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20 Dec 2018
Executive Interview with the CEO of SilTerra by The CEO Magazine

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22 Apr 2019
Opportunities in Semiconductor

Country offers an attractive ecosystem to effectively support fab industry

The Star, Malaysia

By Joy Lee

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MALAYSIA is among one of the larger semiconductor markets in the world. But there is room for the local industry to further develop its capabilities in the area of design works to remain competitive amid slowing global sales.

Raj Kumar, founder and group chief executive officer of IGSS Ventures, notes that Malaysia has the potential to play a bigger role in the semiconductor industry than it does today.

“This is especially so in specific capabilities and sectors with multiple advantages that can be better optimised and commercialised.

“The unique opportunity here is for Malaysia to start `fabless product companies’, but to do so, we must address the critical needs for top notch product design talents,” he says.

According to reports, Malaysia is one of the most important semiconductor export markets in Asia – after China, Japan, South Korea, Singapore and Taiwan. Nonetheless, the country pales in comparison with other semiconductor nations in terms of investments.

“Thus far, Malaysia has yet to have a strong home-grown semiconductor champion in the international arena like what TSMC is to Taiwan or Samsung is to South Korea. And China’s investment capabilities, on the other hand, are well ahead of others,” Raj adds.

There are generally two main types of semiconductor companies in Malaysia: integrated device manufacturer (IDM) and dedicated foundries.

Regional opportunities: By scaling up regional cooperation, South-East Asia can create a robust semiconductor space.

IDMs mainly design, manufacture and sell their own semiconductors, like Intel or Samsung. Dedicated foundries or fabs, on the other hand, are much like “factories for hire” which manufacture semiconductors according to their customers’ specifications.

The third category of companies is the fabless companies, which design semiconductors and contract out the manufacturing to other foundries or IDMs with spare manufacturing capacity.

Apart from developing a pool of product design talents, issues such as intellectual property protection, licensing and research and development (R&D) spending are also important issues, particularly for fabless companies.

“The global semiconductor industry, in general, currently needs viable alternative locations to build their new fabs or relocate their existing niche fabs due to increasing higher operational costs in countries such as Japan, the US and Europe.

“If Malaysia develops an intensive national sectorial marketing strategy and further enhance or implement supporting incentives for semiconductor operators, it can very likely attract five to 10 other wafer fabs in the next 10-15 years.

“The potential is there for Malaysia to be akin to South Korea in branding itself as an ideal ‘fab relocation’ destination in chosen semiconductor fields in the next 15 years,” says Raj.

He adds that growth and expansion of the industry lie in the areas of wafer foundries, outsourced semiconductor assembly and test industries, design services and in supporting entities with niche semiconductor technology capabilities.

This will help to differentiate local players from the much bigger global competitors.

“These sectors are already present in the country and it provides a strong base for industry players to further tap into,” he says.

Other advantages that the local wafer fab industry have include a rich multinational culture, business-friendly laws and good comprehension of English.

Another trend that will determine Malaysia’s competitiveness is its ability to adapt and adopt new technology.

“The global technological trends led by top semiconductor and technology nations will affect and shape the local industries. Malaysia is playing catch-up.

“That is why we will need to prioritise first, the talent development for Industry 4.0, and build skill sets and foundations for companies and sectors that purely or mainly compete with overseas competitors for global businesses.

“The semiconductor industry is primarily export-based, hence we are competing with global competitors, and the need to adopt best practices quickly and effectively, is crucial. This also includes establishing business strategies and partnerships that can accelerate technology adoption and achieve business efficiencies to drive innovations,” says Raj.

The government has been pushing the adoption of Industry 4.0 in the manufacturing sector for some time now. However, there is still a lot of education needed for producers to jump on the bandwagon – most don’t know where to begin.

While some form of upgrade has already taken place in some parts of the semiconductor industry, these efforts can be further enhanced. An example is the increased automation in repetitive operations in the cleanroom, where robotics can be used in place of manual labour.

