KL20: Reversing the brain drain and turning Malaysia into a semiconductor powerhouse

The Kuala Lumpur 20 (KL20) Summit 2024 was launched by Malaysia’s Prime Minister, Datuk Seri Anwar Ibrahim last month. It is a monumental event to attract more start-ups and investors to Malaysia.

The summit, held on April 22-23, aimed to establish a supportive environment for start-ups with valuable commercial and marketing terms, and efficient regulatory procedures. A KL20 blueprint is also set to enlarge the bucket of quality start-ups and talents, attracting more venture capitalists (VCs), improving the ease of doing business, and creating a prosperous culture of innovation in Malaysia.

In the current scenario, Malaysia is competing with regional powerhouses such as Singapore, Indonesia, and Vietnam.

Many experts and business coaches like Kevin Brockland, founder and managing partner of Indelible Ventures, highlighted that Malaysia has a fascinating representative sample market with a variety of cultures and languages. It is the right place to test the market for new start-up product launches.

Malaysia had produced successful start-ups including Grab, Merchantrade, Carsome, Iflix, iProperty.com, and Aerodyne Group. Malaysia is on the right path to establishing itself as a regional hub for start-ups.

Ensuring start-ups are innovative, and grow quickly, is vital for Malaysia to break away from its previous ‘old’ economy, in which traditional business ecosystems like plantation, banking, and utilities navigate the economy to the ‘new’ system. The new economy is hence expected to stimulate high-growth and borderless businesses, which leads to higher productivity and value of product.

Malaysia’s Economy Minister, Rafizi Ramli, emphasised that the thriving start-up ecosystem can evolve through the involvement of multiple government agencies that are related to product development and financial support.

Rafizi explained at KL20 that it boils down to investment in digital and technology, especially in the semiconductor industry.

Over the last 10 to 15 years, China has been the dominant, key player in the semiconductor industry. The current global supply chain is vulnerable due to geopolitical pressures and the post, Covid-19 pandemic. Many international investors, especially China-based and Chinese companies, are looking outside China to reduce risks and sidestep geopolitical changes. As such, Malaysia should grab this opportunity.

The country is also restructuring its economy as a result of the dip in the government’s coffers from oil and gas (O&G). The depletion of revenue from O&G could perhaps be mitigated by focusing on the semiconductor industry.

Oil and gas remains an important sector in Malaysia’s economy, and the country is still the second-largest oil producer in Southeast Asia, and the world’s third-largest exporter of liquefied natural gas (LNG).

The semiconductor industry needs to be a priority to support the commodities and the O&G sectors in Malaysia’s economy. The growing interest in Malaysia’s semiconductor investment opportunities will be captivating with the support of sufficient human capital, capacity, skills, requirement, and knowledge.

The availability of capital and skilled manpower has to be harnessed in the local market.

We have several semiconductor players in Malaysia such as Jabil, Bosch, Western Digital, Intel, AMD, and Infineon. However, local talents are lured to work or opt to migrate overseas due to better opportunities. Many skilled and well-trained Malaysian engineers end up working abroad in semiconductor and integrated circuit (IC) industries because of the limited companies focusing on this area at home.

The 2020 United Nations Department of Economics and Social Affair (UNDESA) report highlighted that the number of Malaysian diaspora is around 1.86 million, which is cited by the Department of Statistics Malaysia (DOSM) in 2022.

The main destination countries for the Malaysian diaspora outside Southeast Asia are Australia, UK, US, Canada, New Zealand, China, Japan, India, and Germany. Similarly, the report by the Organisation for Economic Cooperation and Development (OECD) 2015/2016 revealed that the majority of Malaysians working abroad are in the skilled category, who found jobs in high-tech industries, financial services, education, and healthcare.

KL20 is attracting more IC design start-ups to Malaysia. These start-ups will hopefully generate more opportunities in IC design, locally. The government aims to reverse the brain drain and to turn Malaysia into the hub for semiconductor design and manufacturing in Southeast Asia.

Microsoft had earlier this month announced its US$2.2 billion (RM10.45 billion) investment in cloud and artificial intelligence (AI) services over the next four years in Malaysia. The US tech company’s cloud and AI infrastructure investment will create AI skilling opportunities for 200,000 Malaysians and support the growth of the local developer community. The Digital Ministry and Malaysia Digital Economy Corporation have extended their appreciation to Microsoft’s investment, in which numerous collaborative initiatives, including start-up support, talent development, digital adoption for micro, and small, and medium enterprises, have been carried out since 1998.

The Malaysian government looks forward to continued future collaborations with Microsoft and other technology industries to foster digital talent development, drive innovation, and accelerate Malaysia’s journey towards becoming Southeast Asia’s – and the world’s – digital hub.

Dr Sayed Mohammad Reza Yamani Sayed Umar is a Research Fellow at the Ungku Aziz Centre for Development Studies, Universiti Malaya.

The views expressed here are the personal opinion of the writer and do not necessarily represent that of Twentytwo13.