E&E growth spurs call for stronger R&D
KUALA LUMPUR: Malaysia has enjoyed strong investment growth in the electrical and electronics (E&E) sector over the past four years, but more needs to be done to strengthen its research and development (R&D) capabilities – particularly in product innovation – to move up the value chain.
Malaysia Semiconductor Industry Association (MSIA) executive director Andrew Chan Yik Hong said Malaysia continues to be the preferred investment destination for the E&E sector.
'The proof is in the pudding. Approved investments for the E&E sector in Malaysia from 2021 to 2024 total RM319bil.
'This is more than the investments secured in the past 41 years, from 1980 to 2020, of RM289bil,' he said during a panel discussion titled 'From Production Hub to Innovation Powerhouse: Strengthening Malaysia's E&E Industry' at Bank Negara's Sasana Symposium 2025 yesterday.
STMicroelectronics Malaysia group vice- president and general manager Tan Chun Sheng described R&D as the 'crown jewel' of the semiconductor business and stressed the need for a change in the types of incentives offered, moving away from merely tax incentives.
He believes the government should redirect support toward firms' R&D efforts in the form of grants and wage supplements.
'We are very good at manufacturing-related R&D. However, let us move up the value chain in terms of R&D, because that is what makes the country an attractive and vital part of the supply chain,' he said.
Tan suggested the government consider taxing multinational corporations and ploughing back the revenue into R&D grants and incentives.
'We have always talked about the need for higher wages in the industry...All the government needs to do is declare that anyone involved in science, technology, engineering, and mathematics or R&D will receive wage supplements. Instantly, the wages will go up.
'But where will the money come from for this? Taxation,' he added.
Citing South Korea, Kolon Industries senior technology adviser Sung Han said the government there offers significant tax incentives to firms across various industrial sectors based on their R&D investments.
'I think this is critically important because it incentivises talent development and drives the innovation that must happen within the R&D space, rather than just on the manufacturing floor,' he said.
He also highlighted the strong public-private partnerships in Korea, where much of the R&D is government-funded, creating an environment that continuously fuels innovation across industries like semiconductors and automotive.
'What South Korean companies like Samsung Electronics Co Ltd and SK Hynix Inc have done to move up the value chain is not just developing semiconductor-related materials needed for production – because companies can't decouple material characteristics from IC (integrated circuit) design – but they have also built up local suppliers for materials and production tools.
'Today, for a few critical tools in leading-edge nodes, local Korean companies can supply many of those tools and materials. This creates the infrastructure necessary for the sector to become independent in developing and conducting its own R&D on new next-generation products.
'I think this is what Malaysia may be missing today,' Sung Han added.
That said, Tan opined that Malaysia's semiconductor sector does not necessarily have to rely solely on financial incentives such as subsidies or grants from the government to attract investment.
In fact, the country already holds several key advantages, chief among them being experience.
'The most important advantage that we have as a country is experience, given that the semiconductor industry has been here for more than 50 years.'
He said the second advantage that Malaysia has is talent. 'Our engineers are very talented, with strong technical skills.'
When asked why Malaysia has not been successful in attracting leading foundry companies, MSIA's Chan said much of the recent investment surge occurred before the National Semiconductor Strategy (NSS) was introduced.
'I believe that the Malaysian Investment Development Authority had received enquiries on this back then, but somehow the equation did not stack up.
'However, I am optimistic that if we continue to double down on the NSS – the upcycle for semiconductor fabrication plants (fabs) is not now, it is in a couple of years – we will see more fabs, hopefully, in Malaysia,' he said.
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