CHINESE semiconductor design companies are recruiting Malaysian firms to assemble part of their high-end chips, Reuters reports.

Quoting sources. the report said  the Chinese firms are keen to hedge risks in case the United States expands sanctions on China’s chip industry.

It said the companies are asking Malaysian chip packaging firms to assemble graphics processing units (GPUs), which does not contravene US restrictions barring the fabrication of chip wafers.

A GPU is a specialised electronic circuit that performs rapid mathematical calculations for rendering images.

People familiar with the matter told Reuters that some contracts have already been agreed, while declining to disclose the names of the companies involved in the deals, citing confidentiality agreements.

Washington has increasingly placed curbs on the sale of chips and chip-making equipment to China as it seeks to limit Chinese access to high-end GPUs that could fuel artificial intelligence breakthroughs or power supercomputers and military applications, 

Some of the Chinese companies are interested in advanced chip packaging services, the sources said.

Advanced packaging of chips can significantly improve chip performance and is emerging as a critical technology in the semiconductor industry.

This sometimes involves the construction of chiplets – chips that are packaged tightly to work together as one powerful brain.

Malaysia, a major hub in the semiconductor supply chain, is seen as well placed to grab further business as Chinese chip firms diversify outside of China for assembly needs.

Unisem, whose majority owner is China’s Huatian Technology, and other Malaysian chip packaging companies have seen increased business and enquiries from Chinese clients, said a source.

Unisem chairman John Chia declined to comment on the company’s clients, but said: “Due to trade sanctions and supply chain issues, 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.”

Chinese chip design firms also see Malaysia as a good option because the country is perceived as being on good terms with China, is affordable, with an experienced workforce and sophisticated equipment, the sources said.

On whether accepting the Chinese could provoke US ire, 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 are from the United States.

Malaysia accounts for 13% of the global market for semiconductor packaging, assembly, and testing. It aims  to boost that to 15% by 2030. – December 18, 2023.