# The Electrical & Electronics (E&E) Industry

> Malaysia's electrical and electronics sector is the country's single largest export earner, spanning semiconductors, components, consumer electronics and electrical products, with Penang as its historic heartland.

- Category: industries
- Language: en
- Status: published
- Updated: 2026-08-14
- Canonical: https://negaraku.md/en/industries/electrical-electronics-industry

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Open almost any laptop, smartphone or car built in the last decade and there is a decent chance a piece of it passed through Malaysia. The chip inside might have been tested and packaged in Penang; the power adapter, the LED backlight or the circuit board could have been assembled in Kulim, Melaka or the Klang Valley. For a country of about 34.1 million people (2024, DOSM), Malaysia sits at a surprisingly central point in the world's electronics supply chain — and that is almost entirely the story of one industry.

Electrical and electronics — universally shortened to "E&E" in Malaysia — is the country's largest manufacturing sector and its single biggest export. In 2024 it earned about RM601 billion, the highest figure ever recorded and roughly 40% of everything Malaysia exports. No other product category comes close.

But E&E is widely misunderstood as being just about semiconductors. Chips are the largest and most valuable slice, yet the industry is much broader: it stretches from the tiny passive components soldered onto a circuit board, through industrial control systems and medical devices, to the air conditioners, televisions and light fittings that carry familiar brand names. This guide explains what the E&E industry actually is, how Penang became its heartland, and where it is heading next.

## What counts as "E&E" in Malaysia?

The Malaysian Investment Development Authority (MIDA), the federal agency that promotes and tracks manufacturing investment, divides the E&E sector into four broad categories. Understanding these four buckets is the key to seeing past the "Malaysia makes chips" headline.

| Segment | What it covers | Typical products |
| --- | --- | --- |
| Electronic components | The building blocks that go inside larger devices | Semiconductors (integrated circuits), passive components, connectors, printed circuit boards, LEDs |
| Industrial electronics | Electronics for machinery, business and infrastructure | Telecoms equipment, control systems, medical devices, computers, storage |
| Consumer electronics | Finished goods for households | Televisions, audio equipment, cameras, home appliances |
| Electrical products | Products that generate, distribute or use electricity | Wiring and cables, lighting, solar modules, home electrical appliances |

Semiconductors sit inside the first bucket — electronic components — and they dominate the value. In 2024, semiconductor products alone were worth about RM437.5 billion, or roughly 72.8% of all E&E exports, according to figures reported by The Edge Malaysia. That leaves close to RM164 billion in the other three segments — a substantial industry in its own right, easily overlooked because the chip numbers are so large.

This is the crucial point for anyone trying to understand the sector: **semiconductors are the headline, but E&E is the whole newspaper.** A great deal of Malaysia's E&E activity is in the less glamorous but highly valuable work of assembly, testing and packaging (ATP) — taking silicon wafers made elsewhere and turning them into finished, usable chips — plus contract manufacturing of complete electronic products for global brands.

## How did Penang become the heartland?

The modern industry has a clear birthday: 1972, in Penang.

Facing high unemployment and looking to move beyond a colonial economy built on tin and rubber, Malaysia's government created its first free trade zone — the Bayan Lepas Free Industrial Zone — on the island of Penang. The offer to foreign manufacturers was straightforward: import components duty-free, assemble them using local labour, and export the finished goods, with tax holidays and light regulation on top.

The first major taker was Intel. In 1972 the American chipmaker opened a five-acre assembly plant in Penang — its first offshore production facility anywhere in the world. It was a modest start, but a consequential one. By 1975 the plant employed roughly a thousand people and had become a crucial part of Intel's global manufacturing chain, per InvestPenang, the Penang state investment agency.

