An increasing number of Chinese semiconductor design businesses are enlisting Malaysian companies to assemble a percentage of their high-end chips, insiders have revealed. The move aims to act as protection in case the US extends its sanctions against China’s chip industry.
Three people with knowledge of the matter said that the corporations are requesting that Malaysian chip packaging companies build a particular type of chip known as graphics processing units (GPUs).
According to them, the demands do not concern the production of the chip wafers; rather, they solely relate to assembly, which does not violate any US limitations. Two of the individuals noted that some contracts had already been agreed upon. Citing confidentiality agreements, the sources refused to be named or reveal the identities of the companies involved.
Washington has been piling on additional restrictions on sales of high-end GPUs, which Beijing could use to power supercomputers, AI breakthroughs, and military applications.
As a result of these sanctions and the growing demand for AI, smaller Chinese semiconductor design firms are finding it difficult to secure adequate advanced packaging services domestically, according to analysts.
According to two sources, some Chinese companies are also interested in advanced chip packaging services. Advanced chip packaging services are emerging as a critical technology in the semiconductor industry and can significantly improve chip performance.
The sources said that while it is not covered by US export regulations, this is a sector that sometimes calls for advanced technology, and the companies are concerned that China may eventually become the target of export tariffs.
As a major semiconductor supply chain hub, Malaysia is thought to be in a good position to win more business as Chinese chip companies expand their operations outside of China to meet assembly needs.
As per a source briefed on the topic, Unisem, which is controlled by Huatian Technology in China, along with other chip packaging companies in Malaysia, have witnessed a surge in business and queries from Chinese customers.
Currently, Malaysia accounts for 13% of the global market for semiconductor packaging, assembly, and testing, and aims to boost it to 15% by 2030.
Chinese chip firms that have announced plans to expand in Malaysia include Xfusion, a former Huawei unit, which said in September it would partner with Malaysia’s NationGate to manufacture GPU servers.
Offering an array of incentives, Malaysia has attracted multi-billion dollar chip investments. Germany’s Infineon said in August that it would invest $5.4 billion to expand its power chip plant there.
US chipmaker Intel announced in 2021 that it would build a $7 billion advanced chip packaging plant in Malaysia.
Other countries, such as Vietnam and India, are also seeking to expand further into chip manufacturing services, hoping to lure clients concerned about the geopolitical risks of US-Sino relations.
Chinese Semiconductor Businesses Enlisting Malaysia for Advanced Chip Assembly
International corporations are requesting that Malaysian chip packaging companies build a particular type of chip known as graphics processing units.
December 18, 2023
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