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Chinese Semiconductor Firms Pivot to Malaysia Amid U.S. Sanctions Threat

Chinese Semiconductor Firms Pivot to Malaysia Amid U.S. Sanctions Threat

Chinese semiconductor design firms are increasingly turning to Malaysian companies for assembling high-end chips in a bid to mitigate potential risks stemming from the U.S.’s potential expansion of sanctions on China’s chip industry. This strategic move comes as a response to Washington’s tightening restrictions on chip sales to China and the escalating demand for advanced graphics processing units (GPUs).

These firms are engaging Malaysian chip packaging companies specifically for assembling GPUs, a maneuver aimed at circumventing U.S. restrictions while still meeting their technological needs. Some contracts have already been established, signaling a shift in the semiconductor supply chain.

Washington’s efforts to restrict China’s access to high-end GPUs, crucial for AI advancements, supercomputing, and military applications, have prompted smaller Chinese semiconductor design firms to seek advanced packaging services beyond China’s borders. The increasing demand for these services, vital for improving chip performance, is driving this surge in outsourcing to Malaysia.

Malaysia’s prominence in the semiconductor supply chain, coupled with its perceived geopolitical neutrality, affordability, skilled labor, and advanced technology infrastructure, makes it an attractive choice for Chinese companies diversifying their assembly operations.

Companies like Unisem, among others, have reported heightened business from Chinese clients seeking to establish alternative supply sources. Despite potential concerns about provoking U.S. backlash, these Malaysian firms emphasize the legitimacy and compliance of their business dealings.

Moreover, Malaysia’s goal to bolster its semiconductor packaging, assembly, and testing market share by 2030 has garnered significant attention from Chinese chip firms. Investments by companies like Xfusion and StarFive, as well as TongFu Microelectronics’ expansion in collaboration with U.S. chipmaker AMD, signify the growing traction of Malaysia as a hub for chip manufacturing.

Beyond Malaysia, Singapore, Vietnam, and India are also positioning themselves to attract clients looking to navigate geopolitical uncertainties between the U.S. and China. This global shift reflects the escalating complexities in the semiconductor industry and the strategic maneuvers being made to ensure uninterrupted chip supply chains.


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