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Electronic Manufacturing and Sourcing in Malaysia: An Overview 

The Malaysian electronics manufacturing industry began in the 1970s with simple components and semiconductor parts assembly. Throughout the years, the industry matured to complete assembly of computer equipment, TVs, electric vehicles, and smart electronics. Malaysia is ambitious in moving the sector further in the value chain to create advanced autonomous units such as autonomous vehicles, robots, and intelligent machines. In this article, we review Malaysia’s electronics industry, where you can find most suppliers, what electronics products are produced, the benefits of choosing Malaysia, and more. 

Where are electronic components made in Malaysia?

Western Malaysia, formerly known as Peninsular Malaysia, and Eastern Malaysia are Malaysia's two primary islands. Western Malaysia is home to the majority of the industrial sector.

Western Malaysia 

Most electronic manufacturing facilities in Malaysia are located in the western region. Penang, Selangor, and Johor are this region's most important electronics manufacturing provinces.



This state has the most significant manufacturing facilities in Malaysia, including CINCARIA SDN BHD. These facilities concentrate on producing integrated circuits (IC), packaging, design, and backend and frontend semiconductor manufacturing. Moreover, the province is also the heart of EMS in Malaysia.


This state holds the second-most manufacturing facilities in Malaysia. Similar to Penang, Selangor excels in IC packaging, design, and semiconductor production. Nevertheless, Selangor also possesses facilities for the production of consumer and industrial electronics.


This state consists of the third-most manufacturing facilities in Malaysia. Johor is primarily focused on EMS, but it also has facilities for secondary semiconductor manufacturing and a Panasonic facility for consumer and industrial electronics.


Eastern Malaysia

In contrast, only a few electronic manufacturing facilities are located in Sarawak in Eastern Malaysia. Eastern Malaysia's facilities concentrate on manufacturing EMS and frontend semiconductors. 

What types of electronics are produced in Malaysia?

Malaysia is a significant exporter of electronics, with particular strength in semiconductors, industrial electronics, telecommunications electronics, and consumer electronics. 



Malaysia produces 5% to 7% of the world's semiconductors. In addition, it accounts for approximately 13% of the testing and assembly of semiconductors. Integrated circuits (IC) design, engineering, and packaging are areas where the country excels. Semiconductor manufacturing is also the most significant subsector of Malaysia's electronics manufacturing industry, with production capacity predominantly concentrated in Penang, Johor, and Selangor but spread throughout the country. As a result of the United States' imposition of a prohibition on imports and exports of Chinese semiconductors, Malaysia stands to gain as manufacturers relocate to comply with US regulations. In the first few years, however, the transition period is anticipated to be sluggish.


Industrial Electronics 

Industrial electronics production is concentrated in Negeri Sembilan, Johor, Selangor, Kedah, and Melaka, with the heaviest concentration in Penang and Kulim, Kedah. Transmitters, routers, and embedded systems are types of industrial electronics products. The industrial electronics sector of Malaysia is prioritizing high-tech applications to advance the entire electronics manufacturing industry up the value chain.


Telecommunication equipment

According to the United Nations Conference on Trade and Development (UNCTAD), the value of Malaysia's telecommunication exports increased by 35.3% from 2011 to 2021, from US$5.7 billion to US$7.8 billion. Hardware such as routers, cables, and mobile devices are examples of telecommunications apparatus. Ericsson selected Malaysia in 2022 to become the company's Asia-Pacific center for manufacturing and distributing 5G telecom equipment, a sign of Malaysia's increasing significance in telecommunication equipment production. In light of the United States' prohibition on Chinese-made telecommunications equipment, Ericsson's investments will position Malaysia as a viable alternative for manufacturing telecommunications equipment. 


Consumer electronics 

Consumer electronics production is similarly concentrated in four states: Negeri Sembilan, Johor, Selangor, Kedah, and Melaka. Audio-visual devices such as televisions and cameras are examples of consumer electronics products.  

Benefits of Sourcing Electronics in Malaysia

Malaysia provides companies with extensive sector experience, a robust infrastructure, a skilled workforce, government incentives, and other advantages.


Strong record of foreign investments and export 

Malaysia's robust foreign investment presence in the electronics manufacturing sector indicates the nation's experience and capacity to assimilate foreign investments effectively. Approximately 98.8 percent of the total investments in electronics manufacturing in 2021 will come from abroad. These investments have enabled the Malaysian electronics industry to contribute nearly 40 percent of the country's total exports. This number also demonstrates Malaysia's extensive export experience with electronic products. From January to December last year, Penang accumulated RM13.7 billion in approved manufacturing investments. InvestPenang stated that this demonstrated that the state kept attracting active participation from new and current investors due to its 50-year history of industrial success. "In 2022, the state received RM9.7 billion in foreign direct investments (FDI) and RM4 billion in domestic direct investments (DCI)." "The investment inflows in the year above featured 135 projects and are expected to result in 15,752 new job opportunities in the state," it said. Foreign corporations such as TF AMD and Boston Scientific and domestic firms such as Greatech Integration and Inari Technology were cited as participating in notable investment initiatives. According to InvestPenang, Penang is the second largest contributor to Malaysia's approved manufacturing investments in 2022, with a 16% share.