Where Intel went, others followed. AMD, Hewlett-Packard and Hitachi all set up operations in Penang in the 1970s, and by the early 1980s around fourteen multinational semiconductor firms were operating in Malaysia, per InvestPenang. This cluster of pioneers — later joined by names like National Semiconductor, Bosch and OSRAM — did something that turned out to be more durable than any single factory: they trained a generation of Malaysian engineers and technicians, and they created demand that local suppliers grew up to serve.

That supplier ecosystem is the real moat. Today Penang's E&E industry is supported by a network of over 6,500 local suppliers spanning automation, precision engineering, plastics, packaging and software, according to InvestPenang. A multinational can move a single plant; it is far harder to walk away from thousands of specialised vendors clustered within an hour's drive.

The result is that Penang remains disproportionately important. In 2024 the state contributed RM358.1 billion in E&E exports — about 60% of the entire nation's E&E exports — from a single state (about 1.76 million people, or roughly 5% of Malaysia's population, per DOSM) that produces well over half the national total.

## Where is E&E made beyond Penang?

Penang is the origin story, but it is no longer the whole map. Over five decades the industry spread down the peninsula, partly because Penang ran short of land and labour and partly through deliberate policy.

- **Penang (Bayan Lepas and Batu Kawan):** Still the core — semiconductors, ATP, and a deep contract-manufacturing base. Home to Intel, AMD, Broadcom, Bosch, OSRAM, Motorola and Lumileds, plus EMS players such as Jabil, Flex, Plexus, Sanmina, Benchmark and Inari Amertron, per InvestPenang.
- **Kulim, Kedah:** The Kulim Hi-Tech Park, just across the state line from Penang, extended the northern cluster with advanced electronics manufacturing — including OSRAM's LED chip factory, which since 2017 has run genuine wafer fabrication for LEDs and microLEDs at the park.
- **Klang Valley (Selangor and Kuala Lumpur), Melaka and Negeri Sembilan:** The Central cluster mapped by the New Industrial Master Plan 2030 — the Shah Alam industrial belt and a southern electronics corridor, closer to the country's main airport and financial centre, hosting firms such as Sony, Panasonic, Samsung, Renesas and ON Semiconductor.
- **Johor:** Increasingly relevant as spillover from neighbouring Singapore drives new data-centre and electronics investment in the south; Johor Bahru drew RM9.8 billion in approved E&E investment in the first nine months of 2024, per MIDA.

The concentration in the northern corridor — Penang plus Kulim — is why that region is sometimes called Malaysia's "Silicon Valley," though the comparison flatters the branding more than the business model: Malaysia's strength has historically been in manufacturing and back-end services rather than chip design.

## Why does E&E matter so much to the economy?

Three numbers tell the story.

First, **scale.** At about RM601 billion in 2024, E&E is by a wide margin the country's largest export earner and the reason Malaysia consistently runs a healthy trade surplus.

Second, **share.** E&E makes up roughly 40% of total exports. That is a level of concentration few economies match — and it cuts both ways, as we will see.

Third, **jobs and skills.** The industry employs a large, relatively high-skilled workforce and has been the training ground for Malaysia's engineering talent for fifty years. The supplier network alone runs into the thousands of firms.

For a mid-sized emerging economy, having a globally competitive, high-technology export sector is rare and valuable. It is a big part of why Malaysia is classified as an upper-middle-income country rather than a commodity exporter.

## What are the risks and weaknesses?

A sector this dominant brings real vulnerabilities, and Malaysian policymakers are candid about them.

**Concentration risk.** When 40% of your exports come from one industry, a downturn in the global electronics cycle hits the whole country. Semiconductor demand is famously cyclical, swinging with inventory gluts, product transitions and global growth.

**Stuck in the middle of the value chain.** Malaysia's historic strength is in the *back end* — assembly, testing and packaging — and contract manufacturing. These are essential but lower-margin activities compared with chip *design* and *wafer fabrication*, where the largest profits sit. Moving up that chain has been a stated goal for years and remains difficult.

