Malaysia's Ambitions on AI Developments
Malaysia is rapidly positioning itself as a regional leader in artificial intelligence (AI), driven by a clear national vision and strategic investments. The country recognizes AI as a transformative technology essential for economic competitiveness and sustainability, as emphasized by Prime Minister Anwar Ibrahim, who described AI as the "quantum leap" needed for emerging economies like Malaysia. The government's commitment is evident in the Malaysia National Artificial Intelligence Roadmap 2021-2025 (AI-Rmap), which outlines comprehensive strategies to develop and implement AI technologies across sectors, aiming to ensure broad societal benefits.
The Current Situation in AI Development in Malaysia
The AI ecosystem of Malaysia has gathered momentum, with over 140 AI solution providers having generated a revenue of more than RM1 billion till mid-2024. This ecosystem, much diversified and growing, draws its markets from various sectors such as digital health, smart cities, and agriculture. Consumer adoption is also occurring on the rise, with nearly one-half of Malaysian consumers expressing a preference for interacting with brands through AI technologies. Government support has also helped with Malaysia's AI readiness, pushing its Oxford Insights Government AI Readiness Index's 2022-to-2023 ranking higher from 29th to 23rd place.
Among the key infrastructure developments is the realization of the National Artificial Intelligence Office (NAIO) in 2024, established to act as a central authority to govern and coordinate AI initiatives across ministries and sectors. Talent development, ethical AI frameworks, regulatory policies, and innovation form the core of NAIO's interests. In parallel to talent development, Malaysia is augmenting its data center capacity, which is of utmost importance for AI workloads and digital transformations..
Global technology behemoths like Google and Microsoft are investing substantially in Malaysia, contributing billions of dollars to construct cloud and AI infrastructure, train talent, and establish centers of excellence. For example, Google is investing $2 billion to speed digital transformation, including the construction of its first data center and cloud region in Greater Kuala Lumpur. These investments supplement government incentives under Budget 2025, which includes tax cuts, R&D support, and subsidies for talent development in AI and related technologies.
Malaysia's AI Ecosystem and ARM MoU
Malaysia has taken aggressive initiatives to develop a strong AI ecosystem by encouraging collaboration among the government, industry, and academics. The AI Roadmap's 24+ action plans are 63% complete as of Q3 2024, with a target GDP rise of 30% due to AI-driven productivity gains7. Policies that promote AI adoption, ethical use, and workforce preparation help to drive the ecosystem's growth.
Malaysia recently signed a Memorandum of Understanding (MoU) with ARM, a global leader in semiconductor intellectual property and chip design. While terms of the MoU are still being worked out, the relationship is intended to benefit Malaysia by strengthening local capabilities in chip design and AI hardware innovation.
ARM's technological advantage in energy-efficient, high-performance processors complements Malaysia's objectives to develop sophisticated AI infrastructure and applications. This collaboration could hasten Malaysia's advancement up the semiconductor value chain by allowing local enterprises to design and manufacture chips optimized for AI workloads, thereby enhancing the national AI ecosystem.
SilTerra Records
SilTerra Malaysia Sdn Bhd, Malaysia’s first homegrown semiconductor wafer foundry, continues to play a strategic role in the country’s semiconductor and AI ambitions. Established in 1995, SilTerra was created to elevate Malaysia beyond chip assembly into semiconductor manufacturing. After being loss-making for years, it was acquired in 2021 by Dagang NeXchange Bhd (DNeX) and Beijing Integrated Circuit Advanced Manufacturing Fund for RM273 million.
Since then, SilTerra has turned profitable and is expanding its production capacity. In 2022, it announced a RM645 million investment to increase annual wafer production capacity by 20%, targeting growing demand in electric vehicles, IoT, data centers, and e-commerce sectors. Supported by long-term agreements with international customers, SilTerra is strengthening its technology portfolio, including advanced CMOS logic and specialty processes such as MEMS and silicon photonics.
Despite some shareholder disputes overboard appointments, SilTerra’s operations remain stable and focused on growth. The company is recognized as a national strategic asset and a catalyst for high-tech investments, with ongoing efforts to innovate and support Malaysia’s transition into higher-value semiconductor manufacturing.
