As reported by TechNews, a media partner of TrendForce, Southeast Asia and India, equipped with the advantages of demographic dividends, strategic geographic positioning, manufacturing capabilities, and rapidly growing economic markets, have undoubtedly emerged as the preferred destinations for the technology industry amidst the global supply chain transition prompted by geopolitical factors.

As supply chains actively seek production bases beyond China and governments introduce incentive programs and policy restrictions for localized supply, various Southeast Asian countries have become key hubs for different sectors. Vietnam has become a focal point for consumer electronics manufacturing such as laptops, watches, and headphones, while Thailand has become a preferred choice for automotive-related supply chains. Thailand and Malaysia host assembly bases for servers, and India is set to become a crucial hub for mobile phone production.

Apart from the movement of end-product assembling, the shift in the semiconductor supply chain has also garnered attention. With TSMC, Samsung, and Intel relocating wafer fabrication plants to the United States, Europe, and other regions, a significant cluster of semiconductor backend testing and packaging has been forming in Malaysia.

What Advantages Does Malaysia Offer to Attract Multinational Semiconductor Companies’ Investment, and What Is the Current Industry Landscape?

Firstly, Malaysia boasts higher education standards than neighboring countries. Among ASEAN nations, only Singapore and Malaysia employ the British legal system, providing a competitive edge for many companies’ location choices. Secondly, in terms of language proficiency, Malaysian citizens predominantly use English, Mandarin, and Malay, facilitating smooth communication with global enterprises.

Thirdly, Malaysia is home to two major ports—Port Klang and Port of Tanjung Pelepas—both ranked among the world’s top 15 ports, with substantial container handling capacity and global reach.

Lastly, the state of Penang stands as a semiconductor hub for Malaysia, having nurtured the semiconductor industry for several decades and holding a technological lead. Often referred to as the “Silicon Valley of the East,” Penang has primarily focused on producing chips for electronics, computers, and mobile phones. However, with the growing adoption of electric vehicles, the demand for automotive chips has surged. Concurrently, the green energy trend has propelled the need for solar panels and renewable energy sources. This optimistic outlook for the semiconductor industry has once again attracted numerous companies to establish facilities and expand production capacity.

Current State of Malaysia’s Semiconductor Industry

Looking at the recent dynamics of corporations over the past two years, the trend is evident that Malaysia is evolving into a center for semiconductor backend testing and packaging. Major global players have announced plans to establish or expand operations in Penang. Intel, for example, announced a $6.46 billion investment in Malaysia in 2021, focusing on advanced packaging capabilities in Penang and Kedah.

Texas Instruments declared its intent to construct semiconductor testing and packaging plants in Kuala Lumpur and Malacca, with a total investment of up to $2.7 billion. Infineon is investing $5.45 billion to expand existing facilities, producing silicon carbide and entering the electric vehicle sector. Bosch Group is investing $358 million in stages to strengthen its semiconductor supply chain position in Penang. ASE Technology Holding, also began construction on a new testing facility in Penang at the end of last year.

With the influx of semiconductor giants, Malaysia’s position in the semiconductor industry has become increasingly critical. The distinct production base trends, aligned with the strengths of various Southeast Asian countries, have become clear. The restructuring of supply chains and the transformation of production centers undoubtedly remain the focus and challenge for global companies.

(Photo credit: ASE)

According to sources cited by Nikkan Kogyo Shimbun, TSMC intends to commence the construction of the second fab in Kikuyo-cho, Kumamoto Prefecture, Japan, in April 2024, with the goal of commencing production before the end of 2026.

It is worth mentioning that news about TSMC’s plan to build its second fab in Japan had already surfaced earlier this year. In January, TSMC’s CEO, CC Wei, revealed that the company was considering establishing a second chip manufacturing facility in Japan. In June, TSMC’s Chairman, Mark Liu, also mentioned during a shareholders’ meeting that the Japanese government expressed a desire for TSMC to continue expanding its investments in Japan, while TSMC was still evaluating the construction of the second fab in the country.

Regarding TSMC’s establishment of a fab in Japan, TrendForce indicated that TSMC has played an instrumental role in fostering the growth of Japan’s semiconductor industry as Japanese fabs are unable to handle manufacturing processes as advanced as 1Xnm. TrendForce posits that TSMC could potentially consider setting up a 7nm production line in Phase 2 of JASM to cater to Japan’s demand for advanced technology. Yet, the ongoing market slowdown necessitates a long-term appraisal before implementing any expansion strategies.

In addition to TSMC, more than 20 new wafer fabs are scheduled for completion in the coming years, despite the industry being in a downturn. According to TrendForce’s statistics report in January this year, there are over 20 planned new wafer fabs worldwide, including 5 in Taiwan, 5 in the United States, 6 in Mainland China, 4 in Europe, and 4 in Japan, South Korea, and Singapore combined.

Furthermore, numerous new wafer fab projects have been announced globally since the beginning of this year. For example, in February, Infineon and Texas Instruments both announced plans to construct new wafer fabs. Infineon plans to invest 5 billion euros to build a 12-inch wafer fab in Germany, while Texas Instruments intends to establish its second 300mm wafer fab in Lehi, Utah, USA. On July 5th, PSMC signed an agreement with SBI of Japan, proposing the establishment of a 12-inch wafer foundry.

Currently, semiconductor resources have become strategic assets. In addition to considering commercial and cost structures, wafer fabs must also account for government subsidy policies, meet customer demands for local production, and maintain supply-demand balance. TrendForce believes that future product diversity and pricing strategies will be key factors for the operation of wafer fabs.

