Amazon Web Services (AWS), an Amazon.com company, has on Tuesday released new research revealing that artificial intelligence (AI) adoption continues to accelerate in Malaysia, with 2.4 million, or 27 percent of Malaysia’s businesses, already adopting AI.
However, most Malaysia businesses (73 percent) remain focused on basic uses of AI.
AWS said in a statement that only 31 percent of startups and 15 percent of large enterprises that have adopted AI are building entirely new AI-driven products with AI.
This presents an opportunity for Malaysia to unlock greater economic potential of AI by combining the agility and innovation of startups with the scale and resources of large enterprises to accelerate and deepen Malaysia’s AI adoption.
It is noted that in 2024, 630,000 businesses in Malaysia adopted AI — over one every minute.
AI adoption in Malaysia is gaining momentum, at a year-on-year growth rate of 35 percent, from 20 percent in 2024 to 27 percent this year.
AI adoption is the strongest in the technology and professional services sector (49 percent), followed by financial services (42 percent), and manufacturing (39 percent).
Meanwhile, the productivity and economic potential of AI adoption are promising.
65 percent of Malaysia’s businesses that have adopted AI reported an increase in revenue, at an average increase of 19 percent, while 72 percent report significant productivity improvements.
67 percent of businesses also expect an average of 15 percent in cost savings.
While AI adoption is increasingly widespread in Malaysia, most businesses are not yet harnessing its most advanced uses, underscoring the need to deepen AI adoption to unlock Malaysia’s full AI potential.
73 percent of Malaysia’s businesses that have adopted AI remain focused primarily on basic use cases, like driving efficiencies and streamlining processes using AI – rather than innovation like developing new products or disrupting industries.
Just 17 percent of Malaysia’s AI-adopting businesses have advanced to the intermediate stage of AI adoption, and only 10 percent have reached the most transformative stage of AI integration, where AI is no longer just a tool but a core part of product development, decision-making, and business models.
Startups, in particular, are enthusiastic and innovative in their use of AI in Malaysia, adopting AI’s most advanced uses far more rapidly than more established companies.
48 percent of startups in Malaysia are using AI in some way, of which 31 percent are building entirely new AI-driven products with AI, leveraging the technology to its full potential.
In contrast, 44 percent of large enterprises are using AI, but only 15 percent of these are delivering a new AI-driven product or service, and only 12 percent have a comprehensive AI strategy.
This gap in AI innovation uncovers a deeper finding that could shape Malaysia’s economic future.
“It is an interesting phenomenon we are seeing with AI adoption coming out of the study results in Malaysia,
“While 27 percent of businesses reported they have adopted AI, most of the deployments remain basic despite the rapid adoption of the technology over the past year,” said Nick Bonstow, Director at Strand Partners.
“The differences in the pace and depth of AI innovation between startups and large enterprises also point to an emerging ‘two-tier’ AI economy that could have lasting implications on a country’s future economic development,
“Celebrating AI adoption numbers alone masks the deeper challenges many businesses face across Malaysia,” he added.
Meanwhile, a lack of skilled personnel is the leading reason that 52 percent of businesses in Malaysia say is preventing them from adopting or expanding their use of AI.
Many of the businesses reported having the technology and the vision but are unable to find the people to bring it to life.
This puts Malaysia’s global competitiveness at risk and restricts economic potential, as AI literacy is expected to be required in 54 percent of jobs in the next three years, and only 29 percent of businesses feel prepared with their current workforce’s skillset.
The report uncovered three priority actions for Malaysia to unlock the full potential of AI and avoid the emergence of a ‘two-tier’ AI economy.
Firstly, invest in and build industry-specific digital skills programs to develop a digitally-skilled workforce to drive AI-led innovation and growth.
Although 68 percent of businesses see digital skills as crucial, only 29 percent feel prepared.
Secondly, establish a clear picture of Malaysia’s pro-growth regulation that is predictable and innovation-friendly, to help drive deeper AI adoption across all businesses.
Lastly, with 71 percent of businesses saying they are more likely to adopt AI if the government leads, it will be critical to accelerate digital transformation in the public sector, especially in healthcare and education, and use public procurement to drive innovation.
“Malaysia’s AI ecosystem is developing a natural specialization that creates a powerful innovation cycle,
“Startups build new AI products and business models, enterprises prove these solutions can scale, and the public sector acts as a trust multiplier that encourages wider adoption,” said Hussein Mohd. Ali, Country Manager, AWS Malaysia.
“This feedback loop creates market demand that fuels further innovation,
“For this cycle to reach its full potential, we must address the skills gap, only then can we accelerate the entire country’s digital economy,” he added.
AWS collaborated with Strand Partners to conduct the AI adoption survey in Malaysia.
The “Unlocking Malaysia’s AI Potential” study surveyed 1,000 business leaders and 1,000 nationally representative members of the public in Malaysia.