Since the establishment of diplomatic relations between Malaysia and China, all previous governments from both sides have always attached great importance to the relationship. The heads of governments and high-level exchanges between the two countries have always been close; Malaysia and China have jointly established many mega projects. The original intentions and expectations of these mega projects are forward thinking, innovative and strategic in nature. Unfortunately, in the process of implementation, it has created controversies and skepticism which may have involved corruption/political involvement, commercial fairness with racial sentiment, and “debt trap” concerns in relation with affordability of our country’s economy.
Let’s objectively review and assess the outcome of most of the mega projects which were jointly promoted by the two countries. These projects have not had the desired impact, in the improvement of the people’s quality of life in Malaysia. There are also no significant improvements to our national economy, nor has it fostered the further development and progress of the country. The stagnant situation is really worrying. The good news is that the bilateral trade volume between China and Malaysia reached a record high of US$203.6 billion in 2022, and China has become Malaysia’s largest trading partner for 14 consecutive years.
I formerly worked in foreign multinational companies for 34 years, cumulating with me serving as the President of Motorola China for 8 years. After retiring, I devoted myself to the education sector in China. I have participated in and witnessed the process of the overall electronic industry development of Malaysia and the great achievements of China’s opening and reformation process. Therefore, allow me to state some of my personal views on the development of the national electronics industry and the perspective of macroeconomic development.
Let me start with the current state of international political environments and then express some of my thoughts from the perspective of the development of the semiconductor industry:
- International Political Environment
At present, the world is undergoing major changes unseen in a century. Sino-US relations are tense, and unstable and uncertain factors are increasing. This era is full of challenges which coexists with crisis and business opportunities. We need an open mind and a positive attitude to face these challenges, and we also need to seize opportunities wisely to achieve a win-win situation.
In general, the world pattern has the following characteristics:
- Multi-polarization pattern:
The current world pattern is changing from US hegemony to multipolarity. The United States and China have become the most influential powers in the world.
- Geo-competition is intensifying:
With the rise of China, global geopolitical competition is also intensifying. The United States and Western countries have launched a comprehensive trade war and technological war against China, and the industrial chain has been in the process of decoupling which means full of crisis and business opportunities coupled with challenges and opportunities.
- The global governance system faces challenges:
The global governance system includes international organizations, international laws, and coordination mechanisms, etc. Existing frameworks are increasingly being questioned, and key issues are becoming increasingly difficult to resolve.
Malaysia is an ASEAN country and is located in a special geographical location in the Strait of Malacca; China regards ASEAN as a comprehensive strategic partner with a shared destiny and a shared future. China will continue to promote high-quality joint development project through the “Belt and Road” initiative, to inject new momentum into regional development with more opportunities, and it also proposes a development strategy which will be implemented in the region.
I believe that most Malaysians have come to a common understanding that Malaysia will strictly abide by the position of neutrality and non-selection of sides in Sino-US relations, support China’s “One Belt One Road” initiative, strengthen economic and trade cooperation between Malaysia and China, and assist our country to further improve Infrastructure construction , promote the transformation and upgrading of energy sector, industrial structure, and strive for more Chinese industries to establish and develop in Malaysia, with the commitment of jointly build prosperity for the two countries.
- Malaysia’s Semiconductor Industry Development
Malaysia is one of the world’s largest seven countries/bases for semiconductor “back-end” packaging and testing. There are more than 50 semiconductor companies in Malaysia. The Malaysian Ministry of International Trade and Industry (MITI) reported the development of the domestic semiconductor industry, pointing out that in 2021 the export of electrical products is 456 billion Ringgit, of which semiconductor products account for 62%, mainly in the manufacturing plants and packaging and testing factories of multinational companies. Malaysia currently accounts for about 7% of the global semiconductor trade volume, and the packaging and testing accounts for 13%.
For decades, Malaysia has been striving to upgrade the semiconductor industry chain to the direction of “front-end” IC design and wafer manufacturing. In the early 1990s, Intel was the first company to establish an IC design centre. After decades of development, it has developed into a design centre with thousands of employees. The progress of “frontend” IC design has been slow and has not yet scaled upwards. Only in recent years, most of the Multinational Corporations (MNC) have only begun to advance in this direction. It is very exciting that in the field of IC design, many Malaysian senior executives have left their comfort zone with their job in MNC companies and ventured into “front-end” IC design by setting up their own companies.
