A growing number of Chinese semiconductor design companies are engaging Malaysian firms to assemble high-end chips, particularly graphics processing units (GPUs), as a strategic move to mitigate risks associated with potential U.S. sanctions on China’s chip industry, according to sources familiar with the matter.
The requests made by Chinese firms to Malaysian chip packaging companies focus solely on assembly, a process that does not violate any existing U.S. restrictions. This development comes as Washington tightens restrictions on selling high-end GPUs, aiming to curb China’s access to technologies that could fuel artificial intelligence advancements, supercomputers, and military applications.
Amid increasing sanctions and a surge in demand for AI-related technologies, smaller Chinese semiconductor design firms face challenges securing advanced packaging services domestically. Some Chinese companies are specifically interested in advanced chip packaging services, which are crucial in improving chip performance.
As a significant global semiconductor supply chain hub, Malaysia is a strategic location for Chinese chip firms diversifying outside China for their assembly needs. Companies like Unisem and other Malaysian chip packaging firms have experienced heightened business and inquiries from Chinese clients.
The appeal of Malaysia for Chinese chip design firms is attributed to geopolitical considerations, affordability, an experienced workforce, and access to sophisticated equipment. Malaysia, which accounts for 13% of the global semiconductor packaging, assembly, and testing market, aims to boost its share to 15% by 2030.
While there is potential concern about provoking U.S. reactions, industry insiders emphasize that their business dealings are legitimate and compliant. Some Chinese chip firms see the advantage of having their chips assembled outside China as it facilitates more accessible access to non-Chinese markets.
The move towards Malaysia is part of a broader trend, with countries like Vietnam and India seeking to expand their presence in chip manufacturing services. Malaysia’s competitive incentives have attracted significant investments from global players, including Germany’s Infineon and U.S. chipmaker Intel, highlighting the country’s importance in the evolving landscape of semiconductor manufacturing.
As geopolitical uncertainties persist, Chinese semiconductor firms strategically diversify their operations to ensure a stable and efficient product supply chain.
