Supply chain resiliency is among the major sectors we would like to focus on — to have a greater link with [our] trading partners,” Ibrahim said, adding that high-growth sectors, including semiconductors, electric vehicles and renewable energy, were among the priorities.
“We would like to invite Japanese companies to consider investing in renewable energy, where Japanese companies have great knowledge,” Ibrahim added.
Ibrahim also highlighted the government’s objective of introducing tiered corporate tax incentives, based on the planned budget for 2024, to attract investments in high-value and high-growth sectors.
Malaysia’s efforts come on the back of rising tensions between Washington and Beijing that have pushed electronics and semiconductor companies to look to diversify their production beyond China. While India and Vietnam have emerged as popular alternative sites, Malaysia is also seeking to tap that demand.
Indeed, the global chip industry has already been increasing its investment into Malaysia, with German semiconductor company Infineon Technologies in August announcing plans to spend up to €5bn to expand its current facility in the nation over the next five years. The company plans to manufacture chips used in the production of electric vehicles.
During a panel discussion at Wednesday’s forum, Honda Motor chair Seiji Kuraishi said Malaysia’s position as a semiconductor hub was becoming “even more crucial” for the global supply chain.
“If production in Malaysia is disrupted, electronic components, including those used for the automotive industry, cannot be produced, [which would] . . . result in a major impact on the entire world,” Kuraishi said, calling on businesses and governments to enhance their resilience.
During his opening remarks, FMM president Soh Thian Lai noted that the country’s new master plan would provide more opportunities for Japanese companies to collaborate in the digital space.
“We also like to encourage more young entrepreneurs in Malaysia to have business partnerships with Japanese companies, especially in the digital economy and industry 4.0,” he said. “We can work together as a group and make Malaysia a business hub [in the region].”
A version of this article was first published on October 25 by Nikkei Asia. ©2023 Nikkei Inc. All rights reserved.
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