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Malaysian chip makers gear up to cater global chip demand with ease in Covid-19 restrictions

According to global experts, the semiconductor shortage may start to ease by the end of the year as more workers in Malaysia return to factories once they have been vaccinated

Even as the global Covid-19 cases have started to fall, the global demand for chips from Malaysia continues to swell with car firms, and makers of phones and medical equipment are ramping up their output fearing a third pandemic wave to strike later this year.

According to global experts, the semiconductor shortage may start to ease by the end of the year as more workers in Malaysia return to factories once they have been vaccinated and the government eases restrictions on critical sectors, Wong Siew Hai, president of the Malaysia Semiconductor Industry Association said.

“Predicting based on data I’m seeing, the situation should improve, but we still cannot fulfill the demand,” said Wong, adding that demand had not shown signs of slowing and orders had been piling up since the end of last year.

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

The country accounts for 13% of global chip assembly testing and packaging, and 7% of the world’s semiconductor trade passes through Malaysia, undergoing some added value at local factories or getting combined with other parts before being shipped.

Several automakers and semiconductor companies have said this month that pandemic-related disruptions in the Southeast were hitting their supply chains.

Earlier in June Malaysia imposed a strict nationwide lockdown that initially shut almost all industries, before it eased restrictions for some key sectors. Plants in recovery areas can now employ 80% of their workforce and run at full capacity if all staff is vaccinated.

“The constraints we had in June and early July are now beginning to reduce and more volume is being shipped because we are allowed to operate at a higher percentage level,” Wong said. Electrical and electronics exports worth $92 billion made up 39.4% of Malaysia’s total exports last year.

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