ICYMI: Chinese firms go to Malaysia for assembly of high-end chips — sources

More Chinese companies are looking for Malaysian firms that can assemble their high-end ships.

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Tapping Malaysian firms for the assembly of GPUs

Citing people who have knowledge about the matter, a Reuters report said Chinese semiconductor design companies are turning to Malaysian firms to assemble a portion of their premium chips.

This move is seen to avoid risks in case the US chooses to expand sanctions on Beijing’s chip industry.

Specifically, Malaysian chip packaging firms are being tasked to assemble graphics processing units (GPUs). The sources declined to name the companies.

Washington restricted the sale of GPU and sophisticated chip-making equipment to China. This is to limit Beijing’s access to such technologies that could fuel artificial intelligence breakthroughs or power supercomputers and military applications.

While these sanctions take effect and an AI boom fuels demand, experts said smaller Chinese semiconductor design firms struggle to secure sufficient advanced packaging services.

Some of the Chinese companies are interested in advanced chip packaging services, two people said. Advance packing of chips improves chip performance. It is emerging as a critical technology in the semiconductor industry.

“Although not subject to U.S. export restrictions, it's an area that can require sophisticated technology which the firms worry might one day be targeted for curbs on exports to China,” Reuters said, citing two of its sources.

Malaysia, a major hub in the semiconductor supply chain, is seen to benefit as Chinese chip firms diversify outside of their country for assembling needs.

A Reuters source said Unisem, whose largest shareholder is China's Huatian Technology, and other Malaysian chip packaging companies have seen increased business and inquiries from Chinese clients.

Unisem Chairman John Chia declined to comment regarding their clients but said “Many Chinese chip design houses have come to Malaysia to establish additional sources of supply outside of China to support their business in and out of China."

Chia said Unisem's business dealings were "fully legitimate and compliant" and the company did not have the time to worry over "too many possibilities". He noted that most of Unisem's customers in Malaysia were from the US.

Reuter said two of its sources said Chinese chip design companies favor Malaysia due to their perceived good ties, affordable but experienced workers, and sophisticated equipment. Another source also said that Chinese companies are interested in having their chips assembled outside China as that could also make it easier to sell their products to other markets.

Malaysia currently accounts for 13 percent of the global market for semiconductor packaging, assembly, and testing. It is aiming for 15 percent by 2030.

Chinese chip firms that have announced plans to expand in Malaysia include Xfusion, a former Huawei unit, Shanghai-based StarFive, and chip packaging and testing firm TongFu Microelectronics.

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Via: Reuters