Numerous international corporations have recently decided on Malaysia as a location.
(Photo: Bloomberg/Getty Images)
Munich Palm oil was yesterday: In the jungle of Malaysia, the chip plants are now growing up. One group after the other recently announced billions in investments in the Southeast Asian country.
Malaysia is the preferred location for Western companies that want to produce cheaply in Asia but deliberately avoid China. Because the US is beginning to restrict high-tech exports to the country. And in corporations there is a growing fear of being robbed of their own know-how in China.
“Not least because of this, we decided on Malaysia in order to diversify regionally,” said Andreas Gerstenmayer, head of the chip supplier AT&S, the Handelsblatt. The listed company is investing 1.7 billion euros in a new factory in Kulim in the north of the country. The company has never invested so much money at once.
Like AT&S, many chip companies have recently opted for Malaysia. Infineon, Germany’s leading chip manufacturer, will also build a new factory in Kulim for two billion euros.
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Intel boss Pat Gelsinger has even bigger plans: The engineer is building a factory for chip packaging in Malaysia for more than seven billion dollars. The plant is scheduled to start in 2024, and 4,000 jobs will be created.
The group has been represented in Malaysia since 1972. Here the company had its first overseas location for the further processing of chips. Packaging and testing the chips is labor intensive, so the low wages are an advantage.
According to AT&S boss Gerstenmayer, something else speaks for Malaysia: “Kulim has a great tradition in microelectronics. There are many suppliers there, qualified employees, and the labor costs are also attractive.”
There is a lack of qualified personnel in Europe
Before Kulim was chosen, the manager had 200 locations checked around the world – including in Europe. The result: “Europe suffers from a blatant lack of qualified personnel,” says Gerstenmayer. “This not only affects engineers, but is already noticeable in the workers.” In Kulim, the CEO wants to create 6,000 jobs.
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In addition, Malaysia has nothing to do with the world’s major geopolitical conflicts – unlike leading chip locations such as Taiwan, where TSMC, the world’s largest contract manufacturer, is based. The island is considered a breakaway province by China. But South Korea, home of the most important memory chip manufacturers Samsung and SK Hynix, is also considered a location with risks. After all, it borders on the politically unpredictable North Korea.
Many chip manufacturers have had good experiences in Malaysia, including Infineon. The Munich-based company opened its first plant in Kulim in 2008. A second factory went into operation there in the middle of the last decade. The group also operates its largest site for packaging and testing chips in Malacca in the south of the country.
The new, third plant in Kulim will manufacture chips from the promising materials silicon carbide (SiC) and gallium nitride (GaN). Production Director Jochen Hanebeck: “We are creating a profitable combination with the development competence center in Villach and the cost-efficient production of SiC and GaN power semiconductors in Kulim.”
The high demand for semiconductors contributed to an export record in Malaysia last year. The country shipped goods worth around 290 billion dollars abroad – a quarter more than in the previous year. The electronics industry alone accounted for around 100 billion dollars of this. The statistics office spoke of an “excellent performance” in the industry, which employed around 575,000 people in 2020. In the chip industry, the country accounted for around 13 percent of global test and packaging capacities.
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However, Malaysia is not only attractive for the chip industry: Foreign and domestic direct investments in the manufacturing sector rose last year by 114 percent to almost 47 billion dollars. Around three quarters of this was accounted for by the electronics industry, as Malaysia’s economic development agency Mida recently announced. Among other things, she emphasized investments by Infineon in Malacca: These would help to “further strengthen Malaysia’s position as a global semiconductor center”.
The corporations are followed by medium-sized companies
With the move, the government tried to take into account the importance of factories for global supply chains. However, the decision was not without controversy: A research by the financial service Bloomberg in December gave the example of a semiconductor factory with thousands of employees whose Covid death rate was five times the national average.
The Munich electronics producer opens a new location in Malaysia and creates 150 jobs there.
(Photo: Katek SE)
In the meantime, medium-sized companies are also settling in the wake of the large corporations. One of them is the electronics manufacturer Katek from Munich. CEO Rainer Koppitz: “The government is bending over backwards to make us invest.” This spring, Katek will open a location in Penang, not far from Kulim, with 150 employees.
“Malaysia is a very stable country,” says Koppitz. It is also neighboring Singapore, the most important hub for many European customers in the region. Many development departments for which the company will work in the future are based in Singapore. Katek will produce prototypes and small series in Penang. Koppitz intends to expand the location significantly over the next few years.
More: Europe’s chip offensive: 43 billion euros to catch up