US, Malaysia agree to cooperate on stronger semiconductor supply

The US Commerce Department and the Malaysian Ministry of International Trade and Industry have signed a memorandum of cooperation to strengthen semiconductor supply chain resiliency and promote sustainable growth amid an ongoing chip shortage that has disrupted production in the automotive industry and other sectors, the agencies said May 11.

The agreement was arranged between Commerce Secretary Gina Raimondo and Mohamed Azmin Ali, Malaysia's senior minister for international trade and industry, according to a statement.

"The Secretary and Senior Minister acknowledged that US-Malaysia cooperation is a crucial element of creating resilient, secure, and sustainable semiconductor supply chains," the departments said. "[The memorandum] will strengthen the growing partnership between both governments and the semiconductor industry. It will also aim to increase transparency and trust, as well as promote investment in the semiconductor supply chain."

The MOC was signed after Raimondo and Azmin Ali hosted a roundtable with industry experts to discuss current and long-term supply chain challenges and opportunities. The agreement provides "guiding principles" on how the US and Malaysia can improve the semiconductor supply chain between the two countries in a manner that is mutually beneficial.

The US imported more than 21 million semiconductors from Malaysia out of a total import volume of nearly 304 million units in 2021, according to trade data Commerce compiled. Malaysia was the US' third-largest source of semiconductor imports during the year, although shipments were well behind Taiwan and South Korea, the top two sources.

Malaysia is also a key supplier of components for global semiconductor production.

In a 2021 letter to Azmin Ali, the US-based Semiconductor Industry Association said Malaysia is "a key player in the global semiconductor supply chain."

"Approximately 7% of total global semiconductor trade flows through Malaysia, while US trade with Malaysia accounts for 24% of all US semiconductor global trade," the SIA said in the letter.

Push for US production continues

The memorandum with Malaysia comes as US lawmakers continue to push Congress to pass the Bipartisan Innovation Act, which includes $52 billion in investments to promote new domestic semiconductor production capacity.

"The semiconductor shortage is causing massive supply chain disruptions and has idled auto plants in Michigan and across the country, harming our workers," US Senator Gary Peters of Michigan said in a joint statement with Commerce and other stakeholders May 10 following a meeting among lawmakers, government officials, and industry representatives.

In anticipation of the proposed funding, Intel said in January it would invest more than $20 billion to construct two semiconductor chip factories near Columbus, Ohio, with production expected to start in 2025.