MSIA proposes RM100 million automation allowance limit for Budget 2027

The Malaysia Semiconductor Industry Association (MSIA) wants Budget 2027 to raise the Automation Capital Allowance qualifying expenditure ceiling from RM10 million to RM100 million. It has also proposed a tax deduction of 200 per cent for qualifying research and development (R&D) expenditure.

MSIA said the higher ceiling would more closely match automation and advanced manufacturing investment requirements in the semiconductor and electrical and electronics (E&E) industry. Its recommendations were prepared following member consultations and sent to the government before the budget’s tabling on Oct 9.

The association proposed an investment incentive framework tailored to new strategic investments, reinvestment and expansion by existing investors, and Malaysian-owned businesses pursuing global growth. It also sought stronger reinvestment support through Accelerated Capital Allowance and Reinvestment Allowance.

For R&D, MSIA called for more activities and expenditure to qualify for the proposed deduction. It sought support throughout the R&D lifecycle, covering engineering, design, testing, validation and technology development, as well as targeted grants, shared research facilities and closer collaboration between industry and universities.

MSIA president Datuk Seri Wong Siew Hai said policies needed to adapt as competition for investment, technology and talent intensified. Alongside attracting new investments, he said Malaysia needed conditions that enabled companies already operating locally to reinvest, expand and pursue higher-value activities.

Other priorities in the recommendations include reducing business costs and friction, addressing critical talent needs, updating the stamp duty framework and strengthening the domestic semiconductor ecosystem. MSIA said approved investment in Malaysia’s semiconductor subsector reached RM16.9 billion in 2025.