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Chinese Companies Seek To Malaysia For The Manufacture Of Premium Chips

Chinese Companies Seek To Malaysia For The Manufacture Of Premium Chips
According to insiders, an increasing number of Chinese semiconductor design businesses are enlisting Malaysian companies to assemble a percentage of their high-end chips. This is because they want to protect themselves in case the U.S. extends its sanctions against China's chip industry.
Three persons with knowledge of the conversations said that the corporations are requesting that Malaysian chip packaging companies build a particular type of chip known as graphics processing units (GPUs).
According to them, the demands do not concern the production of the chip wafers; rather, they solely relate to assembly, which does not violate any U.S. limitations. Two of the individuals noted that some contracts had already been agreed upon.
Citing confidentiality agreements, the people refused to be named or to reveal the identities of the companies involved.
Washington has been putting more and more limitations on the sales of high-end GPUs, as well as on advanced chip-making equipment, in an effort to deny China access to these vital components, which could lead to breakthroughs in artificial intelligence or power supercomputers and military applications.
According to observers, smaller Chinese semiconductor design firms are finding it difficult to obtain enough advanced packaging services domestically as a result of the sanctions and the surge in artificial intelligence.
According to two sources, certain Chinese businesses are considering providing cutting-edge chip packaging services.
In the semiconductor industry, advanced chip packaging is becoming a vital technology that can greatly enhance chip performance. Occasionally, this entails the creation of chiplets, which are essentially tightly packed chips that function as a single, potent brain.
The two persons said that while not covered by US export regulations, this is a sector that sometimes calls for advanced technology, and the companies are concerned that China may eventually become the target of export tariffs.
Major semiconductor supply chain hub Malaysia is thought to be in a good position to win more business as Chinese chip companies expand their operations outside of China to meet assembly needs.
According to a source briefed on the topic, Unisem, which is mostly controlled by Huatian Technology of China, and other chip packaging companies in Malaysia have witnessed a surge in business and queries from Chinese customers.
"Due to trade sanctions and supply chain issues, many Chinese chip design houses have come to Malaysia to establish additional sources of supply outside of China to support their business in and out of China," stated Unisem Chairman John Chia, without providing further information about the company's clientele.
According to two of the sources, Malaysia is viewed favourably by Chinese chip design firms due to its reasonable cost, skilled labour force, advanced equipment, and friendly relations with China.
Chia responded that Unisem's business operations were "fully legitimate and compliant" and that the company did not have the time to stress over "too many possibilities" in response to a question about whether taking orders to assemble GPUs from Chinese enterprises may potentially incite anger from the United States.
He mentioned that Americans made up the majority of Unisem's clientele in Malaysia.
There were no comments available from US Department of Commerce.
Inari Amertron and Malaysian Pacific Industries are two more significant chip packaging companies in the nation. These packaging companies did not respond to inquiries about the matter.
According to a source who invested in two Chinese semiconductor startups, Chinese corporations are also considering outsourcing the assembly of their chips to other countries, as this could facilitate the sale of their goods in non-Chinese markets.
By 2030, Malaysia wants to increase its share of the worldwide semiconductor packaging, assembly, and testing market from 13% to 15%.
A former Huawei subsidiary, Xfusion, revealed in September that it would collaborate with Malaysia's NationGate to produce GPU servers, which are servers intended for data centres and utilised in artificial intelligence and high-performance computing. This is just one of the Chinese semiconductor companies that have declared intentions to grow in Malaysia.
Additionally, Penang is home to the design centre being built by Shanghai-based StarFive, and TongFu Microelectronics, a joint venture with American chipmaker AMD, said last year that it will be expanding its Malaysian facility.
Malaysia has drawn multibillion dollar chip investments with its array of incentives. Germany's Infineon said in August that it would expand its power chip production there with an investment of 5 billion euros ($5.4 billion).
American semiconductor manufacturer Intel declared in 2021 that it would establish a $7 billion state-of-the-art chip packing facility in Malaysia.
Chinese businesses are selecting more than just Malaysia. The third-biggest chip assembly and testing business in the world, JCET Group, finalised the purchase of a cutting-edge testing facility in Singapore in 2021.
In an effort to attract customers eager to reduce the geopolitical concerns between the United States and China, other nations like Vietnam and India are also looking to grow their chip manufacturing services.

Christopher J. Mitchell

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