**Trade-policy exposure.** Because so much E&E output goes to a handful of markets, changes in trade policy abroad matter enormously. In 2024–2025, the prospect of new US tariffs on semiconductors — with threatened duties reported by The Edge Malaysia as high as 100% — hung over the industry, even as Malaysian chip exports continued to avoid them for the time being. Of the RM437.5 billion in 2024 semiconductor exports, about RM56.2 billion went to the United States, per The Edge Malaysia.

**Talent and cost competition.** Rising wages and competition for engineers from regional rivals put pressure on the low-cost model that first attracted investors in 1972.

## What is Malaysia doing about it? The National Semiconductor Strategy

The government's answer to these weaknesses is the National Semiconductor Strategy (NSS), unveiled in 2024, with details presented by Prime Minister Anwar Ibrahim at SEMICON Southeast Asia in Kuala Lumpur on 28 May 2024.

The NSS is essentially a plan to climb the value chain — to add more design, advanced packaging and wafer fabrication to Malaysia's existing manufacturing base. According to MIDA, its headline commitments include:

- A target of **at least RM500 billion in investment** in Phase 1.
- **At least RM25 billion** (about US$5.3 billion) in government fiscal support and targeted incentives.
- Training and upskilling of **60,000 high-skilled Malaysian engineers.**
- A goal of establishing **at least 10 local companies** in design and advanced packaging with revenues between RM1 billion and RM4.7 billion, plus **at least 100 semiconductor-related companies** with revenues close to RM1 billion.

Whether those targets are met, the strategy signals the direction: Malaysia wants to stop being only the place chips are tested and packaged, and become a place where they are designed and fabricated too. The industry's momentum has been supportive — E&E exports set a record in 2024 and continued to climb into 2025.

## E&E vs. the semiconductor industry: a quick clarification

Because the two terms are often used interchangeably, it is worth separating them cleanly.

| | E&E industry | Semiconductor industry |
| --- | --- | --- |
| Scope | The whole sector: components, industrial, consumer, electrical | A subset: chips (integrated circuits) specifically |
| 2024 exports | ~RM601 billion | ~RM437.5 billion |
| Share | ~40% of total Malaysian exports | ~72.8% of E&E exports |
| Includes | Appliances, lighting, cables, PCBs, medical devices, chips | Design, wafer fab, and assembly/test/packaging of chips |

In short: every semiconductor is E&E, but not every E&E product is a semiconductor. When you read that Malaysia is "the world's sixth-largest semiconductor exporter" (as InvestPenang describes it) and commands roughly 13% of the global assembly, testing and packaging market, that is the chip slice specifically — the sharpest point of a much wider industry.

## A decision framework: is Malaysia's E&E base right for you?

If you are weighing Malaysia as a manufacturing or sourcing base, a few questions cut to the heart of it.

1. **Do you need back-end and assembly, or front-end design/fab?** Malaysia is exceptionally strong at ATP, contract manufacturing and components. Cutting-edge wafer fabrication is an ambition, not yet the established strength.
2. **How important is supplier depth?** If you value a mature ecosystem of thousands of local vendors, precision-engineering firms and EMS providers, Penang and the northern corridor are hard to beat in the region.
3. **What is your tolerance for trade-policy exposure?** A base heavily oriented toward the US market carries tariff uncertainty; diversified customers reduce it.
4. **Do you need engineering talent at scale?** Malaysia has fifty years of accumulated E&E skills, and the NSS is explicitly funding 60,000 more engineers.
5. **Land and cost?** Penang island is space-constrained and no longer the cheapest option; Batu Kawan, Kulim and the south offer newer, larger sites.

