Malaysia's semiconductor industry is experiencing a significant talent drain despite substantial investments and training initiatives. The sector faces particular challenges in retaining high-level expertise, prompting government intervention through training programs while grappling with broader labor market issues.
Malaysian Prime Minister Anwar Ibrahim acknowledged in September that while international companies like Nvidia, Infineon, and Google praise Malaysia's talent quality, they express concern about the scarcity of high-level expertise. Anwar emphasized the need for coordinated efforts between industries and government bodies to address this issue and develop young talent.
Malaysia's brain drain persists even as the country benefits from global shifts such as the "China+1" strategy, which has attracted significant semiconductor investments. The country is also emerging as a hub for AI-driven data centers, with Johor positioned as the "data center capital." However, businesses continue to press the government for solutions to talent shortages that threaten sustained growth.
Regional competition intensifies talent exodus
Malaysia faces an escalating brain drain, with 1.86 million Malaysians working abroad in 2022, including 1.13 million in Singapore. Former Human Resources Minister V. Sivakumar reported that Malaysia's emigration rate of 5.5% significantly exceeds the global average of 3.3%. Data shows that 40% of Malaysians in Singapore occupy high-skill positions, with nearly half indicating no intention to return within six years.
Singapore's higher wages, alongside cultural and geographical proximity, drive this migration. Minister of Investment, Trade, and Industry Tengku Zafrul Aziz acknowledges the talent shortage but primarily attributes it to wage disagreements. While initiatives like the IC Design Park in Selangor offer starting salaries of US$1,100 to US$1,560, these figures are dwarfed by Singapore's IT graduate salaries exceeding US$3,770.
Beyond Singapore, Taiwan and Hong Kong have become significant destinations for Malaysian talent. As of late 2023, Malaysians constituted 16.5% of foreign professionals in Taiwan, with many choosing to remain after graduation. Hong Kong, addressing its own talent gaps, has increased recruitment from Southeast Asia, capitalizing on Malaysians' English and Cantonese language skills.
Education system supplies industry talent
Anwar has recognized that Malaysia's Technical and Vocational Education and Training (TVET) system may not adequately address industry requirements, highlighting the importance of increased private sector participation in education, technical training, and emerging technologies like AI. He suggests these approaches could prove more effective than conventional curricula in workforce preparation.
Several companies are actively bridging educational gaps through academic partnerships. Micron has recruited 30 to 40 employees from Universiti Sains Malaysia and plans to expand local hiring. The company is also championing STEM education initiatives in Malaysia, with a particular focus on fostering female engineering talent and creating pathways between universities and employment.
ASE and National Cheng Kung University recently signed an MoU in Penang supporting international talent development. This partnership aims to extend talent cultivation from Taiwan to Malaysia, offering internships and employment opportunities for Cheng Kung University students globally.
Budget allocation and implementation challenges
Malaysia launched its National Semiconductor Strategy (NSS) in May, aiming to strengthen its semiconductor industry position. The strategy emphasizes enhancing the country's downstream assembly and testing capabilities while expanding into upstream IC design. The government has pledged MYR25 billion (US$5.7 billion) over the next decade to attract foreign investment and develop 60,000 semiconductor professionals.
The 2025 national budget includes MYR1 billion (US$228 million) for talent development, supporting universities and high-value projects in IC design services and advanced material development. Implementation is scheduled for the third quarter of 2025. While the Malaysia Semiconductor Industry Association and Sidec have praised the budget, industry players question the lack of clarity in fund distribution.
Concerns have emerged regarding the MYR6 billion stimulus plan from the Employees Provident Fund, which predominantly targets infrastructure development, potentially limiting its direct impact on semiconductor talent development.
Cautious optimism amid ongoing challenges
TalentCorp, a government agency, maintains a positive outlook on talent retention, working to attract senior professionals back to Malaysia. While Singapore offers higher salaries, its elevated living costs have prompted some returns to Malaysia, where professionals seek improved life quality and family-raising opportunities.
Companies like Phison and Malaysian IC design startup Oppstar demonstrate successful talent retention. Phison contributes to Malaysia's IC design center project through its subsidiary MaiStorage, while Oppstar's founders leverage experience from Intel, showcasing the potential for talent retention and repatriation.
The challenge of talent retention extends beyond Malaysia, affecting regional competitors including Taiwan, South Korea, Singapore, and Hong Kong, all of which compete to address similar shortages.
Malaysia continues to attract multinational investment despite staffing challenges. While companies demonstrate willingness to invest in training programs and some overseas talent has returned, the industry seeks additional government support beyond initial investments and initiatives to sustain the semiconductor sector's growth.
