[News] Tariff Uncertainty Could Put Malaysia’s Chip Expansion on Ice

With Trump warning a couple of days ago that Malaysia could face a separate 25% tariff starting August 1, chipmakers in the country are hitting pause on investments as they await clarity on U.S. tariffs, according to Bloomberg.

Citing remarks from Malaysia Semiconductor Industry Association president Wong Siew Hai, the report suggests that firms are hoping the U.S. will extend the current tariff exemption for semiconductors beyond the August 1 deadline. If that happens, he said, investment will pick up again.

Malaysia faced a 24% tariff in April, which the U.S. later eased to 10% during a 90-day pause for talks—only to now announce a surprisingly higher rate of 25%. Notably, Bloomberg warns that the stakes could be high, as the U.S. is Malaysia’s third-largest semiconductor export market. As Reuters reported, Malaysia exported $16.2 billion in chips to the U.S. in 2024, making up nearly 20% of all American semiconductor imports.

In detail, Malaysia handles about 10% of global chip packaging, and electronics make up nearly 40% of its exports, as per Bloomberg.

It is also worth noting that Malaysia, as home to major packaging sites for Intel, GlobalFoundries, and Infineon, plays a critical role as a regional hub in the global semiconductor ecosystem, according to Bloomberg.

In August, 2024, Infineon has launched the first phase of its new fab in Malaysia, set to become the world’s largest and most advanced 200mm silicon carbide (SiC) power semiconductor facility, according to its press release.

Update on Intel’s Penang Project

On the other hand, Intel’s stance on Malaysia remains uncertain. Malaymail reported in late June that InvestPenang, a non-profit entity under Penang State Government with the primary purpose of promoting local investments, is set to meet soon with Intel to get a clear update on its plans for the nearly finished facility.

Intel’s US$7 billion (RM30 billion) investment in Malaysia, announced in 2021, includes building its cutting-edge 3D chip packaging facility in Penang — the first of its kind outside the U.S., according to The Edge Malaysia.

However, as per The Star, Intel’s Penang wafer fab and advanced packaging project may now be on indefinite hold, as the last batch of 200 engineers relocates to New Mexico amid the company’s ongoing challenges.

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(Photo credit: Infineon)