KUALA LUMPUR: Malaysia’s clear competitive advantage lies in the semiconductor industry, built on a strong foundation of education, infrastructure, labour capacity and long-term planning.
While Malaysia accounts for less than 1% of the global economy, it represents roughly 14% of global semiconductor participation and nearly 20% in assembly, testing and packaging (ATP).
This is now a major national strength – with much of the foundation laid down by the late Tun Dr Lim Chong Eu, who was Penang chief minister from 1969 to 2020 – contributing around 40% of export revenue, with exports exceeding Malaysia’s gross domestic product in scale and making the industry both strategically and economically significant.
KSI International Advisory Board chairman Tan Sri Dr Munir Majid said, however, Malaysia’s biggest challenge is that it remains stuck in mid-level activity, particularly ATP, without moving up the value chain.
He said the root issue is not technical capability alone, but a political-economic structure that discourages optimisation, openness and innovation, contributing to talent migration and underutilised potential.
“If Malaysia wants to sustain its advantage, it must shift towards higher-value semiconductor segments and make strategic decisions on what types of chips to develop and which markets to serve – whether AI-driven Western demand or China’s industrial ecosystem – while also building stronger regional capabilities within Asean.
“Ultimately, progress depends on innovation, competitiveness and a more open, merit-driven education and economic environment,“ Munir, who is also the Asean Business Club president, said during a panel discussion at the Malaysia Business Competitiveness & Sustainability Conference 2026 (MBCSC 2026) yesterday.
Executive director of the Asia-Europe Institute at the University of Malaya Prof Datuk Rajan Rasia focused on the policy direction shaping Malaysia’s progress, saying that a useful reference point is the New Industrial Master Plan 2030 (NIMP 2030), launched in September 2023, which should be assessed proactively to ensure Malaysia moves in the right direction.
He said one of its key objectives is to position Malaysia as a high-income country, and recent World Bank estimates suggest Malaysia has already crossed that threshold.
“While these classifications can shift with exchange rates and global benchmarks, the bigger concern is whether income growth is sustainable and broadly shared.
“The plan targets a meaningful rise in median household income by 2030, but achieving this will require stronger workforce development, better technical training systems, and a more effective labour market structure supported by constructive union-employer collaboration,“ he said at the session.
Rajan said the domestic semiconductor sector is central to this strategy, and Malaysia’s policy focus is aligned with global trends.
“Taiwan’s success, for example, was not driven by exports alone, but by strong technical institutions, long-term industrial coordination, and visionary leadership – culminating in the rise of TSMC as a global leader in advanced logic manufacturing.
“Under NIMP 2030, Malaysia has identified two priorities: strengthening chip design capabilities and positioning itself as a global hub for advanced manufacturing and advanced packaging.
“However, value-added growth is what ultimately drives GDP, and moving up the semiconductor value chain will require more than policy statements.
“It will require clear execution frameworks, credible talent pipelines, stronger innovation ecosystems, and industrial infrastructure comparable to what Taiwan built through its science parks and technology incubators. Without that depth, Malaysia risks remaining competitive on paper but falling short in real economic transformation,“ he said.
Malaysia External Trade Development Corporation strategic communications and head of trade publication deputy director Edison Choong Wan Sern highlighted Malaysia’s strong performance in overall trade last year, which reached RM3 trillion, an increase of 6%.
He noted that Malaysia’s exports grew by 6.5% and imports by 6.2%, with trade growth currently tracking close to 9.5%.
Beyond the headline numbers, this growth reflects real economic activity, including job creation, particularly in manufacturing, he said.
“The discussion around Malaysia as a “semiconductor hub” is also timely, but a hub only holds credibility if it includes the full ecosystem, including higher-value capabilities at the top of the value chain.
“Malaysia has clearly built that position in the electrical and electronics (E&E) sector, but outside of E&E, it remains unclear which other industries have reached true hub status.”
Choong pointed out that Malaysia’s extensive network of free trade agreements (FTA) – including the Regional Comprehensive Economic Partnership and the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) – is designed to strengthen market access and expand trade opportunities.
“While the direct utilisation of these agreements by companies remains relatively low, it is improving, and the broader impact is evident: close to 70% of Malaysia’s trade already occurs with countries where FTAs are in place.
“However, market access is increasingly shaped by non-tariff barriers, including technical standards, certifications, and regulatory requirements. This is where mutual recognition agreements become critical, as they reduce duplication and speed up entry into foreign markets.
“Negotiating these agreements is complex and highly strategic, but the government’s role remains clear – to protect national interests while building stronger international collaboration, including new initiatives under CPTPP to deepen cooperation among global trade and promotion agencies,“ he said.
MBCSC 2026 brought together about 150 delegates comprising policymakers, business leaders, economists, industry practitioners and sustainability advocates. The conference served as a high-level platform to examine Malaysia’s economic positioning amid global uncertainties, industrial transformation, and the national sustainability agenda.
