Opportunities for semiconductor manufacturers are numerous in the Asia-Pacific
The conditions in Malaysia right now have essentially created the perfect storm for certain manufacturing operations, specifically semiconductor or “wafer” development. From both a cost and infrastructure perspective, the nation has a lot to offer.
Resource availability, productivity levels, infrastructure standards and general logistics — in regards to trade and transport — are all top notch, offering the best conditions for any manufacturer.
It helps to explain why a lot of organizations are relocating or opening up in the region, or planning to. But it’s still a surface definition. There’s a lot more happening behind the scenes that makes it such a lucrative option.
Why Malaysia or the Asia-Pacific?
Operations in Malaysia remain cost-effective yet high performing thanks to a mix of conditions, including resource availability, local costs and even labor options. Talent and skill in the region remain relatively high, especially in the electronics industry. A lot of this is because of its history, with companies like Intel, OSRAM, HP and National Semiconductor having established their manufacturing operations in the region in the 70s.
It is also well-ranked when it comes to global offshoring and the connected supplier network. In other words, there’s a high-quality supplier base available with plenty of room for growth and development.
Then there’s the matter of the legal and regulatory system. Malaysia — unlike China — has a strong intellectual property rights system and many of their regulations are on par with international standards.
Additional factors include a strong education system with a focus on engineering and manufacturing, an ideal physical infrastructure thanks to a growing number of existing operations in the region, as well as financial and tax-based support thanks to free trade agreement opportunities and government assistance.
The real question is why anyone in manufacturing hasn’t moved there already?
Innovation Abounds in the Region
Another important element or staple of semiconductor manufacturing is, of course, the option to explore and enhance the technology as a means to spark innovation. Research and development (R&D) is a huge part of what these manufacturers do if only to push the limits of modern electronics.
Tax incentives and government assistance aimed specifically at research and development is a huge incentive for moving operations into the region. The country has also increased investments in telecommunications infrastructure, which not only intensifies the accessibility but introduces new opportunities too. The smart, automated factories of today need open connections to streamline operations.
Coupled with the incredibly desirable talent pool thanks to a robust education system and skilled workers from years of conditioning, it collectively forms a network for innovation.
In terms of manufacturing and semiconductor development, it means that new opportunities, strategies and development methods are not only created but tested openly and fairly. In fact, that’s exactly how some current methods were discovered.
Take the process of etching PTFE tubing as an example. PTFE or polytetrafluoroethylene is indicative of the highest standard in synthetic fluoropolymer materials. It’s an advanced form of tubing used in many manufacturing applications — including semiconductor creation — that offers unique properties like anti-stick, water-repellant, strong temperature resistance and more. It’s so lubricous, in fact, that chemical etching is used to ensure the surface properties of the material can be bonded with other materials. This whole process would be unknown, making PTFE tubing unusable for certain applications, without the help of robust R&D operations.
This is specifically something that Malaysia and its surrounding areas allow for. It could be exactly what the electronics and semiconductor industry needs to push the medium forward.
Malaysia’s Manufacturing Index Rating
According to Cushman and Wakefield’s Manufacturing Risk Index report for 2019, Malaysia ranks quite high compared to other nations and regions. North America remains at the top of the rankings overall, thanks to rising costs in Asia and growing concerns for IP protection. But when you consider both of these things, it’s evident that Malaysia is a much more lucrative option, as well.
Here are the nation’s rankings in terms of category and conditions:
- Baseline | Conditions 40 percent, Risk 20 percent, Cost 20 percent | Rank 11 to 15
- Cost | Conditions 20 percent, Risk 20 percent, Cost 60 percent | Rank 1 to 5
- Risk | Conditions 20 percent, Risk 60 percent, Cost 20 percent | Rank N/A
The MRI or manufacturing risk index is designed to highlight the best locations that are suitable for manufacturing across a global spectrum. Each country is scored using the same variables to help discern the viability of a location.
The exception is, of course, the risk rating which Malaysia has not been graded upon. In the 2017 report, Malaysia was ranked number one but fell to third place in the subsequent 2018 report. Keep in mind that doesn’t necessarily mean it’s not a lucrative option just that there are other considerations to make.
What Does All of This Mean?
In short, Malaysia offers an ideal series of conditions that rank it as a phenomenal possibility for manufacturing operations locality. Thanks to government and tax assistance, strong intellectual property rights and laws, incredible labor opportunities and relatively-low costs, it’s already looking good. Factor in the other elements such as resource availability, a high-quality supplier base, strong educational opportunities for local residents and workers, and longstanding history of wafer or semiconductor manufacturing operations — you’re looking at a hub of innovation and high-quality development.
This explains why many semiconductor manufacturers have either moved to the region already or plan to in the near future. IGSS Ventures is an excellent example of a semiconductor-focused provider in the region.
Thanks to increasing costs the world over — with China, Japan, the U.S., and Europe all seeing rising costs — the global semiconductor industry needs to find a suitable alternative. That’s before factoring in the growing demand for modern electronics and components as more and more consumers adopt new technologies and innovative platforms. Everything from IoT to modern computing requires low-cost yet high-performing semiconductors, and let’s not forget mobile tech, gaming, enterprise tech, cloud computing and remote servers, and much more. Even something like a driverless vehicle will require similar components as they are outfitted with new solutions that help power the control system and modern amenities.
Case in point, the manufacturing industry needs to find a low-cost, yet viable solution in terms of performance and Malaysia looks to be at least one answer.
Written by: Megan Ray Nichols, BOSS Contributor
Megan is a STEM writer and blogger at https://schooledbyscience.com/