The US will continue to lose semiconductors, not only in chip manufacturing, but also in the expertise related to tool production. Furthermore, rather than going to low cost allies of the US, a huge national security hole is being opened. The pro-CCP government of Malaysia is a huge beneficiary of the movement of some of the highest tech manufacturing in the world. We can’t fault Lam Research for the move as it’s clearly driven by US policy failures on tax, education, and manufacturing, but we do want to bring attention of this to our readers.
I think you are perhaps excessively worried about Anwar and his coalition being Pro CCP and therefore investments in Malaysia are a security risk. The country is a democracy has political cleavages, this government may not even last a whole term it doesn't even have a true majority. post election there was crisis in forming the government A new govt may form and pivot on policy. Essentially if you worry about investments in any country in Asia, then to some extent using that logic all of them are at risk including the closest that isn't Taiwan, Singapore (South Korea and Japan are treaty allies). No state in Asia is particularly thrilled about having to make a choice between security and economy, which is the choice they feel they are being forced to make by US China competition. LAM according to this piece seems fairly savvy and made a decision based on competitiveness. The way to deal with that is as you have laid out previously in other posts is ensure the US can compete as a destination by any and all means necessary.
All states in Asia Pacific have very individualist relationships. Mahathir was very hostile, the relationship and orientation changed with Razak who we all know famously went down for corruption. Now its Anwar, his first call was to Erdogan after he formed govt as a predominantly Muslim country. (which is difficult to read) But fundamentally Anwar was neo liberal and a Washington Consensus type . The reason Mahathir imprisoned him, on trumped up sodomy charges, during Asian financial crisis, he wanted the IMF bailout as finance minister. His patron who was grooming him for his role was opposed, Anwar used that moment of weakness as leaders were falling and made a play for Prime Minister, lost and spent time in prison and then decades in the political wilderness. Now he has finally achieved his ambition. Malaysia ethnically diverse. Malays Tamils and Chinese. There is ethnonationalism at play that is hostile to minorities above all else Chinese who are resented for being seen as a community who made money at the expense of ethnic Malays which is why in his second stint as PM Mahathir became much more sectarian. The great hope with Anwar is he is more liberal and protective of minorities whether he is, remains to be seen. But most everyone in Asia Pacific with the exception of Laos and to a lesser extent Cambodia has security fears themselves, Malaysia has a territorial disputes in the SCS with China over the Spratly Islands. Every state is balancing in their own way. He hasn't been in the seat very long he is also constrained by a coalition he doesn't fully control. How he orients foreign policy is yet to be determined, I haven't really read anything yet to suggest what the position will be. His former orientation was neoliberalism and Pro US that may have changed given how the world is today and his own domestic political realities. Its a democracy, govts come and go and with it their policies. Philippines under Duterte leant towards Beijing. Under Marcos it seems to be pivoting to DC. Whatever your view on the US relationship I am not trying to change it, rather make the point everyone is significantly different from each other. One thing all states in Asia Pacific have in common where there are territorial disputes , is suspicion of growing Chinese militarization. No one in the region wants to be dominated, nor does any state in the region want to see US China conflict. How everyone is hedging is unique, with the two exceptions mentioned. If your desire is all or nothing, for US technology company investments in Asia Pacific, which is not unreasonable given your concerns over security, all states can be coerced by the US if necessary, but its only really treaty allies and Taiwan that will deliver all or nothing and as you know they too are doing so with reservations.
The relationship with Vietnam, India, Taiwian is very different than with Malaysia between the US and China no? I'd rather the US companies built in countries with favorable relationships to the US and negative to China.
Thanks for the history, some things I didn't know.
