Dec 18 (Reuters) — In a strategic move to mitigate potential risks associated with the expansion of U.S. sanctions on China’s chip industry, an increasing number of Chinese semiconductor design companies are collaborating with Malaysian firms for the assembly of high-end chips. Industry sources reveal that Chinese companies are turning to Malaysian chip packaging firms to assemble graphics processing units (GPUs), a critical component in various technological applications.
The focus of these partnerships is on assembly, specifically for GPUs, and does not involve the fabrication of chip wafers. This strategic approach ensures compliance with U.S. restrictions, allowing Chinese semiconductor design firms to secure essential assembly services without violating any regulatory constraints. The discussions have already translated into finalized contracts, although the names of the involved companies remain undisclosed due to confidentiality agreements.
The escalating U.S. restrictions on high-end GPUs, crucial for artificial intelligence breakthroughs, supercomputing, and military applications, have prompted Chinese companies to diversify their supply chain and secure advanced packaging services. With sanctions impacting the sales of high-end GPUs and sophisticated chip-making equipment, smaller Chinese semiconductor design firms are facing challenges in meeting the growing demand for advanced packaging services domestically.
Chinese companies express particular interest in advanced chip packaging services, a technological domain that significantly enhances chip performance. Advanced chip packaging involves constructing chiplets, where tightly packaged chips operate collectively as a powerful processing unit. While this area is currently not subject to U.S. export restrictions, Chinese firms anticipate potential challenges in the future, prompting them to secure alternative sources of advanced packaging services.
Malaysia, recognized as a major hub in the global semiconductor supply chain, emerges as an ideal choice for Chinese chip firms looking to diversify their assembly needs outside China. Malaysian chip packaging companies, including Unisem (UNSM.KL) and others, have experienced a surge in business and inquiries from Chinese clients.
Unisem Chairman John Chia acknowledged the influx of Chinese chip design houses to Malaysia, attributing it to trade sanctions and supply chain challenges. Malaysia’s perceived positive diplomatic relations with China, affordability, an experienced workforce, and sophisticated equipment position the country as a preferred destination for Chinese chip design firms.
Addressing concerns about potential backlash from the U.S., Chia emphasized that Unisem’s business dealings are “fully legitimate and compliant,” with a primary focus on meeting industry standards. Notably, most of Unisem’s customers in Malaysia are from the United States.
While the U.S. Department of Commerce did not respond to requests for comment, other prominent chip packaging firms in Malaysia, including Malaysian Pacific Industries (MPIM.KL) and Inari Amertron (INAR.KL), have not provided statements on the matter.
Chinese companies are also exploring the option of having their chips assembled outside China, facilitating easier access to non-Chinese markets. Malaysia, currently holding a 13% share of the global market for semiconductor packaging, assembly, and testing, aims to boost this to 15% by 2030.
Several Chinese chip firms, such as Xfusion and StarFive, have announced plans to expand in Malaysia, showcasing the country’s attractiveness for the semiconductor industry. Malaysia has successfully attracted multi-billion dollar chip investments, with companies like Infineon (IFXGn.DE) and Intel (INTC.O) announcing significant investments in advanced chip manufacturing facilities.
Beyond Malaysia, other countries, including Vietnam and India, are also exploring opportunities to expand into chip manufacturing services, aiming to attract clients seeking to minimize geopolitical risks associated with U.S.-Sino relations.
Source: Reuters