The analog IC industry is one with a long history of development and product adoption across various applications. Annual analog IC revenue reached US$53.9 billion in 2020. As the spread of the COVID-19 pandemic is gradually brought under control in China and the US this year, their domestic demand for telecom, automotive, industrial, and consumer electronics products has also kept growing, in turn generating strong demand for analog ICs. TrendForce therefore expects IC revenue for 2021 to reach US67.9 billion, a 22.1% YoY increase.

More specifically, analog IC demand from the automotive market is expected to undergo remarkable growth this year, primarily due to the recovery of the global automotive market and the continued trend towards automotive electrification as commercial opportunities from ADAS, EV, and automotive electronics enter a period of rapid growth. In response to demand from automakers and the auto market, various major IDMs have been placing a heavy emphasis on automotive analog IC development. Led by Infineon, NXP, Renesas, TI, and STM, the automotive IC market is expected to experience a 24.6% growth in 2021.

What is an analog IC?

The analog IC is an indispensable component in electronic devices. These chips can be divided into two categories according to their functions: general purpose analog IC and application specific analog IC. The former category encompasses amplifiers/comparators (signal conditioning), signal conversion, interface, and power management (general purpose). In sum, general purpose analog ICs are characterized by their low costs, single purpose, and universal compatibility.

Application specific analog ICs, on the other hand, encompass such use cases as consumer, computer, communications, automotive, and industrial/others. This product category refers to analog ICs that are designed and manufactured in accordance with electrical systems specified by the client. Compared to digital ICs, analog ICs are much more diverse in terms of product type, less costly, and more stable, while also having longer lifecycles.

The current state of the top three analog IC manufacturers

Almost all major analog IC suppliers are IDMs with long histories. In particular, longtime market leader Texas Instruments once against took pole position in the ranking of analog IC suppliers by revenue last year. With a range of analog ICs that includes more than 80,000 products, Texas Instruments possessed a 19% market share. The company is expected to maintain its dominance in 2021 thanks to its diverse product lines, high market acceptance, and high volume of client orders.

Infineon, which took second place on the ranking, registered a 19% YoY revenue growth on the back of its expansion into automotive and power management markets. Third-ranked STMicroelectronics benefitted from rising sales of its analog, MEMS, and sensor product portfolios. TrendForce expects Infineon and STMicroelectronics to continue their upward trajectories throughout 2021.

Whereas China is the largest market for analog ICs, the analog IC industry will see the highest growth in the US

China is expected to account for 42% of analog IC sales, the highest among all regions in 2021, with the consumer electronics segment comprising most of these transactions. However, the US is expected to undergo the highest growth in terms of analog IC sales with a US$10.6 billion revenue in 2021, a 25% YoY growth. This performance can mostly be attributed to the fact that the US economy has been recovering in the post-pandemic era owing to increasing purchases in the consumer electronics, telecom, and automotive markets.

Furthermore, the US government has been pushing for infrastructure developments with a focus on transportation, networking, and electricity generation, leading to expanded procurement of analog ICs used in these applications. As the markets welcomes the arrival of the traditional peak season for analog IC procurement in 2H21, growth in the US market will likely persist as well.

（Cover image source: Pixabay）

National governments in Southeast Asian countries, including Thailand, Vietnam, and Malaysia, have been instituting increasingly stringent pandemic control measures in response to the intensifying COVID-19 pandemic in these countries. Remarkably, these countries are all hotspots in the electronic component supply chain, and Malaysia, home to many semiconductor packaging and testing facilities as well as passive component fabs, has now come under the international spotlight as a result. In particular, Malaysia’s MCO 3.0 (Movement Control Order 3.0) lockdown, which was extended on June 1, specifically excludes the semiconductor industry, as this industry boasts relatively high market revenue. As such, packaging and testing facilities are currently operating normally in Malaysia, according to TrendForce’s latest investigations.

On March 18, 2020, the Malaysian government first implemented similar pandemic control measures, under which only about 50% of private businesses were allowed to operate. The semiconductor industry and medical services were notably excluded from the restrictions at the time, given the former’s high revenue and the latter’s critical importance during emergencies. Despite the heightened lockdown of the MCO 3.0, under which only certain essential economic activities are allowed to function, some aspects of the MCO 3.0’s restrictions are relatively more lenient, as this policy specifies only 40% of private business employees must adopt WFH. Incidentally, as previously mentioned, the MCO 3.0 does not apply to the semiconductor industry.

As manufacturing operations and lead times of passive components become constrained, end clients’ procurement activities remain uncertain in 2H21

On the other hand, TrendForce indicates that the passive component market, which is also a key industry in Malaysia, will likely face supply-side bottlenecks as a result of the MCO 3.0, affecting such suppliers as Taiyo Yuden, Walsin Technology, NDK, and Epson. Under the latest restrictions, product lead times in the passive component supply chain, along with the state of the transportation industry (which determines shipping and delivery schedules of passive components), will become key determinants of whether client orders can be fulfilled on time.

In addition, brands in Europe and North America will begin adjust their orders for late-3Q21 in June and July. Notebook brands including Dell and HP are not only expected to maintain their orders for 2H21, but also taking measures to ensure a steady supply of IC components, while Apple will begin procuring components for its upcoming iPhone 13 from the passive component supply chain in July. Although these orders are expected to provide upward momentum for the passive component market in 2H21, the resurgence of the pandemic in Southeast Asia, as well as whether the shortage of semiconductor components will be alleviated going forward, will affect clients’ procurement activities for MLCC (multilayer ceramic capacitors) in 2H21.

On the whole, although the packaging and testing operations of major IDMs (Intel, Infineon, and Texas Instruments) and OSAT operators (ASE, Amkor, TFME, and Hua Tian) in Malaysia remain unaffected for the time being, TrendForce believes that the MCO 3.0 will likely have an impact on the supply and demand of the global passive component market in 2H21.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com