Intel to invest $9.7 billion in new chip plant in Malaysia, creating 9,000 jobs

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

KUALA LUMPUR (REUTERS, BLOOMBERG) - 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 on Thursday (Dec 16), expanding production in the country following a global shortage of semiconductors.

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

The RM30 billion investment is expected to create over 4,000 Intel jobs and more than 5,000 construction jobs in the country, the Malaysian government said.

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

A global shortage of semiconductor chips, caused partly by a pandemic-fuelled demand for electronics and disruptions in supply chains has seen car makers cut production and delays in smartphone deliveries at companies including Apple.

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

Mr Gelsinger, who said chip demand climbed 20 per cent during the pandemic overall, 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 that the limitations of the shortages will persist into 2023,” he said.

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 TSMC, according to people familiar with his schedule. Intel both needs TSMC's advanced manufacturing services and plans to 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 taking the top job at Intel 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 - such as TSMC and Samsung Electronics, which both have plans to build plants in the US - shouldn't get money through the Chips Act, which is going through political approvals in Washington. As part of those efforts, he's argued the concentration of advanced manufacturing in Asia and Taiwan is a strategic risk.

The chip giant opened its first production facility outside the US at a 5-acre assembly site in the Malaysian state of Penang in 1972. By 1975, it 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 an agreement by early next year towards improving transparency, resilience and security in the semiconductor and manufacturing sector supply chains.

As in other manufacturing hubs across the world, the pandemic has upended supply and production chains and depressed fundamental demand. Malaysia is now keen to continue attracting the big-name investment and jobs it needs to climb the tech ladder and keep the local economy humming.

More than half a million people were employed in Malaysia’s electrical and electronics (E&E)  industry in 2020, working with global chipmakers from STMicroelectronics and Infineon Technologies to Intel and Renesas Electronics.

The nation approved RM47 billion of investment - mostly foreign - in the E&E sector in the first half of the year versus RM5 billion  in the year-ago period, Mr Azmin said.

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