Asia's EVolution: Does Malaysia hold the chips to power its lofty electric vehicle ambitions?

Asia’s EVolution: Does Malaysia hold the chips to power its lofty electric vehicle ambitions?

Malaysia is betting on its role as a leading exporter of semiconductor chips and a rewriting of its industrial DNA to be a force in the global EV ecosystem.

KUALA LUMPUR: The “Pentamaster” name may not be emblazoned on the hoods of the world’s leading electric vehicles (EVs). But without the Malaysian company’s specialised test equipment for the “brains” of these cars, rapid charging would not be possible.

Since 2016, the company has increasingly shifted to the testing of power chips – critical components in EVs and made of advanced materials like silicon carbide and gallium nitride – to ensure their quality and reliability.

“We make the equipment that test the semiconductors that go into EVs … Most of the cars – the inverters, digital content that goes into the car – customers need them to be tested before the assembly process,” Pentamaster’s non-executive director Leng Kean Yong told CNA.

Inverters are devices that convert direct current from the batteries to alternating current for EV motors.

Pentamaster’s EV foray began in 2016 and its growth trajectory in the sector accelerated sharply around 2018, coinciding with China’s aggressive move to dominate the new-energy vehicle space.

As auto giants such as BYD scaled production, the demand for Pentamaster’s precision test equipment surged.

Leng describes Pentamaster’s role in the EV supply chain as “small”, but the Penang-based firm has solidified its status as a global powerhouse.

It ranks among the world’s top five manufacturers of specialised test equipment for EV power chips, which regulate the vehicles’ electricity flow.

From Penang to Johor, local and multinational firms have helped Malaysia emerge as an essential - albeit discreet - link in the global EV ecosystem.

As geopolitics and United States-China rivalry force a “China Plus One” shift among manufacturers to diversify supply chains and avoid tariffs and other trade sanctions, Malaysia, with its established electronics base, has made itself a safe and logical choice for companies making the world’s most critical EV components, say analysts.

“Malaysia is an emerging alternative EV node. Its relevance comes from geopolitics and diversification,” said economist Doris Liew of the non-profit Institute for Democracy and Economic Affairs in Malaysia.

“Global firms increasingly want production options outside China, and Malaysia’s electronics base allows it to plug into specific EV segments. Policy backing under (the country’s) New Industrial Master Plan 2030 strengthens this positioning.”

The master plan serves as the national roadmap for transforming Malaysia’s manufacturing landscape, targeting emerging high-growth areas like the EV supply chain.

LEVERAGING ESTABLISHED SEMICONDUCTOR BASE

Malaysia accounts for 13 per cent of global semiconductor assembly, testing and packaging — the critical “back-end” process that ensures the reliability of every power semiconductor and sensor in an EV.

Malaysia is currently the world’s sixth-largest exporter of semiconductors.

Although the automotive sector has traditionally accounted for a smaller portion of Malaysia’s overall semiconductor output compared to the computing and communications sectors, it has experienced the “largest recent growth in … share of chip sales,” said economist Tham Siew Yean of Universiti Kebangsaan Malaysia.

In a 2024 report, the Ministry of Trade and Industry said the semiconductor segment recorded RM655.13 billion (US$167 billion) in total trade, with RM387.95 billion in exports and RM267.18 billion in imports.

This was partly fuelled by rising demand for automotive electronics, particularly EVs, it said.

Wong Siew Hai, president of the Malaysia Semiconductor Industry Association told CNA the surge in global demand for EVs has catalysed the local chip sector.

A single EV can require up to 3,000 semiconductors — roughly triple the number found in traditional petrol cars — driving demand for Malaysia’s specialised power electronics, microcontrollers and automotive-grade sensors, he said.

According to Wong, Malaysia hosts six global semiconductor leaders such as Infineon Technologies, Renesas Electronics, STMicroelectronics, NXP Semiconductors, Onsemi and Texas Instruments, with a focus on automotive back-end operations.

These automotive-focused operations employ an estimated 25,000 workers, excluding supply chain roles, he said.

“The expansion in power semiconductor and automotive (integrated circuit) production has increased demand for skilled roles in engineering, advanced packaging, automation, quality assurance, supply chain management, and environmental, social and governance compliance,” Wong said.

Infineon Technologies, for instance, opened a €7 billion (US$8.04 billion) silicon carbide production facility in Kulim, Kedah in 2024. It aims to serve 30 per cent of the global market by 2030.

Silicon carbide is considered the “gold standard” for EV inverters due to superior charging speed and range. This is because, like gallium nitride, the material is able to operate at higher temperatures and handle much higher voltages and currents than traditional silicon-based semiconductors.

Infineon estimated that this expansion would create 4,000 high-value jobs.

At the opening of the facility’s first phase in August 2024, Malaysia Prime Minister Anwar Ibrahim said the “major investment” would locate the “world’s largest and most competitive silicon carbide power fab on our shores”.

It would create jobs, attract suppliers, universities and top talent, Anwar said, and “support Malaysia’s efforts to protect our climate by boosting electrification and increasing the efficiency of many applications, including electric cars and renewable energy”.

More companies, especially from China, are also setting up factories to build EVs in Malaysia.

This is seen as a response to policy changes this year, where the government ended tax exemptio