Chinese Chip Companies Turn to Malaysia for Assembly Amid U.S. Sanctions Concerns

Industry Sources Reveal Chinese Companies Seek Malaysia for High-End Chip Assembly

Chinese companies are seeking to assemble high-end chips in Malaysia, according to sources.

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In a bid to mitigate the risks associated with expanding sanctions on China’s chip industry, a growing number of Chinese semiconductor design companies have been seeking the assistance of Malaysian firms to assemble high-end chips, according to sources. It seems the Chinese companies are not taking any chances and are primarily interested in the assembly of graphics processing units (GPUs). However, it’s important to note that these requests solely pertain to assembly and not the fabrication of chip wafers.

The United States has been tightening restrictions on the sale of high-end GPUs in an attempt to limit China’s access to this crucial technology. With the booming demand for artificial intelligence and its applications across industries, smaller Chinese semiconductor design firms have been facing difficulties in securing advanced packaging services domestically. As a result, they have turned to Malaysia, a key player in the semiconductor supply chain, to meet their assembly needs.

One could say that Malaysia has become the go-to destination for Chinese chip firms looking to diversify their production outside of China. With its perceived amiable relationship with China, competitive pricing, experienced workforce, and sophisticated equipment, Malaysia ticks all the boxes for these companies. Unisem, a major player in the Malaysian chip packaging industry, has witnessed increased business and inquiries from Chinese clients. Other notable firms in the country, such as Malaysian Pacific Industries and Inari Amertron, have also caught the attention of Chinese companies.

Despite potential concerns about provoking the United States, Unisem’s chairman, John Chia, remains confident in the legitimacy and compliance of their business dealings. Chia asserts that worrying about “too many possibilities” is not a luxury they can afford, given their numerous customers from the United States.

Now, why would Chinese chip companies want their chips assembled outside of China? Well, apart from mitigating geopolitical risks, it also opens up opportunities to sell their products in non-Chinese markets. By leveraging Malaysia’s expertise in chip packaging and assembly, Chinese companies can access a global customer base more easily.

Malaysia currently accounts for 13% of the global market for semiconductor packaging, assembly, and testing, with ambitions to increase its market share to 15% by 2030. Building on this advantage, Chinese chip firms, including Xfusion and StarFive, have already announced plans to expand their operations in Malaysia. These investments have been facilitated by the array of incentives offered by Malaysia.

It’s worth mentioning that Malaysia is not the only country attracting the attention of the global chip industry. Singapore, Vietnam, and India are also actively seeking to expand their chip manufacturing services as they aim to minimize the risks arising from the U.S.-China geopolitical landscape.

In conclusion, by turning to Malaysia for chip assembly, Chinese semiconductor design companies are taking precautions against potential U.S. sanctions. This move highlights the significance of Malaysia’s position in the global semiconductor supply chain and signals a growing diversification trend among Chinese chip firms. As the chip industry continues to evolve, it will be intriguing to see how different countries position themselves to attract these tech giants.


What are your thoughts on Chinese chip companies partnering with Malaysian firms for chip assembly? Do you think this strategy is effective at mitigating risks? Share your opinions in the comment section below!