Malaysia is setting an ambitious target to capture 7% of the global advanced semiconductor packaging market by 2035, positioning the country for a larger role in the next generation of chip manufacturing. The goal forms part of the National Semiconductor Strategy and reflects a clear shift from traditional assembly, testing and packaging toward higher-value technologies linked to artificial intelligence, high-performance computing and chiplet architectures.

The Ministry of Science, Technology and Innovation has approved a MYR 92 million R&D grant over 24 months for a consortium of five Malaysian companies. With an additional MYR 93.8 million in industry matching contributions, total investment will reach MYR 185.8 million, equivalent to approximately $47.3 million. The funding is intended to accelerate local capabilities in advanced packaging, testing, inspection, dispensing and semiconductor design.

Malaysia’s strategy shows how advanced packaging has become a national competitiveness issue, not only a technical function at the end of the semiconductor process.

The consortium brings together companies with complementary roles across the packaging and semiconductor value chain. SkyeChip will focus on HBM chip design and 2.5D/3D chiplet architecture, both critical areas for AI processors and high-bandwidth computing systems. Inari Technology will develop pilot-scale advanced packaging capabilities, helping translate research into practical manufacturing processes.

FusionAP is working on high-end intellectual property transfer, while Pentamaster Instrumentation will contribute automated test equipment and inspection systems. NSW Automation adds expertise in high-precision liquid dispensing technology, a key requirement for complex packaging processes where accuracy, repeatability and material control are essential.

Malaysia already has a strong foundation in the semiconductor sector. The country is reported to be the world’s sixth-largest semiconductor exporter and accounts for around 13% of global assembly, testing and packaging activities. However, much of this historical strength has been concentrated in lower-margin manufacturing services. The new strategy aims to help Malaysia avoid the low-margin trap by building capabilities in advanced packaging, where margins can be significantly higher.

This shift is closely connected to global demand for AI and high-performance computing. As chips become more complex, performance gains increasingly depend on how components are integrated, rather than only on transistor scaling. Advanced packaging technologies such as chiplets, 2.5D integration and 3D architectures allow logic, memory and other elements to work together with greater speed, bandwidth and energy efficiency.

• HBM design supports AI and data-intensive computing applications.
• 2.5D and 3D packaging enable higher integration and performance density.
• Automated inspection improves quality control in complex manufacturing flows.
• Precision dispensing supports reliability in advanced assembly processes.
• Local R&D strengthens Malaysia’s position in higher-value semiconductor activities.

The government is also framing the initiative around supply chain resilience. Malaysia’s long semiconductor history, established manufacturing ecosystem and neutral geopolitical position are being presented as advantages at a time when global companies are seeking more diversified and reliable production networks. With the semiconductor industry projected to grow strongly by 2030, countries that can offer both manufacturing depth and advanced technology capability are likely to attract greater investment.

Under the 13th Malaysia Plan, semiconductors are being treated as part of the country’s high-growth, high-value industrial agenda. The focus includes stronger R&D, automation, talent development and industry-academia collaboration. These elements are essential because advanced packaging requires more than equipment investment. It depends on process knowledge, materials expertise, design capability, testing systems and skilled engineering teams.

For the global packaging industry, Malaysia’s plan is another sign that semiconductor packaging is moving to the centre of industrial policy. Countries are no longer competing only to build wafer fabs; they are also competing to control the technologies that connect chips, improve performance and turn silicon into usable systems.

The 2035 target is ambitious, but Malaysia’s existing semiconductor base gives it a credible starting point. If the new R&D programme successfully develops local expertise and commercial-scale capabilities, the country could become a stronger regional hub for AI-related packaging, chiplet integration and advanced testing. The initiative also signals to global chip companies that Malaysia wants to participate in the most valuable layers of the semiconductor supply chain, not only in conventional back-end manufacturing.