Raj also points out that the advent of big data and data analytics will be a game-changer for players as demand increases for better efficiencies at the fabs.

“The policies and framework surrounding Industry 4.0 sees Malaysia focusing on the right fundamentals. In encouraging investments, innovations, talent development and growth, high-value manufacturers will almost certainly become a key economic driver.

“However, as is with any policies or framework, the secret to success lies in the execution of them,” he cautions.

Certainly, SMEs in the industry will need greater support. Raj opines that this could come in the form of matching grants or loans to encourage SME innovation and investments in R&D.

“Equally important, the universities and higher learning institutes need to strengthen relevant skills to meet rapidly evolving workplace requirements. There should be new syllabus in polytechnics and vocational schools with focus given to non-graduate students on key industries in Malaysia that will drive socio-economic results,” he adds.

If all these are realised, Malaysia will be in a good position to play a bigger role in the global market.

“Critical success factors include scale, overall capabilities and cost competitiveness, all of which can be improved through economies of scale.”

Currently, Singapore and Malaysia are the only two nations in South-East Asia with the capabilities to support wafer fabs, says Raj.

He adds that there is plenty of room for both countries to collaborate within the region to create a stronger bloc to challenge larger markets.

While Singapore continues to invest in R&D and equipment ecosystem, it faces the challenge of land scarcity and low skilled manpower. Malaysia, on the other hand, has more than enough manpower and a cost advantage.

“The case for regionalisation is to optimise the individual capabilities within South-East Asia, and combine them as a collective industry powerhouse, better equipped to compete with bigger players.

“By scaling up regional cooperation, South-East Asia can create a robust semiconductor space in comparison with China, Taiwan and South Korea.

“By making us a force to be reckoned with, we are more likely to attract multi-billion semiconductor investments from Japan, the US and Europe where some of the niche fabs and supporting industries need to relocate or have a ‘dual-location’ strategy,” he says.

Last year, IGSS tied-up with local semiconductor wafer foundry SilTerra Malaysia Sdn Bhd in a technology transfer deal. The partnership will significantly reduce production costs.

“SilTerra’s capabilities complement ours as they have a world-class semiconductor facility and an aligned strategy of focusing on differentiated emerging niche semiconductor technologies so it can still grow healthily in this space.

“The partnership we have with SilTerra is both strategic and a trusted one, with a win-win model. With continued focus and intensity, it will positively change the future of both companies within the next three to five years,” Raj says.

26 Oct 2018
Visit By Minister Of Entrepreneur Development

The Minister of Entrepreneur Development (MED), YB Datuk Seri Mohd Redzuan Bin Md Yusof and his delegation were at SilTerra for a working visit on Wednesday, 24th October 2018.

The delegation included the Deputy Minister, YB Datuk Wira Dr. Hatta Ramli, the Secretary General and senior management of MED. Accompanying the Minister were the President & CEO of MiGHT (Malaysian Industry-Government Group for High Technology), Datuk Dr. Mohd Yusoff Sulaiman and Kulim Technology Park Corporation (KTPC) Senior VP (Corporate), Tuan Hj. Mohd Sahil Zabidi.

SilTerra's Member of the Board, En. Effizal Faiz Zulkifly (representing Khazanah Nasional), En. Firdaus Abdullah, CEO, and SilTerra’s top management were on hand to greet the Minister and his delegation. A Corporate Overview and Technology & Market Development activities was presented to share SilTerra's readiness and interest to participate in the New National Car Project (NNCP).

The idea for the NNCP was mooted by our Honourable Prime Minister, YAB Tun Dr. Mahathir Mohamad, with the objective to develop and localize more vendors and enhance their engineering capacity and technical capabilities. This will help position Malaysia beyond being just a consumer and to move towards a producer of high-value goods. MiGHT, a think tank under the Prime Minister’s Department, is tasked to establish strategic partnerships and cooperation with the private sector, while leveraging on relevant Ministries to help make this initiative a reality.