Semiconductor industry in Malaysia remains stable despite conflict in Middle East

“GEORGE TOWN, May 18 — The semiconductor industry in the country, including in Penang, remains stable despite the prolonged conflict in Middle East, said Finance Minister II Datuk Seri Amir Hamzah Azizan He said the conflict, which has entered its third month, has indeed posed challenges, especially rising global oil prices and the supply of several critical materials for the semiconductor industry. He said there are several important raw materials in the semiconductor industry that had previously faced supply pressures following instability in the Middle East. “Global industry players have now begun adjusting their respective supply chains by seeking alternative sources to reduce dependence on conflict-hit regions,” he said in a press conference after visiting Intel’s Pelican project in Bayan Lepas here. “There are several items in the semiconductor sector that are indeed difficult to obtain when the Middle East region is unstable,” he added. However, he said the local supply chains have sought new sources to replace existing supplies. Amir Hamzah said that, so far, the supply situation remains under control although supplies are limited. He said the demand for semiconductors, particularly those related to artificial intelligence (AI) technology, has also remained high. He said major manufacturers, including key fabrication plants, possess stronger supply chain ecosystems and are able to adjust their operations quickly. “If they are major manufacturers, their supply chain ecosystems are indeed strong and they can make adjustments,” he said. He said even smaller companies that may face some difficulties because they are not used to dealing with new suppliers will be able to manage. He said Brent crude oil prices have now risen to as high as US$111 per barrel compared with around US$65 to US$70 before the conflict erupted. He said the situation has directly increased operating costs across various sectors, including global manufacturing and logistics. “What is more important than the Middle East issue is the supply aspect because about 20 per cent of the world’s oil supply comes out of that region so the main issue is ensuring there is sufficient supply for countries that need it,” he said. He added that Malaysia remains in a controlled situation due to domestic oil production as well as supply guarantees by major petroleum companies, including Petronas. “In Malaysia, we are fortunate because we have our own oil production as well as operators such as Petronas and other oil companies that help ensure supply stability,” he said. “So we are not seeing situations such as oil shortages or industries failing to obtain supplies happening in this country,” he added.

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