MOVING into February 2025, with the last batch of 200 advance packaging engineers from Penang relocated to New Mexico in the United States, the Intel Penang wafer fabrication and advance packaging plant project is officially coming to an indefinite hold, with no re-initiation in view.
The Intel Penang plant was supposed to be a key milestone for Malaysia’s semiconductor industry, signifying our stake in the global advanced semiconductor field.
Now, it has fallen short of taking off.
This would slow down Malaysia’s wafer fabrication and advance packaging industries for several decades, or possibly be unrecoverable.
Back in 2021, Intel Corp’s former CEO Pat Gelsinger started the make-Intel-great-again project, called IDM 2.0, to reposition the company as an advanced and efficient wafer fabrication service provider globally, in competition with TSMC and Samsung.
As part of the IDM 2.0 project, Intel announced an investment of US$9bil to build a new chip packaging and testing facility in Penang.
The project was to be Intel’s first advanced 3D chip packaging facility outside of the US, the first 300mm wafer fabrication facility for Malaysia and the first ASML Deep Ultraviolet lithography system implementation for the country.
With the project commencement in 2022, approximately 600 engineers and technicians, the majority of them technically rookies in advanced packaging technology, were sent by Intel to the United States for one year of seeding at its New Mexico and Oregon water fabrication plants.
These Intel-trained engineers are not just the pioneers for the Intel wafer fabrication plant in Malaysia, they are the seeds of the future for the country’s semiconductor wafer fabrication and advanced packaging industries.
After several years of technical endeavour in Intel Penang, they would represent the core personnel for advanced homegrown packaging industries and the key attraction for future foreign investment in wafer fabrication for Malaysia.
Ultimately, the project is poised to be the third semiconductor industrial leap for Malaysia. The first one in the 1970s saw the US semiconductor multinational corporations (MNCs) landing in Malaysia.
The second leap in 2019 saw the relocation of semiconductor manufacturing by MNCs from China to Malaysia after the US-China trade war during Donald Trump’s first presidency.
Unfortunately, the Intel Penang plant master plan fell short of coming to realisation. Intel announced a hold on the Penang advanced chip packaging plant in the third quarter of 2024 due to its disastrous financial results, followed by a capital-expenditure (capex) slash.
Malaysian technical personnel, who Intel spent millions to train, were either laid off or relocated to the United States (now on a one-year contract). Only a small fraction of the talent remains in Malaysia as remote support personnel.
This is a huge loss that could deter Malaysia’s semiconductor industry advancement for more than a decade. It will be hard pressed to find another semiconductor MNC that will curate a massive scale of industrial skills upgrade and people development scheme for the country.
The indefinite hold of the Intel Penang project highlights the volatility and dynamics in the semiconductor industry development, characterised by high capex, demand for highly skilled talent and significant vulnerability to global geopolitical factors.
Malaysia, aiming to be a global advanced semiconductor hub, will need to heed the dynamics and challenges mentioned.
The fallen Intel plant is a good lesson learned for Malaysia.
Malaysia announced its semiconductor master plan, the National Semiconductor Strategy (NSS), in 2024, aiming to transform itself from a mid-tier test and assembly house to a high-tier wafer fabrication and design hub.
But benchmarking the lesson learned, the strategy has a clear gap in coping with the industrial reality.
Firstly, semiconductor wafer fabrication development requires massive capital investment to build state-of-the-art facilities and sustainable electrical and water supply systems.
The recent successful wafer fabrication investment in South-East Asia, the NXP-TSMC plant in Singapore, saw an initial investment of US$7.8bil, a stunning reality when compared to the overall US$5.3bil investment for the NSS, an amount falling short of even building a new wafer fabrication plant.
Due to its massive capital investment, the industry is financially fragile, high risk and sensitive to external changes.
Hence, it will always need a strategic partner in mitigating the long-term risk encountered: the government.
The success of Singapore and Taiwan as a regional wafer fabrication hub is built on a strong government equity injection in long-term commitment.