However, industry experts and the Khazanah Research Institute stress the need for more companies like SilTerra but with greater capital and ambition to address talent underemployment and accelerate Malaysia’s move into advanced chip production. SilTerra’s current focus on mature 200mm wafer technology is solid but upgrading to more advanced nodes and high-end chip production is essential to fully support Malaysia’s AI ecosystem and technological sovereignty.
SilTerra's Role and Challenges in Homegrown Chip Production
SilTerra Malaysia Sdn Bhd, has traditionally concentrated on mature 90nm chip production techniques. While this has benefited many sectors, the rapid progress of AI necessitates increasingly advanced, high-performance circuits that function at smaller nanometer scales in order to meet the computational demands of AI models.
SilTerra's current reliance on 90nm technology limits its potential to make meaningful contributions to the AI hardware ecosystem, which increasingly relies on cutting-edge processors with innovative architectures and fabrication capabilities. Given the strategic relevance of semiconductors in AI, it is critical that SilTerra expands beyond traditional process nodes.
The ARM MoU gives SilTerra the potential to use ARM's chip design expertise to improve its capabilities and participate in the production of increasingly powerful AI chips. SilTerra might produce competitive high-end circuits specialized for AI applications by integrating ARM's intellectual property and design frameworks, thereby aiding Malaysia's larger AI goals. This will increase Malaysia's reliance on key technology while also stimulating local innovation and talent development in semiconductor production and AI hardware design.
The Real Hope for the Long Run
Malaysia's long-term success in AI development depends on a comprehensive strategy that includes talent development, infrastructure expansion, ethical governance, and smart industrial alliances. The government's clear goal, together with Budget 2025 incentives and the founding of NAIO, lays the groundwork for long-term AI growth.
To fully realize AI's disruptive potential, Malaysia must ensure that its semiconductor industry, specifically SilTerra, does not fall behind. It is important to upgrade SilTerra's manufacturing capabilities to support high-end, smaller-node chip fabrication. This progression will allow Malaysia to manufacture the sophisticated AI chips needed for advanced applications, reducing dependency on imports and nurturing an indigenous innovation ecosystem.
In the long run, Malaysia's AI objectives will be realised by combining domestic semiconductor production with global technology alliances such as ARM, cultivating a robust AI talent pool, and preserving a legislative climate that promotes responsible AI use. This holistic plan would position Malaysia not only as an AI technology consumer but also as a producer and inventor, thereby boosting regional economic growth and technical sovereignty.
References
Chambers Global Practice Guides, Artificial Intelligence 2025 - Malaysia: Artificial Intelligence 2025 - Malaysia | Global Practice Guides - Chambers and Partners
MIDA News, Preparing Malaysia Workforce for an AI-Driven 2025: Preparing Malaysia workforce for an AI-driven 2025 - MIDA | Malaysian Investment Development Authority
Malaysia National Artificial Intelligence Roadmap 2021-2025: Malaysia National Artificial Intelligence Roadmap 2021-2025 | Digital Watch Observatory
Malaysian Science, Technology Information Centre (MASTIC), Artificial Intelligence Roadmap 2021-2025:MALAYSIA - International Science Council
MyDIGITAL Corporation, Budget 2025 Accelerates Malaysia’s Transformation in AI: Malaysia Launches AI Malaysia To Spearhead Artificial Intelligent Driven Growth
Ministry of Digital Malaysia, Press Release on AI Ecosystem and Talent Development, April 2025: Malaysia Builds Robust AI Ecosystem Through Talent Development And Data Centre Growth - Announcements | Ministry of Digital
The Malaysian Reserve, Malaysia’s AI Roadmap 2021-2025 Achieves 63% Completion Milestone: Malaysia's AI Roadmap 2021-2025 Achieves 63 Pct Completion Milestone As Of 3Q 2024
VeeCoTech, Malaysia’s AI Landscape & What It Means For Businesses (2025): Malaysia's AI Landscape & What It Means For Businesses (2025) - VeecoTech
VeeCoTech Blog, Malaysia’s AI Landscape & What It Means For Businesses (2025): Blog | VeecoTech
SilTerra Official Announcements:silterra.com/news/announcements
Malaysia Needs More Companies Like SilTerra – MIDA: mida.gov.my/mida-news/malaysia-needs-more-companies-like-silterra-but-with-more-capital-and-ambition
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