Penang’s electrical and electronics sector contributed 68 per cent of Malaysia’s total E&E exports last year. But industry leaders say the real prize from the AI boom lies beyond the fabrication floor.
Advanced packaging, semiconductor equipment, power electronics and precision engineering are the growth areas where Penang can capture the most value from surging AI demand, according to the Malaysian Semiconductor Industry Association (MSIA).
“AI demand is driving investments across semiconductor equipment, advanced packaging, photonics, power electronics and automation,” MSIA president Datuk Seri Wong Siew Hai said.
Penang attracted 45 per cent of the country’s approved E&E manufacturing investments from 2021 to 2025. The state is home to more than 1,000 semiconductor ecosystem companies employing over 200,000 workers.
Demand for high-bandwidth memory (HBM), a critical component in AI chips, is largely booked until 2028-2029. That long lead time gives Penang’s supporting industries a wide window to build capacity and lock in contracts.
Penang Menteri Besar Chow Kon Yeow stressed the need to move beyond traditional manufacturing.
“Growth could no longer rely solely on low-cost advantages but must instead be driven by productivity improvements, technology adoption and talent development,” he said.
Malaysia is unlikely to attract leading-edge wafer fabs given the high capital costs involved. The state’s future depends on competing on technology rather than labour costs.
Penang’s Penang 3.0 agenda aims to accelerate the shift to a high-value manufacturing and technology hub, with a focus on innovation, digitalisation and intellectual property ownership. The foundation is already in place: more than 6,500 manufacturing SMEs support over 350 multinational corporations in the state.
Local companies are being urged to become providers of specialised equipment, engineering services, automation systems and advanced manufacturing solutions to capitalise on the flow of AI-related investment.
Source: New Straits Times
