Malaysia invests US$250 million in Arm Limited to develop homegrown chips

The government of Malaysia has signed a MoU with Arm Limited to establish an ecosystem wide partnership on semiconductors.

With the US and China engaged in a tariff and trade war, Malaysia has taken the opportunity to avoid being directly involved in the chip war by investing over US$250 million over the next decade to build its own semiconductor ecosystem.

The Japanese-owned British semiconductor and software design company will be providing Malaysia access to its high-performance, power efficient compute platform, Arm Compute Subsystem (CSS) as well as its flexible licensing program, Arm Flexible Access. Arm will also be training up to 10,000 semiconductor talents to ensure the ecosystem in the country is well prepared to cope with the demand.

“The adoption of CSS and Arm Flexible Access will enable Malaysia to offer hassle-free frontend IC design opportunities to the semiconductor industry that will help to accelerate the time-to-market for the development and deployment of AI-powered silicon solutions,” said Will Abbey, EVP, Chief Commercial Officer at Arm in a blogpost.

Abbey explained that Arm CSS technologies provide the semiconductor industry with the fastest path to silicon, with validated and performance-optimized computing on a leading-edge foundry process. Meanwhile, Arm Flexible Access delivers up-front, no-cost or low-cost access to a wide range of Arm IP, tools and training.

Arm will also establish its first office in Southeast Asia in Kuala Lumpur. The company aims to expand its reach in the region as well as Australia and New Zealand.

According to Malaysian Prime Minister, Anwar Ibrahim, the comprehensive partnership with ARM will also see the most ambitious technological plans in the country as it looks to pioneer Made-by-Malaysia AI chips. The chips are expected to be designed, manufactured, tested and assembled in the country and sold to the rest of the world.

“The Arm partnership with the Malaysian government will provide a range of innovation opportunities for the semiconductor industry in the age of AI, from the development of more advanced AI-optimized silicon products to nurturing new skills and talent in the region. Through utilizing Arm’s technology expertise, Malaysia is building a brand-new, highly innovative AI chip ecosystem that features the Arm compute platform at its heart,” added Abbey.

The impact on semiconductor industry

Malaysia’s investment in Arm Limited marks a significant change in the country’s semiconductor industry. In the past, Malaysia relied heavily on investments from semiconductor companies in the country and have seen increased investments in the past few years from some of the biggest semiconductor companies in the world.

However, with some chip manufacturers having to deal with tariffs and supply chain concerns as well as funding issues, this could impact their expansion plans in the country. For example, Intel recently stated that it's holding back on its expansion plans in Malaysia as the chip giant looks to re-strategize its global plans.

In a media statement, Malaysia’s economic ministry also stated that “this represents a strategic shift by moving away from traditional tax grants and cash exemptions for foreign firms, to leveraging intellectual property as a point of attraction. The government is committed to fostering homegrown innovation in frontier technologies, such as AI data servers, autonomous vehicles and robotics.”

At the same time, the deal would also see Malaysia avoid being part of any tariffs that could be imposed on semiconductors by the US or even China. Given the technology is provided by neither the US nor China, its development would be able to continue without any disruptive concerns.

Moreover, the development of homegrown chips could prove to be a gamechanger in the region, especially with increasing demand in the market as well. The economics ministry predicts the projected ecosystem impact of one complete Arm CSS lifecycle is approximately US$30 billion, with expected economic spillover in innovation, job creation, wage growth, exports and investment.