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Challenges plague Malaysia’s semiconductor industry growth

THE semiconductor industry in Malaysia is facing several significant challenges affecting its growth and development.

Supply chain disruptions, particularly exacerbated by the Covid-19 pandemic, have caused delays while shortages of raw materials and components are impacting production timelines.

The Malaysia Semiconductor Industry Association said labour shortages due to strict lockdowns and movement restrictions have further strained the industry, emphasising the need for more skilled labour to meet increasing technical demands.

It added that keeping up with rapid technological advancements requires continuous investment in research and development, as well as upgrading facilities to stay competitive in the global market.

Prime Minister (PM) Datuk Seri Anwar Ibrahim highlighted recently that the highly competitive landscape, driven by significant advancements in countries like China, Taiwan and South Korea, necessitates continuous innovation and investment for Malaysia to maintain its global position.

He emphasised that adequate infrastructures, such as advanced manufacturing facilities, research centres and reliable logistics networks, are essential and requires ongoing investment.

Addressing these challenges requires coordinated efforts from the government, industry players and educational institutions to create a supportive ecosystem that fosters growth, innovation and sustainability in the semiconductor industry.

The State of Malaysia’s Semiconductor Sector
Discussing the semiconductor industry in Malaysia, Siemens Malaysia Sdn Bhd president, CEO and head of digital industries Tindaro Danze said he believes there will be a rising demand for skilled workers in the sector as Malaysia’s semiconductor industry is expected to grow.

Currently, Malaysia’s semiconductor industry constitutes 7% of the global market and contributes 30% to the country’sGDP.

To support the industry’s local growth, Siemens closely collaborates with the Selangor state government and other regions on educational initiatives.

The collaboration, established in February this year, involves the company in offering technology advisory and consultancy services aligned with the Rancangan Selangor Pertama framework.

The partnership encompasses various key segments such as industry, sustainability and education, with a primary focus on digitalisation, environmental sustainability and the integration of innovative technologies in the education sector.

As part of the collaboration, Siemens Malaysia has developed a comprehensive syllabus used by the Selangor Technical Development Centre.

The syllabus aims to enhance the skills of both blue-collar and white-collar workers, including engineers, by focusing on emerging technologies like edge computing, cloud usability and software-asa-service (SaaS).

The initiative ensures that professionals, even those who graduated several years ago, stay abreast of the latest advancements in the field, said Danze to The Malaysian Reserve (TMR) at Semicon Asia held at the Malaysia International Trade and Exhibition Centre recently.

Furthermore, the company extends its partnership to universities, ensuring that graduates not only acquire academic knowledge but also gain practical, applied skills in new technologies.

The holistic approach provides graduates with a solid foundation for their careers, whether in the semiconductor industry or other emerging sectors in Malaysia.

Through the initiative, the industry can secure a skilled workforce capable of effectively operating cutting-edge technology and software.

Meanwhile, during his address at the closing ceremony of the SEMICON South-East Asia 2024, Investment Trade and Industry (MITI) Deputy Minister Liew Chin Tong detailed why the government’s approach has created favourable conditions for ushering in a new era for the semiconductor industry.

He highlighted the importance of nurturing Malaysian technology companies alongside foreign direct investment.

He also pointed out that the semiconductor sector, as the most advanced industry, must invest more in skills and talent development.

Additionally, he noted that the ecosystem, which attracts numerous companies to Malaysia, is significantly supported by the government’s role in providing essential enablers.

“Malaysia offers hope for a middle ground for geopolitics, and a fertile ground for the most important global industry of our time — the semiconductor industry — to grow healthily and in the most resilient and secure manner,” he said in his speech.

Cloud Computing in Malaysia
The cloud computing industry in Malaysia is also experiencing significant growth but faces several challenges that hinder its widespread adoption and development.

“I believe it is currently on an upward trajectory, particularly with the impending establishment of data centres,” said Danze, expressing optimism about the market’s potential growth in Malaysia.

He highlighted the critical role of infrastructure, particularly data centres, in bolstering a cloud-based economy.

Despite that, he commended the government’s effective endeavours in attracting investments into the country, expressing optimism for the future.

He said once the essential infrastructure is in place, it creates opportunities for companies like Siemens to engage with customers.

This entails a transition from conventional on-site IT operations to cloud-based services, where software is provided as a service rather than perpetual licence.

He believes the shift enables scalability and cost efficiency, particularly benefitting smaller enterprises.

