Semiconductor Surge: Venture Capital Sparks Next Big Innovation Wave

PE Landscape by Themes

With Private Equity (PE) deal activity expected to increase in 2024, the Ernst & Young publication highlights that Southeast Asia’s PE landscape will be led by the following themes:

1. Technology and artificial intelligence: Besides reshaping various sectors in SEA, it is creating significant demand for digital infrastructure
2. Reshaping of the global manufacturing landscape: Companies are looking for supply chain resilience, and are seeking out alternative supply chains and expanding their suppliers. Many are considering SEA as an alternative supply base.
3. Aspirational consumer: Driving demand for consumer products, services, better quality health care, accessible financial services and high-quality education
4. Transition to a low carbon economy: Creating investment opportunities in the energy and other related sectors
5. Fragmented business services landscape: Consolidation across various verticals to continue

As technology and artificial intelligence dominate investment trends since the beginning of the year, venture capitalists are unmistakably reallocating their funds and resources to maximize profit potential within this lucrative investment theme, centring around SEA.

VC’s Move on Semiconductor Sector in Malaysia

Joining the bandwagon, a Venture Capital firm has set its eyes on the semiconductor industry in Malaysia. According to Malaysia Semiconductor Industry Association (MSIA), the semiconductor sector in the country is forecast to shine in the second half of 2024 as the world semiconductor market is predicted to rebound by 13% this year to reach US$588 billion. Hence, a surge of investment is poised to propel Malaysia’s semiconductor industry forward, as plans are unveiled by Blue Chip Venture Capital to inject over US$200 million into nurturing startups within the sector. Led by industry veterans with decades of combined experience, Malaysia’s strategic position within the Southeast Asian electronics landscape is set to be harnessed for local chip innovation.

In an exclusive interview with Nikkei Asia, it was emphasized that Malaysia’s opportune moment to seize the momentum in semiconductor development cannot be missed. With the country serving as a focal point for electronics manufacturing and a growing diversity in the global supply chain, there is a palpable sense of urgency to anchor this surge of investment within Malaysian borders.

The firm, founded just last year, aims to mobilize a staggering US$209 million fund, drawing interest from institutional investors eager to partake in Malaysia’s semiconductor ascent. The imperative for Malaysia not to miss out on this pivotal moment was underscored.

The strategy hinges on backing at least 10 promising startups, with a keen focus on integrated circuit design and advanced packaging. This deliberate emphasis on nurturing local Malaysian talent underscores a broader push to cultivate homegrown expertise within the chip sector.

Despite Malaysia’s nascent venture ecosystem, characterized by modest funding figures compared to its Southeast Asian counterparts, the determination remains undeterred. The need for a paradigm shift in the country’s semiconductor landscape was advocated for, with a call for a more robust investment climate to propel Malaysia beyond its current focus on back-end processes.

While the initial US$200 million fund may seem modest in the grand scheme of industry transformation, it is seen as a catalyst for broader participation. A recent startup forum in Kuala Lumpur served as a beacon of hope for Malaysia’s chip industry, drawing attention from a slew of international investment firms eager to tap into the country’s burgeoning venture capital scene.

The announcement of major players setting up shop in Malaysia underscores a growing recognition of the country’s potential as a semiconductor hub. The leadership of Blue Chip Venture Capital, anchored by industry stalwarts with a wealth of experience, instils confidence in Malaysia’s semiconductor trajectory.

Harnessing the Prowess

Looking ahead, greater collaboration between Malaysia and neighbouring Singapore is advocated for to harness the full potential of the region’s semiconductor prowess. By leveraging Singapore’s access to funds and Malaysia’s abundant resources, the two countries can forge a symbiotic partnership that maximizes their respective advantages in the era of artificial intelligence-driven chip demand.

As plans are charted for Malaysia’s semiconductor future, the stage is set for a transformative journey that promises to elevate the country’s standing within the global chip landscape. With innovation as its compass and investment as its fuel, Malaysia stands poised to carve out a distinctive niche in the semiconductor realm, guided by Blue Chip Venture Capital.