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(Bloomberg) -- Arm Holdings Plc has agreed to provide chip designs and technology to Malaysia over the next decade, to help catapult the Southeast Asian country beyond chip assembly and into more valuable semiconductor production.
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Malaysia, which packages roughly a tenth of the world’s semiconductors, has inked a pact to pay the SoftBank Group Corp.-owned UK firm $250 million over a period of ten years for a slew of semiconductor-related licenses and knowhow. The government plans to use that to aid local companies design their own chips and target semiconductor exports of 1.2 trillion ringgit ($270 billion) by 2030.
“We have always wanted to move from the back-end — which is on testing and assembly — to the front-end,” Malaysian Economy Minister Rafizi Ramli said in an interview with Bloomberg Television’s Haslinda Amin on Wednesday. “The government has taken a radical approach” to work with Arm “with the perspective of building the whole ecosystem.”
With the help of the deal, Malaysia is accelerating its goal of making its own chips and aiming to create as many as 10 chip companies with total annual revenue of as much as $20 billion, the minister said. The pact could help add one percentage point to the country’s gross domestic product.
Malaysia is already a key hub for chip testing and packaging, but the country has yet to make a meaningful foray into chip design. The country now hosts a number of chip-packaging facilities for Intel Corp., GlobalFoundries Inc. and Infineon Technologies AG. Local chip gear makers are also muscling their way into the global equipment supply chain, attracting the likes of Applied Materials Inc. to build factories in the country.
The Southeast Asian nation last year pledged at least 25 billion ringgit to support its semiconductor industry, and while Rafizi previously expressed hope that Malaysia would begin producing its own chips in the next five to ten years, on Wednesday he accelerated that timeline to the next five to seven years.
He said the new goal has been made faster by the Arm deal, as developing its homegrown chip technology “organically” would have taken too long.
A vibrant local tech ecosystem led by its own chipmakers would raise Malaysia’s profile in a world of shifting global supply chains and also drive development of cutting-edge manufacturing processes at home. Given geopolitical uncertainties, supporting local chipmaking has become a top priority in a country where roughly two-fifths of exports are made up of electric and electronic products.