“In order to drive the growth of the cloud sector, the important factor is having secure infrastructure. It’s crucial for people to feel assured about where their data is stored.

“Having data centres in Malaysia is a significant advantage because it reassures customers that their data is managed locally rather than in other countries like Singapore or Korea,” he added.

However, Danze pointed out that ensuring the establishment and success of data centres hinges on reliable infrastructure, particularly in terms of electricity and water supply.

Data centres require substantial cooling and electricity, and there is a need for the energy to be clean and sustainable.

This, he highlighted, presents a challenge to the utility sector to provide renewable energy.

While some data centres are developing their own solar farms, space limitations exist.

Hence, a transition to renewable energy within the utility sector is crucial, alongside ensuring adequate water supply for cooling purposes.

Nevertheless, discussing emerging trends in cloud computing, Danze believes that artificial intelligence (AI) will increasingly be integrated into cloud applications, making them more scalable and efficient.

One example he highlighted is the predictive maintenance software that operates on the cloud and can handle an unlimited number of connected assets.

The software includes AI features and a co-pilot system, which will become more common.

“The use of co-pilots is likely to grow significantly, as they enable more natural interactions between humans and machines.

“Currently, interactions with machines often require a programmer to input code. In the future, natural language processing will allow users to communicate with machines more intuitively,” he said.

The advancement will be enabled with Microsoft’s technology that will convert spoken words into computer language, which Siemens will translate into programming code, facilitating seamless communication between humans and machines.

In a brief overview of the collaboration between Siemens and Microsoft Corp, established in October last year, Danze announced the upcoming launch of Siemens Industrial Copilot. This AI assistant is designed to enhance human-machine collaboration in manufacturing. Additionally, the collaboration aims to integrate Siemens Teamcenter software with Microsoft Teams, further advancing the industrial metaverse.

It is currently in the development stage, with the technology already in place. Siemens is now exploring the best applications for it, with the robotic arm being one use case that is already in progress.

In order to tackle these growth trends contributing to industry expansion, Danze highlighted the crucial focus on the education sector.

“When new trends emerge, my first concern is whether our infrastructure is prepared to support them, including having the necessary skilled workforce.

“This is where our responsibility as a multinational company comes into play,” he said.

While it is great to see investments coming in, he believes it is crucial to ensure that all the investments are utilised effectively by having the right people ready to operate and manage them.

Siemens’ Presence in Malaysia
Danze highlighted several of the company’s ongoing projects in the country, notably its investment in a digital enterprise experience centre in Penang.

The centre is designed to help address the challenges faced by the manufacturing and process industries, particularly the uncertainty regarding the return on investment in digital transformation.

Through the centre, the company provides consultations and demonstrates how it’s hardware and software solutions can solve these issues through a proof of concept.

The controlled environment allows companies to see the benefits and feasibility of Siemens’ technologies before making larger investments.

Danze noted that Siemens has formed partnerships with local Malaysian companies such as Progresture Solar and various original equipment manufacturers (OEMs).

Numerous local players are exporting their products worldwide and are enthusiastic about collaborating with Siemens.

“This collaboration not only helps them grow in Malaysia but also expands their presence abroad.

“Our focus is on supporting these OEMs, most of which are based in Penang, but also in other locations,” he said.

Siemens has a longstanding history in Malaysia, spanning over 115 years, with its initial operations focused on sea mining and infrastructure.

One of its earliest significant transactions was selling an electrical motor, highlighting its early contribution to Malaysia’s industrial development.

Over the decades, the company has considerably expanded its presence in the country.

A notable historical milestone for the company in Malaysia is its pioneering role in the semiconductor industry.

Siemens was instrumental in establishing semiconductor manufacturing in Malaysia, with companies like Infineon Technologies AG and Osram GmbH originating from Siemens, reflecting its substantial early investments in this sector.

The company has consistently advanced various industries through technological innovations and has been dedicated to developing local talent.

It has formed partnerships with educational institutions, such as Universiti Malaysia Perlis, to foster industry-ready graduates.

The company has also engaged in corporate social responsibility initiatives, including donating laptops to underprivileged students and collaborating with the Selangor state government to develop IR4.0 talents.

Today, Siemens operates across multiple sectors in Malaysia, including digital industries, smart infrastructure, mobility and healthcare — underscoring its significant role in Malaysia’s industrial and technological landscape. The Malaysian Reserve

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