Skilled workforce 

Due to the highly technical nature of the electronics manufacturing industry, the science, technology, engineering, and mathematics (STEM) education attainment rate is also crucial. According to UNESCO data, Malaysia ranks first in Southeast Asia in this metric, with 38.9% of graduates in 2020. The high rate of STEM education completion demonstrates that Malaysia's labour force is qualified to work in the electronics manufacturing industry.



Malaysia's port capacity is second only to Singapore's in Southeast Asia, placing it ahead of Thailand, Vietnam, and Indonesia. According to the World Shipping Council, Malaysia's Port Klang and Port Tanjung Pelepas are among the top 20 busiest harbours globally. In addition to its port capacity, Malaysia's road network is denser than Thailand's and Vietnam's. Regarding road coverage per capita, the country is roughly double that of Vietnam and 70% higher than Thailand. Malaysia's robust port and road infrastructure enables the rapid movement of commodities from factories to export terminals. CINCARIA, on the other hand, have access to an international airport, significant industrial sites within 80 kilometres, an international seaport, Highwat, and a railway network that connects Malaysia to Singapore and Thailand.


Strategic location 

Our enterprise is located in Penang, Malaysia, in the Malacca Strait, the busiest shipping lane in the world. In addition, the country is centrally located in Southeast Asia, allowing for simple access to the region's economic hubs, including Jakarta, Singapore, Ho Chi Minh City, Manila, and Bangkok. India and China are also within a six-hour flight time from Malaysia. Overall, procurement from Malaysia provides convenient access to the largest electronic product markets in the economic hubs of the Indo-Pacific, the motor of global economic growth. 


Free trade agreements 

Malaysia has agreed to and ratified 16 free trade agreements (FTA) as both a sovereign nation and a member of the ASEAN Free Trade Area. Except for Chile and Turkey, most of Malaysia's FTAs are with countries in the Indo-Pacific region, such as China, India, Japan, and South Korea. Malaysia has yet to sign a free trade agreement (FTA) with the European Union (EU) despite being prominent in regional FTAs. Although the EU and Malaysia have engaged in multiple negotiations since 2010, the process stagnated following the seventh round in 2012. Despite lacking an FTA, the EU remains Malaysia's fifth-largest trading nation, with a projected 2020 volume of $42.9 billion.


Investment facilitation policies 

The Malaysian government has enacted a generous incentive to attract new investments, particularly in the high-tech manufacturing industry. The programme includes tax exemptions of up to one hundred per cent of statutory income and qualifying capital expenditures for ten years.

Challenges of Sourcing Electronics in Malaysia

Despite its numerous benefits, Malaysia has a more expansive and smaller labour force and a continued reliance on China for components and basic materials.


Labor costs and labor shortages 

Malaysia's average wage is comparable to China's and higher than many Southeast Asian countries. For example, the mean wages in Vietnam and the Philippines are only one-third of those in Malaysia. In contrast, Indonesia's labour costs are only one-fifth as high. In addition, Malaysia's small population of 33.6 million in 2021 will limit its labour pool relative to China and many of its neighbours. For instance, Malaysia's labour force is roughly 40% of Thailand's and 30% of Vietnam's. Click here to read about Malaysia’s solution on this issue.


Reliance on China for electrical and electronic sub-components

Despite being a significant exporter of electronics, Malaysia continues to rely significantly on China for introductory materials and subcomponents. This commodity is the most considerable cargo from China for Malaysia. Malaysia needs to be more capable of solving the problem. Malaysia's imports from China increased by 19.8% in the first seven months of 2022, while exports increased by only 13.2%, indicating a widening trade deficit. However, this is not a significant issue for CINCARIA because we have numerous facilities in China. 



Since its inception in the 1970s, the Malaysian electronics manufacturing industry has progressed from basic component assembly to the production of advanced electronics such as autonomous vehicles and intelligent machines. Western Malaysia, particularly states like Penang, Selangor, and Johor, is the hub for electronics manufacturing. At the same time, Eastern Malaysia, primarily Sarawak, focuses on EMS and semiconductor manufacturing. Malaysia's strength lies in producing semiconductors, industrial electronics, telecommunication equipment, and consumer electronics. The country's robust foreign investment presence, skilled workforce, vital infrastructure, and strategic location make it an attractive destination for electronics sourcing. Furthermore, Malaysia's participation in numerous free trade agreements and investment facilitation policies adds to its appeal. However, there are challenges to consider, including labour costs and shortages compared to some neighbouring countries and reliance on China for electrical and electronic sub-components. Despite these challenges, Malaysia's position in the global electronics market remains strong, offering a compelling proposition for businesses seeking to source electronics in the region. Malaysia is poised to play a crucial role in influencing the future of electronics manufacturing as the industry continues to evolve.

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