KUALA LUMPUR (March 25): Malaysia’s semiconductor sector could be on the cusp of a structural upgrade as industry players move into advanced chip packaging, but execution risks and early-stage developments continue to cap near-term optimism, according to Hong Leong Investment Bank (HLIB).
The research house said initiatives led by the newly formed Malaysia Advanced Packaging Consortium (MAPC) and startup FusionAP could help close a long-standing gap in the country’s semiconductor value chain, potentially positioning Malaysia as a credible player in a fast-growing, high-margin segment.
FusionAP, established in 2025, aims to become Malaysia’s first domestic outsourced semiconductor assembly and test (OSAT) provider focused on advanced packaging.
The company is currently pre-revenue and is targeting partnerships with global research institutes to access and co-develop key technologies such as silicon interposers and fusion bonding.
HLIB noted that securing funding and initial customers will be critical milestones over the next 12 months.
The group estimated that FusionAP would require about RM400 million to set up a pilot production line, with a further RM2 billion needed to scale to mass production.
“The read-through is compelling, but remains contingent on successful execution,” the research house said, adding that the initiative is still in its infancy.
The push into advanced packaging comes amid a structural shift in the semiconductor industry, where performance gains are increasingly driven by how chips are integrated, rather than simply shrinking transistor sizes.
This has elevated packaging from a low-value backend process into a critical technological capability, particularly for artificial intelligence (AI) applications.
At present, advanced packaging capacity is concentrated in a few key markets, including Taiwan, South Korea and the US. However, tight supply expected to persist through 2026 and 2027 is opening a window for new entrants.
Malaysia is seen as a potential beneficiary, supported by its position as a geopolitically neutral manufacturing hub and the expected ramp-up of Intel’s advanced packaging facility in Penang.
MAPC, formed in November 2025, brings together local industry players to coordinate development efforts, align research priorities and strengthen ecosystem collaboration. The consortium is targeting a 7% share of the global advanced packaging market, equivalent to about US$5 billion, by 2035.
If successful, the move could drive a rerating of Malaysia’s semiconductor sector, as advanced packaging typically commands higher margins of 40% to 50%, compared with 15% to 20% for traditional packaging.
MAPC has five founding members, namely Main market-bound SkyeChip Sdn Bhd, FusionAP, Inari Amertron Bhd, Pentamaster, and NSW Automation Sdn Bhd.
However, HLIB cautioned that Malaysia still faces significant technological gaps, particularly in high-end packaging segments such as 2.5D and 3D integration, where capabilities remain limited.
Given these uncertainties, the research house maintained a ‘neutral’ stance on the sector, advocating a selective investment approach focused on companies with exposure to structural growth themes such as supply chain localisation and the ‘China+1’ shift.
Its top picks are ITMAX System Bhd, UWC Bhd and Frontken Corp Bhd, which it said are well-positioned to benefit from ongoing industry developments.
Source From : Malaysia eyes advanced chip packaging push, but execution risks keep outlook neutral — HLIB