Amid the US-China tech trade war, Malaysia and British chip giant Arm Holdings struck an agreement to support Malaysia's efforts to create high-end semiconductors.
Although Malaysia is a major player in the critical chips industry, its primary focus has been on lower-end services like packaging, assembly, and testing.
As part of the deal, Softbank-owned Arm will supply chip designs and other technologies, assisting Malaysia in transitioning to higher-value production processes like integrated circuit design and wafer fabrication.
Malaysia's economic ministry briefed journalists that the Southeast Asian country is paying US$250 million over ten years to obtain support from the British corporation.
"Through a comprehensive partnership with Arm, we have conceived one of the most ambitious technological plans Malaysia has ever seen - to pioneer Made-by-Malaysia AI chips," Prime Minister Anwar Ibrahim said in remarks before witnessing the signing.
"These chips will be designed, manufactured, tested and assembled here, and sold to the rest of the world."
To increase the company's presence in the region as well as Australia and New Zealand, Arm will also open its first office in Southeast Asia in Kuala Lumpur, according to Anwar.
According to Malaysian Economy Minister Rafizi Ramli, the partnership will allow Malaysia and Arm "to build a complete supply chain in advanced industries such as AI (artificial intelligence) data servers, autonomous vehicles, IoT (internet of things), robotics and others."
According to him, the agreement would teach about 10,000 local semiconductor engineers.
Dedi Iskandar, Asia Pacific regional director at datacenterHawk, said the agreement would make Malaysia "as one of the elite countries in Asia Pacific that possess advanced AI chip design capabilities other than Taiwan, and Singapore."
A number of companies have felt the need to consider moving their manufacturing from China to other nations, such as Malaysia, Vietnam, and India, in recent years due to tensions between Washington and Beijing over advanced technology, particularly semiconductors.
German electronics company Bosch estimates that Malaysia, a longtime leader in the sector, contributes 13 percent of the world's back-end manufacturing.