Founded in 1985, MIMOS (Malaysian Institute of Microelectronics Systems) is an important part of the government’s investment and implementation of the “Vision 2020” plan. In the past 30 years or so, MIMOS has achieved little to develop semiconductors to the high-end and has not created the expected impact of upgrading the semiconductor industry in Malaysia. The development model of MIMOS can learn from the development model of the early Taiwan Investment Industrial Research Institute. The Industrial Research Institute (Industrial Research Institute) is an applied research institution established by the Taiwan
government. It uses scientific and technological research and development to drive industrial development and create economic value. It has successfully driven the development of Taiwan’s overall IC industry chain, bred, and created large enterprises such as TSMC and UMC, and led large private enterprises such as Formosa Plastics to invest in the establishment of fabs, resulting in the development of Taiwan today, a powerhouse in the global semiconductor industry.
SilTerra is one of the few semiconductors fabs in Malaysia. It was established in November 1995. It is essentially a state-owned enterprise. The Malaysian Ministry of Finance once held 100% of its shares. It can be said that SilTerra has the entire national credit endorsement and government financial endowment behind it. Aiming to lift Malaysia from the back end of chip assembly and testing to a higher-end semiconductor value chain, the government’s investment department has invested more than 2 billion Ringgit in SilTerra. Since its establishment in 1995, the company has accumulated losses of more than 8 billion Ringgit. SilTerra is insolvent, and the company has suffered serious losses yearafter-year. Finally, in 2021, SilTerra’s was sold to DNEX and Beijing Shengshi Investment Institution (Beijing CGP) at a price of US$66 million. The development of the semiconductor industry to high-end manufacturing industry is still the theme of my country’s industrial transformation and development. Since the investment in fabs is very large, it is a capital and talent- intensive enterprise. Our country does not have the capabilities to influence and grasp the market trends. Instead, let us play the role and provide preferential policies to attract foreign capital to build the fabs and shift the development of fabs to foreign capital or private companies to invest. The past can be used as a lesson, and the wrong decision to invest in SilTerra should not be made again.
MIMOS and Huawei signed a memorandum of understanding to provide training and Huawei Certified ICT Engineer (HCIA) diploma courses. This professional training and diploma course focuses on several major areas, including 5G, Internet of Things (IoT), big data, artificial intelligence (AI), etc. Huawei has many years of commercial cooperation in stalling wireless network infrastructure in Malaysia. Hisilicon Semiconductor Ltd (海思半 导体公司, a business unit of Huawei, a highly successful semiconductor company which has great strengths and capabilities with more than 20 years of experience. We can seek a deeper business partnership with Huawei/Hisilicon by extending our business from wireless technology to IC design. 2023 is the 10th anniversary of the establishment of a comprehensive strategic partnership between the two countries, and it is the first visit to China by Prime Minister Anwar after taking office. With the establishment of strategic partnership with Huawei China, it will help to accelerate Malaysia’s semiconductor industry development into the front IC Design back-end assembly and test value chain.
The Sino-US technology war, the decoupling of the US-China technology industry, the Biden administration imposed severe sanctions on advanced semiconductor chips, and the overseas business of Chinese semiconductor companies needs to find a breakthrough to avoid the US sanctions. Malaysia’s favourable geographical environment also attracts foreign investment. Malaysia has laid a strong foundation in semiconductor “backend” packaging and testing, and gradually developed to chip design, and expanded downward to the production of electronic end products. Quoting SK Fong, CEO of Malaysian chip company SkyeChip, from an exclusive interview with a reporter from Global magazine: It is time for Malaysia to develop from the “back end” (packaging and testing) of the chip industry to front-end design and manufacturing. “More than 10 years ago, we did not have this strength, market and opportunity, but now the situation is different. Our local industrial chain is very comprehensive, and we have complete and cutting-edge technologies in chip architecture, microarchitecture, physics, layout and other design links. Moreover, we also have mature experience in global supplier management. Being in the right place at the right time, and readiness-in talented people are all indispensable.” We have been waiting for the opportunity, and now is the time.
Since Malaysia fully reopened its borders last year, I have led semiconductor business elites from China and Taiwan to visit Penang several times. We have visited and inspected several Penang technology companies. The computer and equipment automation, data storage and other fields, and especially the technical strengths demonstrated by local semiconductor design companies such as SkyeChip and Infenecs have impressed. Furthermore, after the visit, it left the visitors with a good impression of Penang ‘s conducive development of IC design environment.
A Chinese semiconductor company is committed to invest and set up a semiconductor IC design company in Penang. My close friend, former president and chairman of Microsoft China, Mr. Chen Yongzheng (Tim Chen) and I discussed the need to establish a venture capital fund to foster the growth of local IC design companies. We anticipate there will be a strong demand for funding from the local semiconductor IC design companies. Just within a short period of one week, a special fund of 100 million Ringgit, which is earmarked for investment in the development of Malaysia’s IC design industry, has been raised. Investors include four Chinese-American technology leaders and four Penang-based public listed companies’ founders. This is highly encouraging, and we are looking forward to have more establishment of venture capital. The industrial development of Malaysia’s semiconductor “front-end” IC design and “back-end” packaging and testing will surely go to a higher level.