Amanda Siddharta
Research expert covering Malaysia
Manufacturing sector in Malaysia - statistics & facts
From packaged food products, everyday electronic devices, to passenger vehicles, the manufacturing sector has been integral to the economic prowess of a newly industrialized country like Malaysia since the 1980s . The manufacturing sector, which contributed more than 366 billion Malaysian ringgit to its gross domestic product (GDP) in 2023, was the second largest sector in Malaysia. This sector played a major role in the country’s rapid economic growth in the past decade.
Moreover, thanks to generative artificial intelligence (GenAI) like ChatGPT, the AI trend has caught the world’s attention. There is now a promising future for the use of AI technology in different aspects of life, which could mean more demands in the semiconductor market. From 2020 to 2023, the GDP from the manufacturing of electronic components and consumer electronics in Malaysia increased by nearly 20 billion Malaysian ringgit, and with a bright outlook in the technology sector, it could surpass more than 90 billion Malaysian ringgit in the coming year.
Nevertheless, instability in the political landscape and issues that revolve around race and religion pose a concern for foreign investors. Malaysia practices parliamentary democracy with constitutional monarchy. And in its 15th General Election in November 2022, the country faced the first ever hung parliament. After days of discussion to secure coalitions, Anwar Ibrahim became the current prime minister. Although his leadership favored economic growth and foreign investors, the foreign direct investment (FDI) net inflows to Malaysia decreased by around 8.5 billion U.S. dollars from 2022 to 2023.
E&E shows an electrifying future
The global chip shortage which occurred during the pandemic in 2020 and 2021 sparked an opportunity for the electrical and electronics (E&E) industry in the Malaysian manufacturing sector. Malaysia proved that it could compete in the global semiconductor market and positioned itself as a known producer of electrical components. The Southeast Asian country was the fourth largest exporter of semiconductors in Asia Pacific in 2023.Moreover, thanks to generative artificial intelligence (GenAI) like ChatGPT, the AI trend has caught the world’s attention. There is now a promising future for the use of AI technology in different aspects of life, which could mean more demands in the semiconductor market. From 2020 to 2023, the GDP from the manufacturing of electronic components and consumer electronics in Malaysia increased by nearly 20 billion Malaysian ringgit, and with a bright outlook in the technology sector, it could surpass more than 90 billion Malaysian ringgit in the coming year.
Opportunities amid concerns for investors
Malaysia’s strategic location in Southeast Asia, as well as its relatively stable economic climate make it an attractive country for foreign investors, especially in manufacturing. In 2023, the value of foreign investment in the manufacturing sector reached more than 128 billion Malaysian ringgit, more than five times the value of domestic investments.Nevertheless, instability in the political landscape and issues that revolve around race and religion pose a concern for foreign investors. Malaysia practices parliamentary democracy with constitutional monarchy. And in its 15th General Election in November 2022, the country faced the first ever hung parliament. After days of discussion to secure coalitions, Anwar Ibrahim became the current prime minister. Although his leadership favored economic growth and foreign investors, the foreign direct investment (FDI) net inflows to Malaysia decreased by around 8.5 billion U.S. dollars from 2022 to 2023.
The sector to drive job creation
The manufacturing sector in Malaysia employed nearly 2.8 million people in 2023, and the number has been steadily rising since 2015. This was approximately 17.5 percent of the Malaysian labor force in the same year. The current MADANI government has identified the manufacturing industry as a key sector for thousands of new jobs and ramped up the efforts to boost growth with the New Industrial Master Plan 2030. Should Malaysia manage to further develop the different industries in manufacturing, the country is on its way to become high-income economy.
