Malaysia wants semiconductor firms to move up the value chain under Budget 2027

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Highlights

Budget 2027 allocates RM1.2 billion from Khazanah Nasional Bhd and the Employees Provident Fund to encourage local semiconductor companies to move up the value chain.
The RM100 million Strategic Investment Fund by Khazanah Nasional Bhd and InvestPenang will support semiconductor startups and advanced manufacturing in Malaysia.
The government emphasises the need to realise investment projects, increase local value added and translate higher productivity into wage increases for industry workers.

This article was translated from the original. Read the original version by our correspondent here.

Budget 2027 funding and the industry transition

As reported by The Edge Malaysia, Malaysian Investment Development Authority chairman Tengku Datuk Seri Zafrul Abdul Aziz said local semiconductor companies need to leverage the Budget 2027 allocation to move into higher-value segments such as integrated circuit design, after Malaysia has built a mature semiconductor ecosystem over more than five decades.

He said the country must move beyond its traditional strengths in assembly and testing to capture greater value from the industry. According to him, some Malaysian companies have already become global champions and are connected to global value chains, but more companies need to reach that position.

Under Budget 2027, Khazanah Nasional Bhd and the Employees Provident Fund will invest RM1.2 billion to help local semiconductor companies transition into higher-value industry segments. The budget also provides for a RM100 million Strategic Investment Fund to be established by Khazanah Nasional Bhd and InvestPenang to support early-stage companies in semiconductors and advanced manufacturing.

Zafrul said the measures will help Malaysian companies strengthen their capabilities and move further up the value chain. He also stressed the need to increase investment in research and development and innovation so that progress in the industry generates broader economic spillover effects.

Impact on investment, supply chains and wages

He said the benefits of investment should not be limited to anchor companies alone, but should strengthen local supply chains and create opportunities for domestic businesses. This approach is important if Malaysia wants to deepen local value added in the semiconductor and manufacturing industries.

At the same time, he said the government needs to focus not only on attracting investment, but also on ensuring that approved projects are realised within a reasonable timeframe. The process of obtaining approvals from local authorities and relevant government agencies remains an important consideration for investors, while implementation speed varies by sector.

According to him, investment projects, particularly in manufacturing, can take around two years from groundbreaking to factory completion, depending on the industry. On wages, he believes companies need to translate productivity gains into higher employee pay so that economic growth delivers a better standard of living for Malaysians.

He added that companies recording higher profits through greater efficiency and productivity should share those benefits with employees. This view positions wage increases as part of the outcome of stronger industry, rather than merely a side effect of investment growth.

In our previous coverage of MOSTI's RM1.29 billion allocation under Budget 2027, we highlighted how the funding was structured to accelerate the development of high-value technologies, including semiconductors, artificial intelligence, startup ecosystems and the commercialisation of local research outcomes. We also outlined the implementation of key programmes such as support for SemiconStart, SUPER 2.0 and the MYSA GeoAI initiative, aimed at strengthening innovation, expanding skilled employment opportunities and helping Malaysia transition from a technology consumer to a technology creator.

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