BIMB Securities has maintained a neutral outlook on Malaysia’s broader technology sector but remain bullish on fabless semiconductor firms as Malaysia’s moving up the semiconductor value chain.

According to the research house, Malaysia is actively diversifying its semiconductor ecosystem, with multiple states rolling out targeted initiatives to attract investment in integrated circuit (IC) design, advanced packaging, and wafer fabrication.

Under the National Semiconductor Strategy (NSS), the country aims to transition from “Made in Malaysia” to “Made by Malaysia,” with the ultimate goal of becoming a global leader in integrated circuit design.

This reflects a strategic shift from traditional contract manufacturing toward higher-value segments of the semiconductor value chain, including design, advanced packaging, and artificial intelligence (AI)-enabled chips.

It is noted that Selangor, a state on the west coast of Peninsular Malaysia, is emerging as a strong contender to Penang as a semiconductor hub.

Its digital economy agency, the Selangor Information Technology and Digital Economy Corporation (SIDEC), is leading the development of an IC design hub in Puchong,
projected to become the largest in Southeast Asia.

This initiative involves collaboration between the federal government, global semiconductor companies, and venture capital investors.

In addition, the government is proposing a 30 percent local content policy for data centers in Selangor to encourage the adoption of domestically designed chips, signaling a push to strengthen local semiconductor capabilities while attracting global players.

Selangor’s focus on IC design is complemented by advanced training programs, such as its partnership with United Kingdom-based Arm Holdings to license chip designs and train 10,000 engineers over the next decade.

A second IC design park in Cyberjaya, set to focus on advanced chip testing and design, is also expected to come online by late 2025.

Meanwhile, Penang, a Malaysian state located on the northwest coast of Peninsular Malaysia, continues to reinforce its position as Malaysia’s pioneer semiconductor hub.

The Silicon Research & Incubation Space at GBS TechSpace in Bayan Lepas provides a purpose-built, 36,000 square feet innovation center to support startups and growing local IC design firms.

Backed by the PSD@5KM+ initiative, the Penang State Government has committed MYR 60 million ($14.3 million), with an additional MYR 50 million ($11.9 million) in federal co-funding, to provide subsidies for operating expenses such as rental, utilities, Multi-Project Wafer (MPW) services, testing, and talent development.

Complementary programs such as the Penang Chip Design Academy, established in 2025, aim to address the talent gap and build a sustainable pipeline of IC design engineers.

Other states worth mentioning in semiconductor ambitions including Kedah, a state in northwest Malaysia, which hosts high-value semiconductor manufacturing and IC packaging/testing firms through its long-standing high-tech industrial park.

Sarawak, a Malaysian state on Borneo, also implements a multi-year roadmap to develop a complete semiconductor ecosystem, build local design capabilities, and attract
significant investment.

Johor, a state in southern Malaysia, is also leveraging its strategic location near Singapore with aims to develop advanced manufacturing, assembly, testing, and research adn development (R&D) clusters.

Cited Bloomberg, BIMB highlighted that AI accelerator market is projected to expand at a compound annual growth rate (CAGR) of 16 percent, reaching $604 billion by 2033.

While graphics processing units (GPUs) will maintain their stronghold with an 81 percent revenue, share driven by deep software integration and memory scaling — custom application-specific integrated circuits (ASICs) are set to grow nearly three times faster.

ASICs are expected to surge from an 8 percent market share in 2024 to 19 percent by 2033, as hyperscalers increasingly deploy proprietary silicon to optimize costs and performance for specific AI inference tasks.

BIMB noted the rapid rise of AI adoption is a major catalyst for ASIC demand.

Enterprises across industries—ranging from hyperscalers to automotive, healthcare, and industrial automation — are increasingly integrating AI into core operations, driving exponential growth in AI workloads.

This trend is not limited to cloud training; AI inference, edge deployment, and AI-powered applications are expanding rapidly, creating structural demand for high-performance, low-latency chips.

As AI models grow larger and more complex, the need for specialized silicon, memory interfaces, and optimized data pipelines continues to rise, benefiting ASIC design houses that can deliver application-specific solutions efficiently, said the research house.

BIMB sees ASICs, often in the form of application-specific SoCs, allow companies to capture design IP, generate recurring revenue, and build stickier customer relationships. This shifts firms from “build-to-print” vendors to technology owners.

It also opined that local strengths in packaging, testing, board design, and manufacturing, along with government initiatives — such as IC design parks, ARM ecosystem access, and EDA support — make ASIC production more achievable.

Besides, it noted many companies prototype on FPGA to validate functionality and demand before migrating to ASIC, unlocking the performance, power, and cost advantages of custom silicon while limiting risk.

BIMB also sees China’s push for semiconductor self-reliance, spanning domestic AI accelerators and critical IP blocks, is creating new outsourcing and partnership opportunities.

“Against this backdrop, Malaysian firms, benefiting from a neutral geopolitical stance coupled with strengths in mature-node ASICs, RTL design, SoC integration, and IP enablement, are well placed to support these initiatives,” it noted.

Malaysia’s tech hardware industry conditions to improve this year – Maybank