The semiconductor industry in Malaysia remains largely insulated from the ongoing conflict in the Middle East for the time being, although analysts warn that prolonged disruptions could eventually affect global chip supply chains.
The sector in Malaysia focuses primarily on assembly, packaging, and testing, which relies heavily on wafers produced in Taiwan and South Korea.
Institute of Strategic and International Studies Malaysia analyst Jaideep Singh noted that while wafer manufacturers in East Asia source critical materials like helium from Qatar, major players such as TSMC and SK Hynix currently maintain sufficient inventory.
However, a long-term shutdown could test the resilience of these partners and, by extension, affect Malaysian testing activities.
Most raw materials utilized within Malaysia, including silicon and germanium, are sourced from China and are unlikely to face immediate disruptions. Furthermore, because exports are predominantly transported by air across Asia, the closure of the Strait of Hormuz has had little immediate impact on the movement of goods.
Neutrality and strategic advantages
The conflict has contributed to higher global oil prices, which typically raises electricity and logistics costs for manufacturers. Nevertheless, Malaysia may be less affected than other nations as it remains a net exporter of mineral fuels.
There is currently no strong correlation between global oil prices and Malaysian producer costs as reflected in the producer price index.
Malaysia Semiconductor Industry Association president Wong Siew Hai indicated that global chip prices might fluctuate depending on demand and the evolution of the conflict. He highlighted that growth in the artificial intelligence sector is expected to drive higher demand and prices for AI chips.
Malaysia’s position as a neutral, non-aligned country offers a unique advantage. In regions affected by global conflicts, international companies may look to shift production volumes to Malaysia to mitigate risks and ensure continuity in their operations.
Industry operations and logistics mitigation
Major industry players have already taken steps to avoid supply disruptions by adjusting their logistics routes. AT&S Austria Technologie & Systemtechnik, which operates a large manufacturing campus in Kulim Hi-Tech Park, confirmed that its operations remain secure despite regional tensions.
Representative Gerald Reischl stated that all inbound and outbound air freight has been rerouted to avoid the Middle East. While transit times may lengthen by seven to 14 days, the company’s existing safety stock policy fully covers this additional lead time.
Similarly, Infineon Technologies, which maintains facilities in Melaka and Kulim, is monitoring the situation closely. The company reported very limited shipping disruptions from its providers, maintaining that the overall impact remains minor and stable.
Malaysia currently accounts for approximately 13 percent of global semiconductor assembly and testing, ranking as the sixth-largest exporter in the sector. The industry is a vital economic pillar, contributing roughly 6 percent of the gross domestic product and 26 percent of total exports.
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