Intel investing $9.7b in advanced chip plant in Malaysia

KUALA LUMPUR • Intel will invest RM30 billion (S$9.7 billion) to build a new chip packaging and testing factory in Malaysia, chief executive Pat Gelsinger said yesterday, expanding production in the country following a global shortage of semiconductor chips.

The new advanced packaging facility is expected to begin production in 2024, he added.

Malaysia expects the plant to create over 4,000 Intel jobs and more than 5,000 construction jobs.

"This undertaking is timely given the bullish global demand driven by the chip shortages and the potential challenges arising from the (pandemic recovery) globally," Minister of International Trade and Industry Mohamed Azmin Ali said in a statement.

A global shortage of semiconductor chips, due in part to pandemic-fuelled demand for electronics and disruptions in supply chains, has seen carmakers cutting production as well as delays in smartphone deliveries at companies including Apple.

Malaysia's chip assembly industry accounts for over a tenth of global trade worth more than US$20 billion (S$27.3 billion).

Mr Gelsinger, who said chip demand climbed 20 per cent overall during the pandemic, expects the crunch to last till 2023. "Overall, the semiconductor industry this year will grow more than it has in the last two to three decades. But still the gaps are large... and I predict the limitations of the shortages will persist into 2023."

Mr Gelsinger was in Taiwan and Malaysia this week for talks that underscore how Asian manufacturing will be crucial to Intel's turnaround efforts. His trip included plans for a meeting with leaders of Taiwan Semiconductor Manufacturing Company (TSMC), say people familiar with his schedule.

Intel needs TSMC's advanced manufacturing services while planning to also compete with the Taiwanese company in the so-called foundry business, a tricky balancing act for Mr Gelsinger.

Apart from Malaysia, Intel also operates a plant in Dalian, China.

This is Mr Gelsinger's first trip to Asia since becoming Intel's head, and comes as he lobbies the US government to allocate money for the country's chip industry to domestic chipmakers only.

He has argued that overseas manufacturers - like TSMC and Samsung Electronics, which both have plans to build US plants - should not get money through the Chips Act, which is going through political approvals in Washington. He said the concentration of advanced manufacturing in Taiwan and elsewhere in Asia is a strategic risk.

The chip giant opened its first production facility outside the United States at a 2ha assembly site in the Malaysian state of Penang in 1972. By 1975, the facility had employed about 1,000 people and had become a crucial part of the company's manufacturing chain, its website said.

Last month, the US and Malaysia said they plan to sign a deal by early next year towards improving transparency, resilience and security in the semiconductor and manufacturing sector supply chains.

As in other manufacturing hubs worldwide, Covid-19 has upended supply and production chains and depressed fundamental demand.

Malaysia wants to continue drawing the big-name investments it needs to climb the tech ladder and keep its economy humming.

More than half a million people were employed in Malaysia's electrical and electronics industry last year, working with global chipmakers ranging from STMicroelectronics and Infineon Technologies to Intel and Renesas Electronics.

The government approved RM47 billion of investment - mostly foreign - in the industry in the first half of the year versus RM5 billion in the year-ago period, Mr Azmin said.

REUTERS, BLOOMBERG