[Column] Why Malaysia's semiconductor industry is being reevaluated now. Current location as the center of ASEAN restructuring

✅ Roughly speaking

• 🇲🇾 Malaysia is still considered to have a core position in the Semiconductor and E&E (Electrical & Electronics) sector in ASEAN.
• 🏭 Its strength lies not only in the accumulation of subsequent processes, but also in the clarity of industrial policies toward IC design and advanced technology.
• 🪤 Malaysia struggled for a long time after becoming an upper-middle-income country in 1996, but is now on a growth trajectory again by incorporating semiconductors.
• 📈 It is important to view it not as a "mature base" but as a "base in a re-rising phase trying to get out of the wanna of middle-income countries."

Introduction

This time, we will explain why Malaysia's semiconductor industry is currently attracting attention as the ASEAN industry map is changing.

Vietnam and the Philippines are gaining a growing presence in Southeast Asia.
On the other hand, it seems that the value of a country with a long industrial accumulation, like Malaysia, is actually being re-evaluated.
In the process of restructuring the supply chain, this is because the strengths of countries that already have a certain track record of agglomeration, human resources, infrastructure, and institutional management will come into play, not just those of newly established bases.

In this paper, I would like to consider this "reassessment" not merely as an introduction to each country, but as a shared challenge facing Southeast Asia as a whole.

The common question is "the wanna of middle-income countries."

When reading ASEAN's growth hierarchy, the main point that currently serves as a supporting line is the "middle-income country's wanna."

This refers to the phenomenon where a country that has reached a certain income level takes the time to improve its industries, and the growth that follows stagnates.
World Bank updated its country and regional income brackets in July 2026, defining countries with a per capita gross national income (GNI, Gross National Income) of $4,636 〜 $14,375 in 2025 as "upper-middle-income countries" (Source: Nikkei Shimbun ).
World Bank itself explains that this classification is based on per capita GNI for the previous calendar year and will serve as a reference point until the end of June 2027 (Source: World Bank ).
World Bank senior economist Varela said that once a certain income level is reached, much effort is needed to sustain growth, citing infrastructure development, regulatory reform and training people to be more productive as necessary measures (Source: Nikkei Shimbun ).
How to overcome this "wanna" in the high-value-added industry of semiconductors.

That is considered a common question that runs through Malaysia, Vietnam, and the Philippines.

Why Malaysia is attracting attention again

When considering Malaysia's strengths, there are some points I would like to emphasize first.

The country is not a "country that will build factories in the future," but rather a country that already has a strong base of manufacturing and related services.
NIMP 2030 (New Industrial Master Plan 2030) organizes manufacturing as accounting for approximately 24% of gross domestic product, responsible for approximately 80% of total exports, and supporting approximately 17% of employment (Source: NIMP 2030 ).
This indicates that manufacturing is not a peripheral industry, but is deeply integrated into the very economic structure of a nation.
And this foundation wasn't built overnight.

Malaysia became an upper-middle-income country in 1996, but has struggled for a long time since then (Source: Nikkei Shimbun ).
In recent years, it has returned to a growth trajectory by incorporating the semiconductor industry, and most recently, it was reported that the growth rate of gross domestic product in the fiscal year ending April 〜 June 2026 accelerated to 6%, driven by the expansion of exports of electrical equipment and semiconductors (Source: Nikkei Shimbun ).

So Malaysia can be read as a prime example of a "wanna" being left out of semiconductors.

Malaysia's strength lies not only in the accumulation of subsequent processes

Malaysia's presence in the semiconductor field is already quite significant.

An article published in MIDA (Malaysian Investment Development Authority) states that Malaysia is the world's sixth largest exporter of semiconductors, accounting for 13% of the global market in semiconductor packaging, assembly and testing (Source: MIDA ).
Furthermore, E&E and the semiconductor sector are said to have accounted for 40% of exports in 2023, or RM575 billion (approximately 575 billion ringgit) in value, while E&E accounted for 5.8% of gross domestic product (Source: MIDA ).

The important point is that the discussion doesn't end here with the phrase "strong in the later stages."
The NIMP 2030 mission-based project aims to create a global IC design champion for EVs, renewable energy, and AI, attract new advanced wafer manufacturing, deepen the specialty chemistry field, and foster advanced materials fields (Source: NIMP 2030 ).
This can be understood as a strategy to build on existing agglomerations while moving up into areas with higher technological density and added value.
An article in the Nikkei newspaper also reported that Malaysia is promoting "advanced packaging" to assemble highly integrated AI semiconductors and other materials, and is preparing to develop a domestic design and development system, with the possibility of becoming a high-income country by 2030 in sight (Source: Nikkei Shimbun ).

Malaysia is not a "land of defense" but a "land in a re-emergence"

In ASEAN discussions, the growth of Vietnam and the Philippines is often discussed, while Malaysia can appear relatively quiet as an "already mature country."
However, I think this view is somewhat outdated.

NIMP 2030 identifies Malaysia's values as its strategic location halfway between the world's major shipping lanes, high education and English language talent, the rule of law, and quality infrastructure (Source: NIMP 2030 ).
Additionally, the MIDA article states that Malaysia has an end-to-end supply chain, a killed plural workforce, and a world-class infrastructure, and that the neutral and open economy policy can act as a receptacle for the "China Plus One" strategy (Source: MIDA ).

Given these conditions, it seems more natural to view Malaysia not simply as a mature country, but as one that is ready to take on more high-value-added functions.
However, this resurgence is not guaranteed.

In Asia, India is also serious about attracting the semiconductor industry, investing in large subsidies to set up factories, including pre-processing, and competition between countries for advanced manufacturing is fierce (Source: Nikkei Shimbun ).
That is why Malaysia's choice of which areas to focus on is more important than ever.

Which position will Malaysia take in the ASEAN restructuring

In future ASEAN meetings, no two countries will likely win in the same way.
Vietnam is rapidly gaining ground, while the Philippines is trying to create its own unique character through its manufacturing and service connections.

On the other hand, Malaysia is likely to be a country that is expected to move to the upstream, high value-added side, building on the existing agglomerations.
In this sense, Malaysia appears to be at a stage where it is redefining its position, not only in terms of volume but also in design, advanced manufacturing, related materials, equipment and the advanced industrial services that support them (Source: NIMP 2030 ).

Next time, we will look at Vietnam, the leader in this catch-up, and consider the relationship between competition and complementarity with Malaysia.

summary

Malaysia's semiconductor industry has been around for so long that it can seem less fresh.

However, in reality, this accumulation is likely to be of great significance in the current supply chain restructuring phase.

Manufacturing is a core sector that supports around 24% of gross domestic product, 80% of exports and 17% of employment, with semiconductors and E&E at one of its centres (Source: NIMP 2030 ).

Furthermore, while it is the world's sixth largest exporter of semiconductors and holds a 13% presence in the global market in the post-processing sector, it is also focusing on IC design, advanced wafer manufacturing, and advanced materials in terms of policy (Source: MIDA , NIMP 2030 ).

Given that Malaysia is emerging from its long stagnation since becoming an upper-middle-income country in 1996 with semiconductors, it seems natural to view Malaysia not as a "protection hub" but as "a core hub for a re-rising phase through the middle-income wanna."