The first planned IC design hub sounds like a moonshot but it is certainly a clever and cost-effective way of attempting to fast track Malaysia’s much delayed ascent into the upper segments of the semiconductor industry. Photo: Image by macrovector_official on Freepik
ONE thing that stands out in this government’s plan to nudge the country higher in the semiconductor industry is how it is being done cost-effectively and strategically.
Formerly, billions of ringgit were spent to build wafer fabricators, arguably the pinnacle of the semiconductor value chain, which are capable of transforming silicon wafers into integrated circuits (ICs).
In the end, the two government-funded wafer fabs were sold at a fraction of the billions that were sunk in.
Hundreds of millions ringgit more have been poured into MIMOS Bhd to boost technological areas such as micro-electronics but failed to create a local IC design industry.
Those failures probably even affected the country’s confidence in trying to climb higher up the semiconductor value chain.
Today’s plan is quite different, although on the surface there can be reservations, even disbelief that it can work.
The first planned IC design hub is being housed in the busy and often congested suburb of Puchong in Selangor. It is distant from any ecosystem of semiconductor companies in Malaysia, most of which are up north in Penang.
The federal government is working with the Selangor government to create this design park housed on three floors of a commercial building called Puchong Financial Corp Centre (PFCC).
The idea, announced in April as an integral part of the KL20 Summit 2024, is a blueprint to catalyse the country’s technology ecosystem. It is the brainchild of Economy Minister Rafizi Ramli and his team.
At this week’s launch at the PFCC, Rafizi said three notable things in his speech.
One, there is no reason why Malaysian engineers cannot become IC designers if given the right tools, opportunities and incentives.
It is important to note that IC design is considered a challenging area within engineering due to its complexity and extensive knowledge requirements.
Two, it is way cheaper to start an IC design hub than to build a highway. Rafizi says the government could invest around RM8 million to start the PFCC with incentives for companies, far less than what it would cost to build one highway.
It is understood that those monies will be spent on things like offsetting rentals for companies coming into the PFCC and subsidising some of their software (electronic design automation or EDA) tool costs.
And thirdly, aside from the already existing semiconductor base that the country has, albeit mostly in test and assembly, Malaysia has another trump card in this game — it has become a global hub for data centres (DCs).
But how do DCs link with the IC design hub story?
There is a huge amount of capex being planned by foreign companies constructing hyperscale DCs in Malaysia, with one source estimating a staggering US$19bil (RM85bil).
Rafizi explains it as an ODM or original design manufacturer opportunity. “As this ecosystem takes place, data centres in Malaysia will begin to consider ‘Made by Malaysia’ chips. That is the consideration the federal government is looking for,” he said at the launch.
How exactly does that work? It may not be so easy.
First, as explained in an earlier commentary by StarBiz7, just because DCs are coming to Malaysia, it doesn’t necessarily mean they will use the products and services of Malaysian companies.
If you haven’t been supplying DCs with anything important in the past, then you are not likely to suddenly turn up on their procurement list, just because these DCs are now near you.
That’s not to say that it cannot happen. If your product or service is high quality and of value to the DC, then maybe you stand a chance.
This seems to be the idea: In order to create this IC design base in Malaysia, why not pair a global company with the right technology with local players who can manufacture the final product on an ODM basis, and then supply that chip or equipment to the DCs being built in Malaysia.
Some global companies prefer to license their technology to others to manufacture. Malaysia is a manufacturing base for semiconductors but only at the lower end of the spectrum.
With the design and advanced packaging element coming into play, hence the ODM dream. Of course this would entail sending the early part of the product to the top wafer fabrication companies in Taiwan to produce the ICs.
The plan sounds like a moonshot but it is certainly a clever and cost-effective way of attempting to fast track Malaysia’s much delayed ascent into the upper segments of the semiconductor industry.
This article first appeared in Star Biz7 weekly edition.
