Malaysian chip makers struggling to meet demand

The global demand for Malaysian-made semiconductors continue to outstrip supply, an issue exacerbated by the nationwide shutdown that forced non-essential industries to completely shutter. This came at a time when automakers, smartphone and medical equipment manufacturers were beginning to ramp up output, an industry executive told The Edge.

Malaysia is home to a number of international suppliers and factories, such as Europe’s STMicroelectronics and Infineon (one of the world’s largest semiconductor manufacturers). Ford has suspended production of the Fiesta at its German plant and another plant that manufactures trucks as a result of the shortage. Toyota and Nissan were also forced to adjust output numbers, while Infineon had temporarily shuttered operations. Nio and Tesla were similarly affected.

There are over 50 semiconductor producers with factories in Malaysia. The collective output accounts for 13% of global chip assembly testing and packaging, and 7% of the world’s semiconductor trade passes through the country for a variety of reasons before being shipped to other markets.

Malaysia Semiconductor Industry Association president, Wong Siew Hai told the newswire that many automakers scaled back chip orders last year in anticipation of lower demand, so Malaysian chip manufacturers shifted those allocation to other sections of the electronics industry.

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“Come January, the automotive industry realised they wanted to get back the capacity but the semiconductor fabrication plans didn’t have the capacity for them,” he said. However, Wong is of the opinion that the crisis could start to ease towards the end of the year, as fully vaccinated employees begin returning to work.

“Predicting based on data I’m seeing, the situation should improve, but we still cannot fulfil the demand,” Wong said, adding that demand kept piling up since the end of last year. “The constraints we had in June and early July are now beginning to reduce, and more volume is being shipped because we are allowed to operate at a higher percentage level.”

When asked to quantify the impact of the prolonged lockdown, Wong said sales losses easily ran into billions of ringgit. Electrical and electronics exports worth US$92 billion (RM386 billion) made up 39.4% of Malaysia’s total exports in 2020.

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