SEMICONDUCTOR makers in Malaysia will need about three months to a year to meet orders that were backlogged from the shutdown during the Covid-19 pandemic, Malaysia Semiconductor Industry Association president Wong Siew Hai said.

Even with the factories now operating at full capacity, he said the industry is still struggling to clear the orders that had piled up during the closures while also dealing with new orders and a severe manpower shortage.

Fortunately however, the sector has not been affected by the delay in the global shipping crisis as the products are shipped using air-freight.

“In phase one of the national recovery plan, we were only allowed to operate with 60% capacity. Then in phase 2, it was 80%, and after the public-private partnership industry immunisation programme was rolled out, that increased to 100%.” Wong told The Malaysian Insight.

“Now that we are running at 100% capacity, we still can’t meet the demand as the backlog goes all the way back to 2019.

“Not only do we need to deal with the backlog, we also need to keep up with new demand but that’s difficult to do that when we can’t increase capacity.”

Feedback from 14 semiconductor plants showed the sector needs RM4 billion to purchase land for expansion, new equipment and upgrade their current facilities.

This is only expected to be completed sometime next year, Wong said, adding that this will ease production and shorten the delay.

“The delays differ between factories – some have a backlog of a few months, some a year. We will reassess the backlog orders every six months.”

Wong said the pandemic has cost the sector billions in losses.

Malaysia is the world’s fourth biggest chip producer after the US, China and Taiwan.

The chips are used in cars, smartphones and home devices.

Data from the International Trade and Industry Ministry show the electrical and electronic sector is the country’s biggest exporter from January to August, accounting for 36.3%, or RM282 billion of, exports. 

The sector contributes 6% of the GDP.

In the 12th Malaysian Plan, Prime Minister Ismail Sabri Yaakob said the sector is expected to contribute about RM120 billion to the GDP with exports earning RM495 billion by 2025.

The government plans to boost investments in high-value activities such as design and development and front-end manufacturing.

Foreign labour

The association represents 150 members who employ 575,000 workers but that is not enough to keep up with demand.

“There is a shortage of 14,000 workers and it is very difficult to hire that many people in a short span of time. 

“We have scouted all over the country but young people do not want to work in this sector as it is highly disciplined. And they are hesitant to work in Penang, where the plants are located.”

Among the 14,000 workers the industry lacks are at least 2,500 engineers and 1,600 non-executive support staff.

A majority of workers at the plants are locals mixed with a small percentage of foreign workers. 

But under certain circumstances, such as now, when the industry cannot cope with supply and demand, Wong said the government should allow for short-term hiring of foreign workers.

The ban on the intake of foreign workers has been in place since March last year when the first lockdown was implemented. The hiring freeze is in place until December.

One of the most heavily hit sectors in the global chip shortage in the automotive industry.

Malaysia is home to suppliers and factories serving semiconductor makers such as Europe’s STMicroelectronics and Infineon as well as carmakers including Toyota Motor Corp and Ford Motor.

Malaysia also accounts for 13% of global chip packaging and testing, and 7% of the world’s semiconductor trade passes through here.

“Many automakers scaled back chip orders last year. Anticipating a downturn in demand, local factories diverted capacity to other sections of the electronics industry.

“Now that there is a huge demand in the automotive sector but there are not enough chips to go around.” 

Due to the shortage, Ford, Infineon, Toyota and have scaled back productions, some even shutting production plants for the time being. – October 25, 2021.