Why Apple assembler Foxconn chose Malaysia to build an electric vehicle chip factory

Taiwanese manufacturing giant Foxconn plans to build a factory in Malaysia, a little-known semiconductor hub, to manufacture chips for the ever-expanding field of electric vehicles.

Foxconn’s Malaysian partner Dagang NeXchange said in a Bursa Malaysia stock exchange filing that it had signed a memorandum of understanding with Big Innovation Holdings, a subsidiary of the iPhone maker, to form a joint venture. in this Southeast Asian country. According to media reports, Foxconn and Dagang NeXchange are building an electric vehicle semiconductor factory.

The joint venture will build a manufacturing facility specializing in mature 28 nanometer and 40 nanometer process node technologies, capable of producing up to 40,000 wafers per month.

“I think Foxconn did their cost-benefit analysis before making such a decision,” says Darson Chiu, a researcher at the Taiwan Institute of Economic Research think tank in Taipei. Products made in Malaysia can be sold in China, the United States and Southeast Asia without political constraints, he says.

“Manufacturing in Southeast Asia will not only reduce costs, but also distance itself from US-China competition and conflicts,” adds Chiu.

Malaysia, notes Chiu, has “the most advanced IT capabilities in Southeast Asia and that’s important because then Foxconn can recruit and train local technicians to start production.”

The Southeast Asian nation represents an emerging tech hub sheltered from the Sino-US trade dispute. The four-year-old dispute has imposed tariffs on hundreds of billions of dollars worth of goods from each country.

About 37% of Malaysia’s goods exports include electrical and electronic products, notes Rajiv Biswas, executive director and chief economist for Asia-Pacific at S&P Global Market Intelligence. Malaysia accounts for about 13% of the world’s semiconductor assembly, testing and packaging capacity, he said.

“Foxconn’s decision to build a major semiconductor factory in Malaysia reflects the high priority electronics companies place on diversifying their supply chains for critical electronic components,” Biswas said.

Foxconn, led by billionaire Terry Gou, has shown its intentions in recent years through a series of joint ventures to expand into electric vehicles, an industry expected to reach $957 billion worldwide by 2030. a compound annual growth rate of 24.5% starting this year.

The company officially known as Hon Hai Precision has deals with US startup Fisker and Chinese automaker Geely, among others. A venture with Stellantis has allowed Foxconn to develop automotive cockpit software and another, with Gigasolar Materials, gives it expertise in EV batteries.

The Taiwanese assembler with annual sales of $214.6 billion also operates its own platform for manufacturing electric vehicles.

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