Malaysia cashes in on China's inbound semiconductor and data centre investments

• According to JLL’s report, China invested a total of US$21 billion (about RM90.3 billion) in semiconductor manufacturing and US$10 billion in data centres in Malaysia between 2019 and 2023.

KUALA LUMPUR (Oct 17): China’s massive investments in semiconductors and data centres in Southeast Asia have made Malaysia a prime destination. With its strong electronics industry and proximity to Singapore, Malaysia has attracted significant Chinese investments in these sectors.

This was pointed out by global real estate services firm JLL Malaysia's head of research, Yulia Nikulicheva during a presentation of its latest market insight on companies worldwide that are increasingly adopting the China+1 strategy, diversifying their manufacturing beyond China on Thursday.

Malaysia emerges as top investment destination

“Before the pandemic, China was the primary destination for foreign investors in the region. However, the pandemic caused a significant drop in global investment,” Nikulicheva said.

She added that Southeast Asia has seen a significant increase in foreign investment since 2023, as Chinese investors expand their international footprint. Malaysia has emerged as a leading recipient of these investments, experiencing a much faster growth rate compared to other Southeast Asian countries.

“Over the past few years, Chinese companies have begun exploring the expansion of manufacturing outside of China. In Asia Pacific, this trend has resulted in the China+1 strategy where companies diversify their manufacturing bases beyond China to hedge up against supply chain disruptions by reducing heavy reliance on a single country,” JLL China's head of logistics & industrial Yin Hong stated.

He stressed that Chinese companies are considering Malaysia because of several factors that contribute significantly to manufacturing company’s long-term success and sustainability. These include skilled labour, infrastructure, environmental regulations, proximity to suppliers and customers, and political stability.

China’s investment totals US$31 billion within five years

According to JLL’s report, China invested a total of US$21 billion (about RM90.3 billion) in semiconductor manufacturing and US$10 billion in data centres in Malaysia between 2019 and 2023.

Malaysia’s manufacturing sector has attracted significant foreign direct investment (FDI) in recent years, particularly in the electronics and electrical (E&E) segment.

The country is home to six of the top 12 global semiconductor manufacturers, contributing to 7% of Malaysia’s gross domestic product (GDP). Additionally, Malaysia ranks seventh globally in E&E exports. Other sectors such as pharmaceuticals, chemicals, machinery and equipment are also experiencing increased investment volume.

“Malaysia has taken a significant lead in data centres and semiconductor computation. Johor, for example, has received substantial investments from Chinese companies because of its strategic location near Singapore. This proximity has allowed it to benefit from the overflow of data centre investments from Singapore,” Nikulicheva explained.

“Many players are considering new projects to meet growing demand. In the coming years, we'll see an increase in international logistics projects, particularly in Singapore, a major logistics hub. Penang also shows a significant growth in demand for dry logistics space,” she added.

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