It is different, the point I was trying to make is everyone in Asia Pac has different relationships but similar concerns. They are managing in different ways., they also change how they manage Vietnam is an odd one, in that whilst it has unsettled territorial disputes, and fought a war with China, there is bonhomie at the leadership level. I think the first visit to Beijing after its recent party conference was the vietnamese communist party leader . Presumably the manufacturing investment flows from China drive that, I don't know. Scratch the surface though, the people themselves for the most hostile and mistrustful , not for a second do they trust China. I understand your concerns its hawkish and that's fair enough.
The point is not so much CCP or China or Chinese workers, as some of the comments pointed out. Let's not ignore the fact that Lam's customers are not consumers, they are TSMCs UMCs Samsungs Microns etc, and the bulk of their fabs are almost all located in Asia except probably Intel. Why didnt Applied Materials move as well? I don't know, maybe it is planning something too. As regard to skilled work-force, TSMC made similar comments on their delayed fab construction in Arizona. I am not sure policy tax or education is help much quickly, even if all the politicians can be persuaded to move in unison. There's a much easier solution: giving more immigration visas, encouraging young skilled engineers and workers to move their family from Asia to US or even Europe, if one plans to build fabs there. Lure them with higher income, better healthcare, better work conditions, freedom and better education for their kids.
I think you have missed something in the analysis. Manufacturing tools in Malaysia makes it easier for LAM to continue to supply the Chinese market in the face of American export controls
the fact that it is "a US company" has absolutely zero meaning meaning under EAR. it is true that US origin technology can still be caught, but it is absolutely possible, in the long run, to get goods produced in Malaysia below the threshold required to continue shipping to China
My point was that the R&D for all these tools is mostly in the US. Perhaps they can get under the EAR eventually, but there's other ways to restrict export still.
As a LAM employee this is false. The workforce is fairly diversified amongst locals (Malays, Chinese & Indian). Mandarin speaking is not a pre-requisite to be hired considering business language is English. Don't spread falsehood
Quite a coincidence that we have the same name. I readily accept that the overall workforce is diverse. The Government will have stipulated a minimum percentage of Malays. My point is that I can understand US concerns. It is also true that there are a lot of suitably qualified people in Penang and plenty more ready to relocate there from other parts of Malaysia as well as from China.
I think you are perhaps excessively worried about Anwar and his coalition being Pro CCP and therefore investments in Malaysia are a security risk. The country is a democracy has political cleavages, this government may not even last a whole term it doesn't even have a true majority. post election there was crisis in forming the government A new govt may form and pivot on policy. Essentially if you worry about investments in any country in Asia, then to some extent using that logic all of them are at risk including the closest that isn't Taiwan, Singapore (South Korea and Japan are treaty allies). No state in Asia is particularly thrilled about having to make a choice between security and economy, which is the choice they feel they are being forced to make by US China competition. LAM according to this piece seems fairly savvy and made a decision based on competitiveness. The way to deal with that is as you have laid out previously in other posts is ensure the US can compete as a destination by any and all means necessary.
Malaysia is signficantly different than Vietnam, Tawian, Singapore, in terms of their political relationship with the USA and China.
