Malaysia secures $250 million deal with UK’s Arm Holdings to boost semiconductor industry

Malaysia has secured a major deal with Arm Holdings, a renowned UK-based semiconductor design firm. Signed today at the Sheraton Imperial Hotel, this partnership could mark a transformative shift for the country’s technology sector.

With an investment of US$250 million over the next decade, Malaysia aims to evolve beyond its established role in chip assembly and testing to lead in high-value chip design.

The deal’s core focus is to enhance Malaysia’s ability to design semiconductors, rather than merely assemble them. Historically, Malaysia has been an important player in semiconductor testing and packaging, contributing around 13% to the global sector.

Major companies like Intel and Infineon already have a strong presence in the country. However, as the global semiconductor market is projected to reach US$1 trillion by 2030, Malaysia is keen to capture a larger share of the value-added segments. This is where the partnership with Arm Holdings comes into play.

Arm, which holds a dominant 95% share in smartphone processor designs, licenses its technology to tech giants such as Apple and Amazon.

Through this deal, Malaysia will gain access to seven compute subsystems (CSS), pre-designed blueprints for chips, including CPU cores, GPUs, and other system components. These subsystems will allow Malaysian firms to fast-track their own chip development, reducing both time and costs.

Malaysia’s ambitious plans extend beyond the partnership itself. The country aims to increase its semiconductor exports to a staggering US$270 billion by 2030. This goal, which aligns with Malaysia’s National Semiconductor Strategy (NSS), would significantly bolster the economy, creating up to 10,000 skilled jobs and strengthening the country’s position in the global supply chain.

As noted by Economy Minister Rafizi Ramli, the goal is to transition from testing and assembly roles into a much higher-value, front-end chip design capacity.

This move could reshape Malaysia’s US$400 billion economy. The projected revenue from domestic chip companies, nurtured by this deal, could reach up to US$20 billion annually. Furthermore, the establishment of Arm’s first ASEAN office in Malaysia signals the country’s rising profile as a technology hub in Southeast Asia.

The deal aligns with the broader “China Plus One” strategy, which encourages companies to diversify their supply chains away from China, adding further appeal to Malaysia’s neutral political stance and skilled workforce.

Despite the promising outlook, several challenges threaten to derail Malaysia’s semiconductor ambitions.

The country faces a significant shortage of skilled engineers, with concerns over students’ lack of interest in STEM fields and a reliance on unskilled foreign labor.

In response, the government has allocated US$5.6 billion to improve education and training under the NSS, which aims to cultivate a pool of local talent capable of meeting the demands of the semiconductor industry.

Additionally, Malaysia must contend with fierce competition from other countries heavily invested in the sector, including the US and China. The US has enacted the CHIPS Act, a multi-billion-dollar initiative designed to boost American semiconductor manufacturing, while China continues to pour resources into its own technological ambitions.

With these global powers vying for dominance, Malaysia’s success will depend on its ability to attract further foreign investment and maintain a competitive edge.

Despite these hurdles, experts believe the country’s commitment to talent development and innovation positions it as a strong contender.