Analysts said Thursday that Malaysia’s partnership with Softbank-backed semiconductor firm Arm Holdings will ignite the front-end semiconductor value chain in the country.

RHB Investment Bank said in a note that it believes this innovative partnership will help to elevate Malaysia into a high-value economy by owning and leveraging ARM, igniting the frontend semiconductor ecosystem while fostering growth of local semiconductor firms over the long term.

As part of Silicon Vision 2025, Malaysia’s memorandum of understanding (MOU) with Arm marks the world’s first collaboration between a sovereign nation and global technology giant in developing proprietary intellectual property (IP) for integrated circuit (IC) design.

According to the research house, electrical and electronics (E&E) exports account for about 37 percent of Malaysia’s total exports, making it the seventh largest semiconductor exporter with about 7 percent of global market share.

By shifting the industry focus from the back-end semiconductor process to higher-value design activities, the collaboration aims to capture a larger share of the semiconductor value chain.

It is noted that the assembly and test operations (OSATs) – which Malaysia is well known for – typically only yield 5 percent to 10 percent in value while the design activities contribute up to 60 percent in the total value of semiconductor supply chain.

“Malaysia is set to reap long-term strategic gains by developing locally-owned advanced artificial intelligence (AI)-optimized silicon products, and attract international investment while empowering local companies to thrive in the semiconductor market,” said RHB.

It is noted that the partnership entails a $250 million investment by the government on various ARM’s cutting-edge IPs and licenses over a course of ten years to transform and foster an indigenous semiconductor ecosystem.

Thus, selected Malaysian companies and/or alliance with advanced foreign companies will be given privileged access to ARM’s compute subsystems (CSS) IPs and flexible access (AFA).

These ensures the reduced time-to-market – from 3-5 years to just 1-2 years – as opposed to design from scratch.

Aside from helping to lower the research and development (R&D) costs and risk of design errors, it also allows local firms to focus on product differentiation and prototyping rather than reinvent the foundational technologies, according to RHB.

For each of the CSS, a complete supply chain worth $30 billion will potentially be built – local players will be prioritized with the technology transfer and help from advanced foreign firms through the different collaboration structures.

According to the research house, a cornerstone of this collaboration is to position Malaysia as a regional IC design hub and ARM’s commitment to making Malaysia its ASEAN + Australasia hub underscores the partnership’s significance.

With ARM’s unparalleled ecosystem of developers and silicon proven IP, RHB opined that Malaysia is set to gain support and access to a complete value chain, from IC design to tape-out.

“The creation of a Malaysia-owned IP will be tailored to various advanced applications in industries such as AI, automotive, industrial IoT, robotics, data centers, and E&E,

“With a goal of creating 10,000 jobs and developing a pool of highly skilled talent, the initiative promises to deliver a substantial economic multiplier,” it said.

MIDF also said in a separate note that it applauds Malaysian government’s radical move to have more presence in the semiconductor front-end under the partnership with Arm.

“The partnership with ARM is expected to expedite the creation of several chip companies in the front-end as early as 2030 with ready end-market products which could ultimately lift the country’s gross domestic product (GDP),” said the research house.

It added the move will also be complementary to the country’s existing stronghold in the back-end process i.e. chip assembly and testing.

“We view this will be made possible by leveraging on ARM’s extensive architecture and partner ecosystem,” it added.

On another, it opined the move would help to partially address the ongoing trade wars which has started off between the U.S. and China and could potentially spill over to the rest of the world.

“The deal entails the creation of up to ten chip companies with total annual revenue as much as $20 billion which could lift one percentage point to the country’s GDP,

“This would the country to produce its own chip in the next five to ten years which is much faster as compared to developing its own homegrown chip technology ‘organically’,” it added.

The deal is also expected to complement Malaysia’s existing stronghold in the chip assembly and testing, said MIDF.

For context, Malaysia is the sixth largest exporter of semiconductors, contributing around 13 percent of the global market share for semiconductor packaging, assembly and testing operations.

MIDF highlighted the partnership allows Malaysia to build domestic production of a component critical to future technologies and national security.

This follows the footstep of other nations such as the U.S, Japan and China who seeks to strengthen their respective chipmaking capabilities.

“We view the move to be timely in view of the on-going trade war. This could help to mitigate, to a certain extent, the impact of the U.S. plans to roll out wide-ranging tariffs that could affect trade-reliant nations.

To recall, President Donald Trump is expected to announce reciprocal tariff from 2nd April 2025 to address unfair trade practices by other countries.

MIDA inks deal with Softbank’s ARM to boost Malaysia’s semiconductor industry