The companies are asking Malaysian chip packaging firms to
assemble a type of chip known as graphics processing units (GPUs), according to
three people with knowledge of the discussions.
The requests only encompass assembly - which does not
contravene any U.S. restrictions - and not fabrication of the chip wafers, they
said. Some contracts have already been agreed, two of the people added.
The people declined to disclose the names of the companies
involved or to be identified, citing confidentiality agreements.
Seeking to limit China's access to high-end GPUs that could
fuel artificial intelligence breakthroughs or power supercomputers and military
applications, Washington has increasingly placed restrictions on their sales as
well as on sophisticated chip-making equipment.
As those sanctions bite and an AI boom fuels demand, smaller
Chinese semiconductor design firms are struggling to secure sufficient advanced
packaging services at home, analysts have said.
Some of the Chinese companies are interested in advanced
chip packaging services, two people said.
Advanced packaging of chips can significantly improve chip
performance and is emerging as a critical technology in the semiconductor
industry. This sometimes involves the construction of chiplets where chips are
packaged tightly to work together as one powerful brain.
Although not subject to U.S. export restrictions, it's an
area that can require sophisticated technology which the firms worry might one
day be targeted for curbs on exports to China, the two people added.
Malaysia, a major hub in the semiconductor supply chain, is
seen as well placed to grab further business as Chinese chip firms diversify
outside of China for assembling needs.
Unisem (UNSM.KL), majority owned by China's Huatian
Technology (002185.SZ), and other Malaysian chip packaging companies have seen
increased business and inquiries from Chinese clients, said one source who was
briefed on the matter.
Unisem Chairman John Chia declined to comment on the
company's clients but said: "Due to trade sanctions and supply chain
issues, many Chinese chip design houses have come to Malaysia to establish
additional sources of supply outside of China to support their business in and
out of China."
Chinese chip design firms also see Malaysia as a good option
because the country is perceived as being on good terms with China, is
affordable, with an experienced workforce and sophisticated equipment, two of
the sources said.
Asked whether accepting orders to assemble GPUs from Chinese
firms could potentially provoke U.S. ire, Chia said Unisem's business dealings
were "fully legitimate and compliant" and the company did not have
the time to worry over "too many possibilities".
He noted that most of Unisem's customers in Malaysia were
from the United States.
The U.S. Department of Commerce did not respond to requests
for comment.
Other big chip packaging firms in the country include
Malaysian Pacific Industries (MPIM.KL) and Inari Amertron (INAR.KL). They did
not respond to Reuters requests for comment.
Chinese companies are also interested in having their chips
assembled outside China as that could also make it easier to sell their
products in non-Chinese markets, said one source, an investor in two Chinese
chip startups.
A MAJOR HUB
Malaysia currently accounts for 13% of the global market for
semiconductor packaging, assembly, and testing and is aiming to boost that to
15% by 2030.
Chinese chip firms that have announced plans to expand in
Malaysia include Xfusion, a former Huawei (HWT.UL) unit, which said in
September it would partner with Malaysia's NationGate (NATI.KL) to manufacture
GPU servers - servers designed for data centres and which are used in AI and
high-performance computing.
Shanghai-based StarFive is also building a design centre in
Penang, and chip packaging and testing firm TongFu Microelectronics (002156.SZ)
said last year it would expand its Malaysia facility - a venture with U.S.
chipmaker AMD (AMD.O).
Offering an array of incentives, Malaysia has attracted
multi-billion dollar chip investments. Germany's Infineon (IFXGn.DE) said in
August it would invest 5 billion euros ($5.4 billion) to expand its power chip
plant there.
U.S. chipmaker Intel (INTC.O) announced in 2021 that it
would build a $7 billion advanced chip packaging plant in Malaysia.
Chinese companies are not just choosing Malaysia. In 2021,
JCET Group, the world’s third-largest chip assembly and testing company,
completed an acquisition of an advanced testing facility in Singapore.
Other countries such as Vietnam and India are also seeking
to expand further into chip manufacturing services, hoping to lure clients keen
to minimise U.S.-Sino geopolitical risks.
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