US-China tiff triggering AI, tech gold rush in Malaysia that could help it beat ‘middle income trap’

KUALA LUMPUR, Dec 7 — Malaysia is witnessing a rapid transformation as foreign investments in technology and manufacturing pour in, driven by US-China tensions and Southeast Asia’s strategic advantages.

According to a new Bloomberg report, the country attracted nearly US$44 billion (RM195 billion) in foreign direct investment to Penang alone since 2019, tripling its previous decade’s inflows.

Penang, home to over half of Malaysia’s chip exports, is now a hub for advanced chip manufacturing, with key players like Intel and Lam Research investing billions.

Penang Chief Minister Chow Kon Yeow said the investments will benefit Malaysians through high-skilled job creation and multiplier effects across multiple sectors.

“Malaysia sees this as a once-in-a-lifetime opportunity of escaping the middle income trap and soon achieving its aspirations as a high income nation,” Chow was quoted as saying

In Penang, living standards and pay levels have also been rising, with the state’s economic output increasing 38 per cent in value since 2018.

Intel’s US$7 billion expansion in Penang includes its first overseas facility for advanced 3D chip packaging, while Lam Research is establishing its largest global campus.

Neighbouring Kedah is also seeing growth, with Infineon Technologies AG opening a €7 billion silicon carbide chipset plant in 2024 to support rising global semiconductor demand.

Malaysia accounts for 13 per cent of the world’s semiconductor testing and packaging, making it a vital link in global tech supply chains.

Johor, Malaysia’s southernmost state, is developing as a data centre hub with massive investments from Nvidia and Microsoft, including a US$4.3 billion AI cloud facility.

Singapore’s previous moratorium on new data centres has boosted Johor’s growth, though analysts now view Johor as an independent technology market.

Malaysia’s ability to provide affordable electricity — about a third of Singapore’s commercial rates — has made it an attractive destination for energy-intensive industries.

Efforts to meet future workforce demands include plans to train 60,000 engineers as the country prepares for hundreds of thousands of new high-tech jobs.

Palm oil giants like SD Guthrie and IOI Corp. are converting plantations into solar farms to support the growing power needs of Malaysia’s tech boom.