All states in Asia Pacific have very individualist relationships. Mahathir was very hostile, the relationship and orientation changed with Razak who we all know famously went down for corruption. Now its Anwar, his first call was to Erdogan after he formed govt as a predominantly Muslim country. (which is difficult to read) But fundamentally Anwar was neo liberal and a Washington Consensus type . The reason Mahathir imprisoned him, on trumped up sodomy charges, during Asian financial crisis, he wanted the IMF bailout as finance minister. His patron who was grooming him for his role was opposed, Anwar used that moment of weakness as leaders were falling and made a play for Prime Minister, lost and spent time in prison and then decades in the political wilderness. Now he has finally achieved his ambition. Malaysia ethnically diverse. Malays Tamils and Chinese. There is ethnonationalism at play that is hostile to minorities above all else Chinese who are resented for being seen as a community who made money at the expense of ethnic Malays which is why in his second stint as PM Mahathir became much more sectarian. The great hope with Anwar is he is more liberal and protective of minorities whether he is, remains to be seen. But most everyone in Asia Pacific with the exception of Laos and to a lesser extent Cambodia has security fears themselves, Malaysia has a territorial disputes in the SCS with China over the Spratly Islands. Every state is balancing in their own way. He hasn't been in the seat very long he is also constrained by a coalition he doesn't fully control. How he orients foreign policy is yet to be determined, I haven't really read anything yet to suggest what the position will be. His former orientation was neoliberalism and Pro US that may have changed given how the world is today and his own domestic political realities. Its a democracy, govts come and go and with it their policies. Philippines under Duterte leant towards Beijing. Under Marcos it seems to be pivoting to DC. Whatever your view on the US relationship I am not trying to change it, rather make the point everyone is significantly different from each other. One thing all states in Asia Pacific have in common where there are territorial disputes , is suspicion of growing Chinese militarization. No one in the region wants to be dominated, nor does any state in the region want to see US China conflict. How everyone is hedging is unique, with the two exceptions mentioned. If your desire is all or nothing, for US technology company investments in Asia Pacific, which is not unreasonable given your concerns over security, all states can be coerced by the US if necessary, but its only really treaty allies and Taiwan that will deliver all or nothing and as you know they too are doing so with reservations.
The relationship with Vietnam, India, Taiwian is very different than with Malaysia between the US and China no? I'd rather the US companies built in countries with favorable relationships to the US and negative to China.
Thanks for the history, some things I didn't know.
It is different, the point I was trying to make is everyone in Asia Pac has different relationships but similar concerns. They are managing in different ways., they also change how they manage Vietnam is an odd one, in that whilst it has unsettled territorial disputes, and fought a war with China, there is bonhomie at the leadership level. I think the first visit to Beijing after its recent party conference was the vietnamese communist party leader . Presumably the manufacturing investment flows from China drive that, I don't know. Scratch the surface though, the people themselves for the most hostile and mistrustful , not for a second do they trust China. I understand your concerns its hawkish and that's fair enough.
The point is not so much CCP or China or Chinese workers, as some of the comments pointed out. Let's not ignore the fact that Lam's customers are not consumers, they are TSMCs UMCs Samsungs Microns etc, and the bulk of their fabs are almost all located in Asia except probably Intel. Why didnt Applied Materials move as well? I don't know, maybe it is planning something too. As regard to skilled work-force, TSMC made similar comments on their delayed fab construction in Arizona. I am not sure policy tax or education is help much quickly, even if all the politicians can be persuaded to move in unison. There's a much easier solution: giving more immigration visas, encouraging young skilled engineers and workers to move their family from Asia to US or even Europe, if one plans to build fabs there. Lure them with higher income, better healthcare, better work conditions, freedom and better education for their kids.
I think you have missed something in the analysis. Manufacturing tools in Malaysia makes it easier for LAM to continue to supply the Chinese market in the face of American export controls
That doesn't really matter because the technology is still developed in the US and it is a US company. Us export control would still apply
the fact that it is "a US company" has absolutely zero meaning meaning under EAR. it is true that US origin technology can still be caught, but it is absolutely possible, in the long run, to get goods produced in Malaysia below the threshold required to continue shipping to China
My point was that the R&D for all these tools is mostly in the US. Perhaps they can get under the EAR eventually, but there's other ways to restrict export still.
The key point for LAM in Malaysia is that almost all (but probably all) key workers will be Mandarin speakers as well as being ethnic Chinese.
As a LAM employee this is false. The workforce is fairly diversified amongst locals (Malays, Chinese & Indian). Mandarin speaking is not a pre-requisite to be hired considering business language is English. Don't spread falsehood
Quite a coincidence that we have the same name. I readily accept that the overall workforce is diverse. The Government will have stipulated a minimum percentage of Malays. My point is that I can understand US concerns. It is also true that there are a lot of suitably qualified people in Penang and plenty more ready to relocate there from other parts of Malaysia as well as from China.