The Malaysian government has signed a US$250 million (RM1.11 billion) partnership with leading semiconductor design firm Arm Holdings plc, marking the beginning of the country’s second semiconductor wave, according to Prime Minister Datuk Seri Anwar Ibrahim. This collaboration aims to propel Malaysia beyond its long-standing role in chip testing and assembly by advancing into chip design and development.
Speaking at Malaysia’s Silicon Vision launch ceremony on Wednesday, Anwar emphasized that the partnership represents a fundamental shift in Malaysia’s semiconductor strategy. With support from SoftBank Group Corp-owned Arm, Malaysia plans to design, manufacture, test, and assemble AI-powered chips domestically before exporting them worldwide.
Under the agreement, Arm will provide Malaysia with intellectual property (IP) licenses and compute subsystems (CSS) worth RM1.11 billion, payable over a 10-year period, along with undisclosed royalties on chip sales. The deal also includes three major components: the development of 10,000 integrated circuit (IC) design engineers, privileged access for selected Malaysian companies to Arm’s cutting-edge technology and IP portfolio, and support for the creation of locally designed semiconductor products. Additionally, Arm will establish its first office in ASEAN in Kuala Lumpur.
Arm CEO Rene Haas highlighted Malaysia’s decades-long experience in the semiconductor industry as a key reason for the partnership. He stressed that AI-powered chips are not only essential for data centers and large language models but are also critical in a wide range of AI-integrated devices. With over 300 billion chips shipped since 1995, Haas reaffirmed that 99% of all individuals worldwide use an Arm-powered device.
“The future of AI is going to run on Arm, and it’s going to run here in Malaysia,” Haas said, applauding the Malaysian government’s ambition and vision for semiconductor advancement.
Minister of Economy Datuk Seri Rafizi Ramli emphasized the importance of prioritizing local players within the supply chain. The government aims to build a complete ecosystem across key industries such as AI data servers, autonomous vehicles, IoT, and robotics. Rafizi noted that while outsourced semiconductor assembly and testing captures 5% to 10% of the semiconductor supply chain value, integrated chip design accounts for 60%.
To support this shift, Malaysia is implementing collaboration structures with foreign technology firms, incorporating technology transfer and localization requirements to empower local industry players. Rafizi also revised his timeline for Malaysia’s chip production, estimating that locally designed chips could be in production within five to seven years, rather than the previously projected five to ten years.
With this landmark partnership, Malaysia is positioning itself as a leader in AI-driven semiconductor design, advancing its role in the global technology supply chain.