Rafizi said Putrajaya’s ambition was for Malaysia to no longer be a main player merely in the back-end of the semiconductor supply chain but at the front-end of the manufacturing process, such as in integrated circuit design.

He said one structural issue was that the chips produced in Malaysia were being manufactured for foreign brands, with manufacturers here mostly involved in “contract manufacturing”.

“We don’t have a large production line that exports (goods). Korea has Samsung, China has everything, the US has this and that. So when they design a chip, it’s going to be utilised by all these global brands.

“So there is a structural issue. Otherwise, I see that our design directly depends on the mercy of overseas brands. Except for our integrated circuit designers, who have managed to convince manufacturers in China, the US and so on (to set up shop in Malaysia),” he said at a talk at the National Public Administration Institution (Intan).

Rafizi then posed the question if this would be sufficient for Malaysia to build a vibrant semiconductor design, pointing out that some countries have a “local content policy”.

This refers to a set of regulations or guidelines established to promote the use of a particular locally produced or sourced product or service.

“The chip industry is on a large scale. Usually, other countries have their own products that have a global market. Samsung and Apple phones are used by people the world over. When they design these phones, they use local products so they already have a scale in the local market.

“And that scale is ultimately used to start expanding to products from foreign countries,” he said.

He said that addressing this means improving the entire ecosystem, as a Malaysian firm could produce a product locally, but there may not be any demand domestically.

“So the government needs to look into how it can strengthen the overall system,” he said.