Chinese chip companies are turning to Malaysia for their high-end chip, GPU needs

In a strategic move to mitigate potential risks stemming from expanding US sanctions on China’s chip industry, an increasing number of Chinese semiconductor design companies are engaging Malaysian firms for the assembly of high-end chips, particularly graphics processing units (GPUs), according to a report by Reuters. The requests from Chinese companies specifically involve chip assembly, a process that falls outside the scope of US restrictions, and excludes the fabrication of chip wafers. Confidential agreements surround the identities of the companies involved, but it has been revealed that some contracts have already been finalized. As the United States tightens restrictions on the sale of high-end GPUs, used in artificial intelligence breakthroughs, supercomputers, and military applications, smaller Chinese semiconductor design firms are grappling with challenges in securing advanced packaging services domestically. Seeking to limit China’s access to cutting-edge technology, Washington’s sanctions are pushing Chinese companies to diversify their assembly needs beyond China. Some Chinese companies are particularly interested in advanced chip packaging services, a critical technology in the semiconductor industry that significantly enhances chip performance. However, concerns persist among these firms regarding potential future export restrictions on the sophisticated technology used in advanced packaging. Malaysia, a key player in the semiconductor supply chain, is emerging as a preferred destination for Chinese chip firms looking to diversify their assembly operations. Companies like Unisem and other Malaysian chip packaging firms are reportedly witnessing increased business and inquiries from Chinese clients. Unisem Chairman John Chia emphasized the legitimacy and compliance of their business dealings, stating that the company does not have the luxury of worrying about numerous possibilities. Malaysia’s perceived positive relations with China, cost-effectiveness, experienced workforce, and advanced equipment make it an attractive option for Chinese chip design firms. Despite concerns about potential US reactions, Chia reaffirmed Unisem’s commitment to legitimate and compliant business practices. Malaysia, which currently holds a 13 per cent share of the global market for semiconductor packaging, assembly, and testing, aims to increase that to 15 per cent by 2030. Chinese chip firms, eyeing opportunities beyond Malaysia, are also exploring chip assembly in other countries, such as Singapore. Additionally, countries like Vietnam and India are actively seeking to expand their chip manufacturing services, offering alternatives for clients seeking to minimize geopolitical risks between the US and China. (With inputs from agencies)