## Common misconceptions

- **"Malaysia just makes chips."** No — semiconductors are the biggest single slice, but roughly a quarter of E&E exports are components, industrial electronics, consumer electronics and electrical products.
- **"Malaysia designs the chips in your phone."** Mostly not. Malaysia's core role has been back-end assembly, testing and packaging plus contract manufacturing; moving into design is the goal of the National Semiconductor Strategy.
- **"It's all in Penang."** Penang is the heartland and about 60% of E&E exports, but Kulim, the Klang Valley, Melaka and Johor are all significant.
- **"E&E is a small niche."** It is the largest export category in the entire economy — around 40% of exports.
- **"The industry is fading."** On the contrary, 2024 was a record year and the sector is the target of the country's biggest industrial-policy push in a generation.

## What's next

Malaysia's E&E industry is at an inflection point. Fifty years after Intel's first Penang plant, the country has a globally significant, record-setting export machine — and a clear-eyed sense that resting on assembly and testing is not enough for the next fifty years. The National Semiconductor Strategy's push toward design and fabrication, the wave of new investment landing in Penang, Kulim and Johor, and the shadow of shifting global trade policy will together decide whether Malaysia climbs the value chain or stays in the middle of it.

If you want to go deeper, the natural next reads are the dedicated guide to Malaysia's [semiconductor industry](semiconductor-industry) — the chip-specific story inside this broader one — and a closer look at [Penang](penang), the state where it all began. For the policy and investment machinery behind the numbers, [MIDA](mida) is the agency to know.

## Sources

- Malaysia's E&E Industry — Electrical & Electronics — https://www.mida.gov.my/industries/manufacturing/electrical-electronics/ (Malaysian Investment Development Authority (MIDA))
- How Malaysia Fostered a Semiconductors Industry That Brought in Investors Like Tesla & Intel — https://investpenang.gov.my/how-malaysia-fostered-a-semiconductors-industry-that-brought-in-investors-like-tesla-intel/ (InvestPenang)
- Electrical & Electronics — Manufacturing — https://investpenang.gov.my/electrical-electronics/ (InvestPenang)
- Govt allocates RM25bil to operationalise National Semiconductor Strategy — https://www.mida.gov.my/mida-news/govt-allocates-rm25bil-to-operationalise-national-semiconductor-strategy/ (Malaysian Investment Development Authority (MIDA))
- Malaysia's E&E exports may surpass record 2024 levels, even with possible US tariffs on semiconductors — https://theedgemalaysia.com/node/769994 (The Edge Malaysia)
- Current Population Estimates, 2024 — https://www.dosm.gov.my/portal-main/release-content/current-population-estimates-2024 (Department of Statistics Malaysia (DOSM))
- Population (Demographic Statistics, First Quarter 2024) — https://storage.dosm.gov.my/demography/demography_2024-q1.pdf (Department of Statistics Malaysia (DOSM))
- Osram's new LED chip factory goes into operation in Kulim — https://ams-osram.com/news/press-releases/pr-23-11-2017 (ams OSRAM)
- OSRAM Opto Semiconductors (M) Sdn. Bhd. — success story — https://www.mida.gov.my/success-stories/osram-opto-semiconductors-m-sdn-bhd/ (Malaysian Investment Development Authority (MIDA))
- New Industrial Master Plan 2030 — Electrical and Electronics Industry (sectoral report) — https://www.nimp2030.gov.my/nimp2030/modules_resources/bookshelf/e-03-Sectoral_NIMP-Electrical_Electronics_Industry/e-03-Sectoral_NIMP-Electrical_Electronics_Industry.pdf (Ministry of Investment, Trade and Industry (MITI), Malaysia)
- Central Region Industrial Clusters: Powering an Integrated Production Ecosystem — https://www.mida.gov.my/central-region-industrial-clusters-powering-an-integrated-production-ecosystem/ (Malaysian Investment Development Authority (MIDA))
- MIDA Anchors Malaysia As A Strategic Semiconductor Supply Chain Partner Under Johor–Singapore SEZ — https://www.mida.gov.my/media-release/mida-anchors-malaysia-as-a-strategic-semiconductor-supply-chain-partner-under-johor-singapore-sez/ (Malaysian Investment Development Authority (MIDA))

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