Chinese Semiconductor Firms Turn to Malaysian Expertise

In a strategic move to mitigate potential risks arising from an expansion of U.S. sanctions on China's chip industry, an increasing number of Chinese semiconductor design companies are engaging Malaysian firms for the assembly of their high-end chips, according to informed sources.

These companies are specifically approaching Malaysian chip packaging firms to assemble graphics processing units (GPUs), as revealed by three individuals familiar with the ongoing discussions.

It is emphasized that these requests pertain solely to the assembly phase, avoiding any infringement of U.S. restrictions, and do not extend to the fabrication of the chip wafers.

Two of the sources disclosed that certain contracts have already been finalized.

To maintain confidentiality, the individuals declined to disclose the identities of the involved companies, citing confidentiality agreements.

The move comes as a response to Washington's efforts to limit China's access to high-end GPUs, crucial for artificial intelligence advancements, supercomputing capabilities, and military applications.

With increasing restrictions on GPU sales and sophisticated chip-making equipment, smaller Chinese semiconductor design firms are grappling to secure advanced packaging services domestically, analysts have pointed out.

Notably, some of the Chinese companies are expressing interest in advanced chip packaging services, recognizing the significant role it plays in enhancing chip performance.

Advanced packaging involves the construction of chiplets, where tightly packaged chips collaborate as a unified and powerful processing unit, marking a crucial development in the semiconductor industry.

As U.S. sanctions take effect and demand for artificial intelligence accelerates, the collaboration with Malaysian assembly services serves as a strategic maneuver for Chinese semiconductor companies seeking to navigate the complex landscape of global chip production.

Fanny Potkin / Reuters