Minimizing Risks and Sustaining Growth in Penang’s Semiconductor Industry
Penang, known as the "Silicon Valley of the East", is home to several major US semiconductor companies, including Intel, Broadcom, and Micron, as well as recent Chinese firms. With the uncertainty of US trade policies in the industry, an economist has suggested that Penang-based semiconductor firms adopt a multi-pronged strategy to minimize risks and sustain long-term growth.
Diversification and Export Expansion
According to Goh Lim Thye, an economist from Universiti Malaya, Penang-based semiconductor firms should diversify and expand their exports to high-growth markets such as the European Union (EU), Asean, and India to reduce their dependency on the US market. The European Chips Act, which aims to increase the EU’s semiconductor production to 20% by 2030, presents an opportunity for Malaysian exporters to strengthen ties with European tech firms.
Strengthening Penang’s Position
Goh suggested that another strategy is to strengthen Penang’s position as a key destination for companies establishing additional sourcing and manufacturing operations beyond China, commonly known as the "China Plus One" strategy. This allows firms to diversify their supply chains while maintaining tariff-free export access to key markets. Additionally, investing in local supplier ecosystems will reduce dependency on imported semiconductor-grade chemicals and components.
Maintaining a Business-Friendly Environment
Harald Sippel, an executive director of ESG Malaysia, emphasized the importance of maintaining and enhancing a business-friendly environment in Penang. This includes ensuring infrastructure, workforce readiness, policy stability, and trade facilitation, rather than providing financial incentives, which may not be feasible due to cost constraints. For small and medium enterprises (SMEs) that may not have a contingency plan when Trump’s tariffs come into effect, Sippel suggested that they receive guidance from the state government on sanctions and trade risks, assisting them in finding alternative markets.
Conclusion
In light of the uncertainty of US trade policies, Penang-based semiconductor firms must adopt a multi-pronged strategy to minimize risks and sustain long-term growth. By diversifying and expanding their exports, strengthening their position as a key destination for companies, and maintaining a business-friendly environment, Penang can continue to thrive in the semiconductor industry.
FAQs
- What is the European Chips Act, and how will it impact Malaysian semiconductor firms?
The European Chips Act aims to increase the EU’s semiconductor production to 20% by 2030, presenting an opportunity for Malaysian exporters to strengthen ties with European tech firms. - How can Penang-based semiconductor firms minimize the impact of US trade policies?
By diversifying and expanding their exports, strengthening their position as a key destination for companies, and maintaining a business-friendly environment. - What is the "China Plus One" strategy, and how can it benefit Penang-based semiconductor firms?
The "China Plus One" strategy involves establishing additional sourcing and manufacturing operations beyond China, allowing firms to diversify their supply chains while maintaining tariff-free export access to key markets.