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01-04-2025
KULIM, MALAYSIA: When tech giant AT&S decided a few years ago that it needed to ramp up production to keep pace with the artificial intelligence (AI) boom, it did not look to its largest manufacturing facilities in China.
The Austrian firm’s plants in Chongqing and Shanghai opened in 2022 and 2016, respectively employ some 9,000 workers between them, churning out high-end components used in everything from consumer electronics to cars but AT&S was at the same time coming to grips with the risks of concentrating production in one country.
Like many tech firms grappling with the disruption of the COVID-19 pandemic and the trade war salvoes between the United States and China, AT&S decided it needed to diversify its supply chains.
Malaysia quickly emerged at the top of the company’s list of potential locations for its next plant.
A little more than two years after breaking ground, AT&S opened its newest production facility in Kulim, in Malaysia’s Kedah state, in January 2024.
The plant, AT&S’s first in Southeast Asia, produces substrates critical components that act as an intermediary layer between the chips and circuit boards used in AI systems and other advanced electronics.
The 1.7 billion euro ($1.8bn) facility represents AT&S’s largest-ever investment and is expected to employ about 6,000 workers once it reaches full capacity.
“It’s part of the China Plus One strategy,” Suan See Yap, AT&S senior vice president and managing director, told media, referring to the efforts of many companies to diversify production outside China.
“The decision is basically driven by the need for more capacity and also to have a footprint outside China as well,” Yap said.
AT&S’s Malaysian facility is located at Kulim Hi-Tech Park, an industrial park which is a stone’s throw away from the neighboring state of Penang, home to a free-trade zone that earned the moniker “Silicon Valley of the East” after emerging as a semiconductor hub during the 1970s.
Among the chip makers with a manufacturing presence in Penang is the US firm AMD, one of the main buyers of AT&S’s substrates.
“Our customers are located here, so it’s a very strategic location, and there are 4,000 SMEs around this area as well,” Yap said, referring to small and medium enterprises.
“So the supply chain is very well supported.”
Malaysia’s geopolitical position also factored into the company’s thinking.
“Our government tries to be neutral and, in fact, we want to be friends with all the countries,” Yap said.
“This is a personal view, but I think we want to become the United Nations of semiconductors. We want to operate in an environment where politics and, you know, geopolitical influences are not part of the puzzle.”
AT&S is just one of a host of tech companies betting on Malaysia, drawn by a range of factors from the country’s strategic location and established chip industry to its well-developed infrastructure and neutral stance in the Washington-Beijing rivalry.
After grappling with political instability and corruption scandals in recent years, Malaysia hopes that positioning itself as a leading AI hub will transform its economy, cementing its rise from middle-income to developed status.
Malaysian Prime Minister Anwar Ibrahim has stressed the need to embrace all aspects of the AI economy, from manufacturing chips to hosting the data centres used to train and run models such as ChatGPT. (Int’l News Desk)
