By Media Selangor Team
SHAH ALAM, April 14 — Selangor is opening global semiconductor opportunities for Malaysian firms by leveraging a proposed 30 per cent local-content policy and targeting sectors such as data centres, electric vehicles (EVs), and aerospace.
In an interview with The Edge published today, Selangor Information Technology and Digital Economy Corporation chief executive officer Yong Kai Ping said as Malaysia invests US$250 million over 10 years to acquire British semiconductor design firm Arm Holdings’ intellectual property for semiconductor-related licences, certain players in Selangor’s semiconductor industry must increase the local content of their products.
“What we are proposing is a 30 per cent local-content policy for data centres in Selangor (for now). It applies only to the equipment, such as service and graphics processing units.
“We want them to apply local content. They have to be OEMs (original equipment manufacturers) or ODMs (original design manufacturers) here, so our local vendors can break into the (IC design) supply chain.
“We may start with OEM and ultimately reach the ODM stage, which means technology transfer needs to happen,” he was quoted in the report, adding that Taiwan, China, India, and Indonesia have implemented similar initiatives, starting with a 40 per cent local content requirement.
However, he said the proposed percentage has not been finalised as negotiations with foreign data centre players are ongoing.
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A researcher plants a semiconductor on an interface board during research work to design and develop a semiconductor product at the Tsinghua Unigroup Research Centre in Beijing, China, on February 29, 2016. — Picture by REUTERS[/caption]
Yong said the state’s strategy is focused on creating real demand and investment incentives for local industry players to rely less on foreign direct investment and stimulate domestic direct investment.
He said public-listed companies and local firms with sufficient resources are ready to invest in Selangor, provided there is market demand to support such ventures.
“In fact, we’ve spoken to some of them. They said they are ready to invest to meet new demand, and if data centres in Selangor require local content, which creates opportunities for servers and chips, they’re prepared to set up shop here,” he was quoted as saying in the report.
Yong said a main issue in the country’s semiconductor industry, which goes beyond testing and packaging, is limited access to the global supply chain.
“What the state government can do is implement the local content policy. We’re not forcing companies to buy from us — we’re offering extremely low water tariffs and various subsidies. They won’t be surprised by this requirement as they’re already subject to similar policies in other countries, often at higher percentages.
“This approach makes more sense for the country. Data centres consume significant electricity and water but employ very few people. By mandating local content and encouraging technology adoption, we create more business opportunities for local firms,” he said.
Beyond data centres, Yong said Selangor is drawing investment interest from Chinese EV makers and aerospace players — industries with a growing demand for chip design and advanced electronics.
With EV assembly plants and maintenance, repair, and operations facilities already based in the state, Yong believes Selangor is well-positioned to become a core hub for semiconductor innovation.
“These three major industries — data centres, EVs and aerospace — will be the key drivers of Malaysia’s semiconductor industry,” he said.
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Semiconductor chips seen on a printed circuit board in this illustration taken on February 17, 2023. — Picture by REUTERS[/caption]
Dual approach strategy
To move Malaysia further up the global semiconductor value chain, Selangor is betting big on a dual approach strategy, mainly by securing a production quota from Taiwan Semiconductor Manufacturing Co (TSMC) and launching the RM100 million Selangor Semiconductor Fund, a venture capital fund to back early-stage chip design firms.
He said the fund, backed by the state government and partners such as BlueChip VC, founded by semiconductor veteran Datuk Lai Pin Yong, aims to inject RM100 million into high-potential IC design companies.
“Many companies are small and cannot offer competitive pricing. By bringing everyone under one umbrella, we improve our negotiating power and create a better chance to work with TSMC,” Yong said.
He said the Puchong IC Design Park is aiming to be part of TSMC’s 5 per cent global allocation reserved for strategic-ups and smaller firms, which is a strategic move that could give Malaysian companies access to produce built on cutting-edge nodes of seven nanometres and below.
The park plans to consolidate member designs for batch submission, creating a viable model for small-scale but innovative chip firms.
“We’re also in talks with regional VCs. All partners will contribute to the RM100 million fund, with the state government expected to inject RM60 million to RM70 million. The capital will be invested in eight to nine identified companies, with each receiving RM10 million to RM12 million,” he said.
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A woman walks past an officiation plaque at the launch of Malaysia’s first IC Design Park at the Puchong Financial Corporate Centre on August 6, 2024. — Picture by MOHD KHAIRUL HELMY MOHD DIN/MEDIA SELANGOR[/caption]
Yong said the fund intends to invest in these companies at the angel or seed stage in exchange for an equity stake of 3 per cent to 10 per cent.
With demand rising in artificial intelligence (AI), automotive and data centre applications, Selangor’s push includes strategic partnerships like the national deal with Arm Holdings, which supports local AI chip development.
Despite global economic challenges, including recent US tariff announcements, Yong remained confident.
Meanwhile, speaking on the talent shortage in Malaysia’s semiconductor sector, Yong rejects the notions, clarifying that many skilled programmers are simply in other industries.
He said Selangor is working to draw skilled tech talent into semiconductors by offering career pathways, practical training, and lifestyle incentives.
With global competition heating up, the state recognises that quality of life, apart from remuneration, is key to attracting and retaining talent.
