Nvidia supplier to set up pilot plant in Malaysia

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Nvidia and AMD supplier Kinsus Interconnect Technology is considering building a substrate manufacturing facility in Penang, Malaysia, potentially joining a string of companies moving into the country’s resurgent chip supply chain, Nikkei Asia has learned.

Kinsus, a subsidiary of iPhone assembler Pegatron, has rented a plant in Penang where it will begin a trial run of the final step in substrate production — testing and quality control — as early as the second quarter of this year as part of an effort to diversify its production outside China, two people with direct knowledge of the matter said.

Substrates, the material on which chips are built, are produced by only a handful of companies.

“Kinsus’s attempt [at the rented facility] is to see if its solutions can work smoothly in Penang, as Malaysia has the potential to become a new hub for chip packaging and testing,” one of the people said. If the operation goes well, Kinsus will eventually expand its investments in the country, the person added.

Initially, output from the rented facility will target end uses in the car, consumer electronics and memory chip sectors, the second person said. “Automotive application is a top priority,” the person added. “Malaysia could be a hub to supply the south-east Asian markets.”

A Kinsus spokesperson told Nikkei Asia that the company was planning to expand its presence outside of China.

This article is from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan.

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Chip substrate facilities are usually built close to chip packaging and testing sites. Many chipmakers such as Intel, Infineon and ASE Technology are increasing their manufacturing capacity in Malaysia. Intel is injecting $7bn to turn the country into its primary Asian production base, including for advanced 3D chip packaging. Their moves could have a magnetic effect on substrate and production equipment makers in south-east Asia.

Kinsus would be the second substrate supplier to establish a presence in the country. Austria-based AT&S, an Intel and AMD substrate supplier, is set to open its first chip substrate facility in Penang this quarter. There are only a handful of chip substrate suppliers in the world, and even fewer with the ability to make advanced substrates for high-computing chips. These include Japan’s Ibiden, Taiwan’s Unimicron Technology, Nan Ya PCB and Kinsus, and AT&S.

Substrate and printed circuit board suppliers — whose capacity is largely in Taiwan and China — are shifting production amid the ongoing Beijing-Washington tech war. Unimicron Technology is building its first PCB plant in Thailand, while Nan Ya PCB said it was considering building capacity in Vietnam.

“Since the China-US trade war, there is a diversification trend of ‘China plus one’ for PCB makers as well, as they try to avoid overly centralising their capacity in China in the future,” Molf Lai, a tech analyst with Digitimes Research, told Nikkei Asia. “We are seeing an emerging demand for substrates in Malaysia due to the growing chip packaging and testing capacity in the country.”

Chiu Shih-fang, a tech supply chain analyst with the Taiwan Institute of Economic Research, said the flood of PCB makers investing in Thailand in the past two years was more an answer to demand for consumer electronics, servers and car PCBs.

“Kinsus’s bid in Malaysia has strong symbolic meaning, as it is the first Taiwanese substrate supplier trying to build a presence in south-east Asia,” she said. “However, given the slow global economy and the inventory correction in the chip industry, it is worth monitoring whether substrate makers’ overseas expansion pace will be adjusted later.”

A version of this article was first published by Nikkei Asia on January 16. ©2024 Nikkei Inc. All rights reserved.

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