Production of semiconductor chip File photo: VCG

An increasing number of Chinese semiconductor design companies are partnering with Malaysian packing firms to assemble graphics processing units (GPUs) in Malaysia, Reuters reported, which industry analysts said is a natural progression for the country’s semiconductor ecosystem.

Malaysian chip packaging companies have seen increased business and inquiries from Chinese clients. Some contracts have already been agreed to, Reuters reported citing sources.

China's collaboration with Malaysia on chip industry is a natural progression toward globalization and division of labor, Ma Jihua, an expert in telecom industry told the Global Times on Tuesday.

China and ASEAN members have always been closely tied together in trade, and developing a semiconductor ecosystem together is a major trend, Ma said. 

Advanced packaging of chips can significantly improve chip performance and is emerging as a critical technology in the semiconductor industry. 

Packaging technology, a downstream sector in the chip industry chain, is considered to have lower technological complexity and production barriers compared to upstream design and manufacturing.

“Some Southeast Asian countries have a strong production foundation in the packaging field, with skilled workers and a basic infrastructure for production equipment,” Ma said.

Chinese chip firms that have announced plans to expand in Malaysia include Xfusion, which said in September it would partner with Malaysia's NationGate to manufacture GPU servers.

Shanghai-based StarFive is also building a design center in Malaysia, and chip packaging and testing firm TongFu Microelectronics said last year it would expand its Malaysia facility, according to the Reuters report.

Malaysia currently accounts for 13 percent of the global market for semiconductor packaging, assembly, and testing, according to Ministry of International Trade and Industry of Malaysia.