PETALING JAYA: It is still early days to determine how the latest US export sanctions on China will affect Malaysia’s chip industry.
Yesterday, the United States announced new export restrictions on China’s semiconductor industry, restricting exports to 140 companies.
Key Chinese chip equipment firms like Naura Technology Group Co Ltd, Piotech Inc and SiCarrier Technology will be affected with new curbs extending to shipments of advanced memory chips and more chipmaking tools to China.
The latest measures also include restrictions on shipments of high bandwidth memory chips to China, which are essential for high-end applications like artificial intelligence training; new limits on 24 additional chipmaking tools and three software tools; and new export controls on chipmaking equipment manufactured in countries such as Singapore and Malaysia.
Malaysia Semiconductor Industry Association president Datuk Seri Wong Siew Hai said the immediate implementation of the new trade curbs meant semiconductor companies could no longer take new orders. However, the question now is how existing orders would be affected.
“Companies would still need to fulfill existing orders prior to these new restrictions as they have already committed to delivering these orders.
“Hence, if a company had just received a new order recently and the lead time is six months, the real impact from the new trade measures can only be assessed come June next year, when no new orders can be taken anymore due to the new trade curbs.
“However, it also remains uncertain whether the US government will allow these existing commitments to be fulfilled, as the full details of the restrictions are still unclear,” he told StarBiz.
The measures mark President Biden’s last large-scale effort to hobble China’s chipmaking ambitions before Donald Trump assumes office in January.
In fact, expectations for Biden’s administration to unveil new export curbs on Chinese chipmakers have floated around since August this year.
Moreover, the expanded rules also include new amendments to the foreign direct product rule (FDPR), under which US export controls will be extended to chipmaking equipment by US, Japanese and Dutch manufacturers outside the United States to certain chip plants in China.It was outlined that equipment made in Malaysia, Singapore, Israel, Taiwan and South Korea are subject to the rule while the Netherlands and Japan will be exempted.
Wong said the expected quantum of revenue loss among local semiconductor companies would depend on how much of their business is tied to shipments of semiconductor equipment to China.
“This means semiconductor firms need to find new markets and sectors for excess production capacity. If not, they may need to consolidate their facilities. These companies can explore alternative business opportunities, which may not necessarily be within wafer fab equipment but could involve sectors such as aerospace and medical.
“Meanwhile, the decline in revenue also means there will be less funds allocated for research and development (R&D) as well as innovation, which may have an effect on the downstream segments of the industry,” he said.
The semiconductor industry accounts for about a quarter of Malaysia’s total gross domestic product. The electrical and electronics (E&E) sector represents around 40% of Malaysia’s exports, generating RM575bil in revenue in 2023.
Malaysia’s top export destinations for E&E products in 2023 included Singapore, which accounted for 18.6% of exports, followed by the United States (16.3%), China (15.2%), Hong Kong (13.1%), the European Union (8.5%), and Taiwan (4.9%).
First introduced in 1959, the FDPR allows the United States to regulate the export of foreign-made items that are produced using US technology or software.
This means that if a product is manufactured abroad with any American technology, the United States can impose restrictions on its sale, even if it is made in a foreign country.
