Semiconductor trade group calls for big rise in tax breaks

The Malaysia Semiconductor Industry Association has urged the government to significantly increase tax breaks for the semiconductor industry. The association proposed raising the expenditure limit for the automation capital allowance tenfold, and granting a 200% tax deduction for research and development expenses in the 2027 federal budget.

Association president Wong Siew Hai emphasized the need for the government to adapt policies to meet the industry's evolving demands, particularly in the face of fierce competition for investment, technology, and talent. He also stressed the importance of creating a conducive environment for existing companies to reinvest, expand operations, conduct more research and development, and transition into high-value activities.

The association's budget recommendations include measures to bolster reinvestment incentives through accelerated capital allowance and reinvestment allowance, as well as enhanced support for automation and advanced manufacturing. They also suggest broadening the scope of eligible R&D activities and expenditures under the 200% tax deduction, along with stronger assistance throughout the entire R&D process to stimulate more engineering, design, testing, validation, and technology development in Malaysia.

Additionally, the association called for targeted R&D grants, shared research facilities, and improved industry-university collaboration to bolster local capabilities. In 2025, the semiconductor subsector in Malaysia attracted RM16.9 billion in approved investments, highlighting the country's ongoing significance in the global semiconductor production networks.