Hence, to increase our competitiveness, the Malaysian government will need to further enlarge the equity size under the NSS, possibly leveraging Khazanah Nasional Bhd and the Employees Provident Fund’s cash to create joint-venture companies to attract more potential wafer fabrication influx, or even cultivating our very own.
Secondly, reflecting on the Intel advance packaging plant setup chronology in Penang, it demonstrated Malaysia might have ample engineers and STEM (science, technology, engineering, or mathematics) graduates, but they do not fit the hiring “scoop and run” criteria. That was why Intel’s seeding plan in the United States came to be in the first place.
The reality is that Malaysia’s industrial ecosystem does not provide readily available talent, and the technical training provided by local universities for our undergraduates is way lagging behind mainstream technology.
Hence, if Malaysia is serious about the wafer fabrication endeavour, an in-depth partnership with technology MNCs, or in short, focus searching for the “next Intel” to seed advance packaging talent is critical to kick-start our transformative vision.
However, this has proven to be a complex solution due to factors such as equity injection and global strategy.
The lower hanging fruit solutions would be coordinating an apprenticeship with industries that own semiconductor advance packaging capability in Malaysia, such as Siterra and TF-AMD, to curate a special training programme that immerses our STEM graduates in the advance packaging ecosystem, equipping them with critical technical know-how.
It would be a slower pace solution, but it is more realistic and lower in cost.
The right positioning in the dynamic global geopolitics would be the last piece of the jigsaw puzzle.
The semiconductor sector has become the most critical bargaining chip in the duel of global superpowers, presenting both opportunities and threats to Malaysia.
Malaysia has always positioned itself as a neutral, non-partisan industrial and trade partner. We have a history-proven record in terms of securing the intellectual property and trade secrets of our international industrial partners.
This reliable, trustworthy national characteristic is a great strength for us in the current semiconductor geopolitics front.
Yet, the prime minister’s recent diplomatic gesture, namely joining the BRICS group, proactive engagement with Russia and diplomatically distancing from the United States, might have contradicted the neutrality narrative that Malaysia has presented to the global society, raising doubts especially among Western investors.
Such doubts might turn into actions that would eventually pose an economic threat to Malaysia. The most recent reaction is German semiconductor giant Infineon’s announcement of a new plant in Thailand.
Infineon already has its biggest manufacturing plants in South-East Asia located in Kulim and Melaka, yet it has decided to start a new Thailand plant in 2025, rather than having a more cost-effective consolidation strategy in Malaysia.
Infineon cited optimisation and diversification of its manufacturing footprint. The underlying narrative is none other than Malaysia might be in geopolitics trouble.
Such alternate competing sites are a serious economic threat to Malaysia as history could repeat itself.
Hard-disk manufacturer Seagate shut down its Malaysian manufacturing operation in 2016 after its Thai plant expansion was completed, consolidating all manufacturing activities there, with Malaysia paying the cost of losing more than 2,000 high-end job positions.
Currently, Malaysia is at a critical juncture.
The recent media interaction between outgoing ambassador to the United States, Datuk Seri Mohamed Nazri Abdul Aziz, and former Investment, Trade and Industry Minister Ong Kian Ming in a diplomacy call with President Trump has reflected the cruel truth from the inner political circle: we are not in a relatively good, trusted position with the United States compared to our Asean peers.
If any trade war tariff or technology sanction would land on Asean, Malaysia, the country with the third-highest trade deficit with the United States in the region, would be on Trump’s butcher knife.
If the prime minister still takes this lightly, it would roll back all the semiconductor development Malaysia has enjoyed in the past decade.
It is time for Datuk Seri Anwar Ibrahim and his diplomacy team to recalibrate our global diplomatic footprint, adopting real neutrality and repositioning Malaysia as a trustworthy tech and trade partner for both the Western and Eastern blocs, to ensure the country continues to develop and prosper.
Tze Howe currently works at an electronic tech multinational corporation and is the founder of a non-profit think tank, HEYA Inc. The views expressed here are the writer’s own.
