US-China chip standoff paving the path for emerging tech hubs in Malaysia and India

In the rapidly evolving landscape of the semiconductor industry, two key players - Malaysia and India - are making significant strides in attracting major investments.

In Malaysia, American companies Intel and Micron have made substantial investments, with Micron opening a billion-dollar assembly and testing facility in Penang and promising an additional USD 1 billion for expansion. Intel, too, has committed a USD 7 billion investment to build a chip packaging and testing facility, with production expected to commence in 2024. These investments are not only boosting Malaysia's economy but also solidifying its position as responsible for 13% of the global market for backend semiconductor manufacturing.

Companies in Malaysia can reap benefits such as the Investment Tax Allowance (ITA), offering a tax deduction equivalent to 60% of its capital expenditure within five years of the grant, and the Pioneer Status (PS), which exempts 70% of their statutory income over a five-year period. Assembly, testing, and packaging facilities in India can also receive fiscal support of up to 30% of capital expenditure.

India, on the other hand, has been making strides in the semiconductor sector with the Indian government approving a USD 10 billion program in 2021 to incentivize both local and foreign semiconductor firms. The Powerchip Semiconductor Manufacturing Corporation (PSMC) has announced a joint collaboration with India's Tata Electronics to build India's first semiconductor fabrication facility in Gujarat, India. The combined investment for the Micron facility in India is valued at around USD 2.75 billion and is predicted to be operational by the end of 2024. The USD 11 billion investment for the PSMC facility in India will have 70% of its project cost subsidized by India's central and state governments.

The construction of the PSMC facility in India is anticipated to complete in 2026, while the founding date of the first semiconductor fabrication facility of Powerchip Semiconductor Manufacturing Corporation in India is not publicly available.

The global export of microchips has been affected by restrictions imposed by both the US and China, with China introducing export controls on germanium and gallium, essential raw materials used in chip manufacturing, in 2023. In response, the Biden administration updated its export controls on advanced chips and semiconductor manufacturing equipment in 2022.

The microchip, or chip for short, is an integral part of modern-day technology. Each microchip houses billions of transistors, each measured to the nanoscale, providing the computing power and memory needed for digital devices. The development of microchips is not just a technological advancement but a crucial step towards progress in various sectors, including healthcare, automotive, and telecommunications.

In a surprising turn of events, China banned Micron, the biggest US chipmaker, from key infrastructure projects following a failed cybersecurity review. However, China's tech firm xFusion, a former Huawei unit, has partnered with Malaysia's NationGate to open its first global supply facility in Penang.

As the semiconductor industry continues to grow, it is clear that countries like Malaysia and India are positioning themselves to be key players in this global market. The investments made by companies such as Intel, Micron, and Infineon, coupled with the supportive government policies, are setting the stage for a promising future in the semiconductor sector.

US-China chip standoff paving the path for emerging tech hubs in Malaysia and India