Malaysia Must Capture More Domestic Value From Global Trade Reconfiguration - McKinsey

KUALA LUMPUR, Aug 18 (Bernama) -- Malaysia needs to capture more domestic value from the ongoing reconfiguration of global trade and technological change, with the country’s next phase of growth dependent on stronger local capabilities, globally competitive companies and the ability to move up the value chain. 

McKinsey Malaysia managing partner Vidhya Ganesan said Malaysia was already seeing early traction from its National Semiconductor Strategy (NSS), but the country needed to look beyond investment announcements and assess whether the strategy was generating deeper capabilities within the Malaysian economy.

She said Malaysia had attracted around RM100 billion in foreign direct investment in the semiconductor space since March 2024, while the NSS had set an engineering talent target of about 60,000 jobs by 2030.

“We are well on our way, having upskilled about 18,000 of them, which is progress,” she said at the McKinsey & Company Media Roundtable here today. 

She noted that Malaysia had about about 30 per cent of the global market share in the outsourced semiconductor assembly and test (OSAT) segment, covering assembly, packaging and testing in the semiconductor value chain.

Vidhya said the next priority was to move Malaysian companies further up the value chain, including into advanced packaging and chip design, while building commercially valuable intellectual properties.

"Are we seeing enough of the Malaysian companies becoming regional global champions the way Petronas did a couple of decades ago to create real champions out of Malaysia in this space and seeing enough good jobs and research and development traction within the Malaysian university ecosystem?

“So these would be the real kind of example markers if we are sitting here three years from now (discussing) whether NSS has really played out," said Vidhya.

Vidhya also said that to strengthen the domestic supplier ecosystem, Malaysia should focus not only on “raising the ceiling” by creating regional and global champions, but also on “raising the floor” through a broader Malaysian vendor and supplier base.

Meanwhile, McKinsey Global Institute (MGI) partner Jeongmin Seong said the changes in global trade went beyond the United States-China tensions, with China and the US accounting for about 25 per cent of global trade.

“So there’s 75 per cent of the trade happening among the rest of the world and there’s a lot of reconfiguration happening among those economies too,” he said.

He said the shift presented a structural opportunity for Malaysia, but the country needed to build its capabilities to benefit from the changing global investment landscape.

Seong said restrictive trade measures had increased from around 600 to 700 a year before COVID-19 to between 3,000 and 4,000 today, while industrial policy announcements had also increased fivefold since 2017.

“So we are certainly in a new era with a reconfiguring world order,” he said.

He said Malaysia could learn from Japan’s specialisation in critical parts of global value chains, South Korea’s bold investments and Taiwan’s strong ecosystem of companies, research institutes and universities.

“So my question is, what is the Malaysian way?” he said, adding that Malaysia did not need to copy these countries but should identify the approaches most relevant to its own needs.

Meanwhile, MGI director Chris Bradley said the emergence of artificial intelligence (AI) could further unlock new sources of economic activity, with its potential extending beyond automation and task replacement.

“I think one thing we often focus too much on in AI is thinking about automation or task replacement and we don't think enough about AI as an inventor,” he said.

Bradley also said that economic growth should remain the dominant expectation, provided economies could continue to bring together capital, energy and new ideas.

“As long as you can put capital and energy together, you get growth and we should plan for that being the more inevitable future,” he said.

McKinsey & Company is a global management consulting firm, and MGI is its internal economic research wing. 

-- BERNAMA