The new factory in the Jolin Industrial Park in Malaysia is still surrounded by construction cranes. But internally, a large number of workers hired by Austrian technology giant AT&S are ready to produce at full capacity by the end of the year.

They are wearing work clothes from head to toe, oversized safety glasses and helmets, reminiscent of the worker bees in the movie Yellow Man, but color coded according to function: blue for maintenance. Provide green services to suppliers. Pink is suitable for cleaners. White represents the operator.

AT&S is just one of many European and American companies that have recently decided to relocate to Malaysia's electrical and electronic manufacturing hub or expand their business.

American chip giant Intel and German Infineon each invested $7 billion. Nvidia, a leading global manufacturer of artificial intelligence chips, is collaborating with the country's utility group to develop a $4.3 billion artificial intelligence cloud and supercomputer center. Texas Instruments (TI), Ericsson, Bosch, and Lam Research are all expanding in Malaysia.

This prosperity demonstrates to what extent geopolitical friction and competition are reshaping the global economic landscape and driving billions of dollars in investment decisions. As competition over cutting-edge technology intensifies between the United States and China, trade restrictions continue to intensify, and companies - especially in key industries such as semiconductors and electric vehicles - are seeking to strengthen their supply chains and production capabilities.

When Otes began searching for new locations, it had production bases in Austria, India, South Korea, and China (its largest factory).

Andreas Gerstenmayer, CEO of AT&S, said, "After investing in China for 20 years, it is clear that we need to diversify our business." The company produces high-end printed circuit boards and substrates, which are the foundation of advanced electronic components that drive artificial intelligence and supercomputers.

The strategic position of Southeast Asia in the South China Sea and its long-term economic ties with China and the United States make the region an attractive location for opening stores. Countries such as Thailand and Vietnam (Otes' second choice) are also actively attracting semiconductor companies to expand, offering tax incentives and other temptations.

But Malaysia has a first mover advantage.

Since the 1970s, the country has been leading the technology wave, attracting some world electrical and electronics giants such as Intel and Litronix (now known as Ames Osram, headquartered in Austria and Germany). It has established a free trade zone in Penang Island, provided duty-free periods, and built industrial parks, warehouses, and roads. Low cost labor is another attraction, along with a large English speaking population and government support for foreign investment.

Gestamar stated that Malaysia's history in the backend of semiconductor manufacturing is one of the main attractions.

"They are very clear about what the needs of the semiconductor industry are," he said. They have a well-established ecosystem in areas such as universities, education, labor, and supply chains. He said that government support is another attraction.

Tengku Zafrul Aziz, Minister of Investment, Trade and Industry of Malaysia, stated that foreign investment began to rebound in 2019, driven by the widespread use of semiconductors in various fields from automobiles to medical equipment. "There are 5000 chips in a car," he said.

After the Covid-19 pandemic exposed the devastating weaknesses of global supply chains, interest in Malaysia as an additional source surged.

With the outbreak of major power conflicts, this trend has accelerated.

In addition to supporting other key industries such as renewable energy and electric vehicles, both China and the United States are committed to building their own reliable semiconductor supply chains.

"American and European companies, even Chinese companies, hope to achieve diversification," said Zavrur Aziz. China has also set up production facilities outside the mainland, some say, partly to evade US sanctions. This is the "China Plus One" strategy.

Malaysia is already the sixth largest semiconductor exporter in the world, packaging 23% of chips from the United States.

"For a country of such scale, it is remarkable to have such a significant impact on the global semiconductor market," said David Lacey, Senior Development and Services Director of OSRAM, one of the world's largest lighting companies.

He sat at a large conference table at the Malaysian University of Science in Penang and quickly pointed out the technology in the room. "There are televisions, lights, projectors, and telephones," he said. "You can almost guarantee that there is Malaysian ingredients in a certain place."

The proximity of numerous technology companies has also generated gravity. Penang and Julin are connected by two winding long bridges, with over 300 companies in total.

"Everything is here," said Eric Chan, Vice President and General Manager of Intel Malaysia. Half a century later, the network and infrastructure are no longer easily replicable.

Mr. Chen also mentioned the important cooperation carried out by the government during the epidemic to keep factories open.

Last year, foreign direct investment was nearly 40 billion US dollars, more than twice the total amount in 2019.

Mario Lorenz, Managing Director of DHL Supply Chain Malaysia, a German logistics company, said, "Most of our major investments have occurred in the past two years."

During this period, the semiconductor industry has developed into the company's dominant business in Malaysia. "We have followed the trend," he said.

In the latest global distribution center of DHL supply chain - Penang Logistics Center No. 4, there are customized orange and blue shelves, which are specially used to handle heavy and super large crates used by semiconductor companies.

Malaysia has four new supply chain facilities under construction.

Malaysia's performance record is mainly focused on the backend of the semiconductor supply chain, including packaging, assembly, and testing of components, which have traditionally been considered less complex and of lower value.

But now the industry is focusing on packaging smaller chips (small chips) more tightly together to improve computing power, which increases the value and technological complexity of these activities.

Intel is building its first overseas advanced 3D chip packaging factory in Malaysia. AK Chong, Vice President and Managing Director of Intel in Malaysia, stated that when cutting-edge technology is introduced, there will be a "chain reaction". This development will attract dozens of new businesses and help improve the overall skills of the workforce.

These advances will require large-scale expansion of public utilities such as green energy, sanitation facilities, water, and 5G digital infrastructure.

This is a challenge for any country, especially one that has suffered losses in history due to billions of dollars in scandals involving sovereign wealth funds. Nevertheless, several company executives expressed confidence in Malaysia's role in the supply chain.

"They have projects to provide green energy by building large solar power plants," said Mr. Gestamier of Otes. "Malaysia is on a good path to becoming a hot topic in the global electronics industry."

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This is reported by Top Components, a leading supplier of electronic components in the semiconductor industry. They are committed to providing customers around the world with the most necessary, outdated, licensed, and hard-to-find parts.

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Name: John Chen

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