Semiconductor industry seeks RM100 million automation allowance limit
Budget 2027 proposals also include a 200% R&D tax deduction, revised reinvestment incentives and easier access to specialised foreign talent.
The Malaysia Semiconductor Industry Association (MSIA) has urged the government to increase automation and research incentives in Budget 2027, alongside changes to talent access and business procedures. Its proposals precede the budget’s tabling on Oct 9.
MSIA wants the Automation Capital Allowance ceiling for qualifying expenditure increased from RM10 million to RM100 million. The association said the higher limit would reflect the scale of spending on automation and advanced manufacturing by semiconductor and electrical and electronics (E&E) companies.
For research and development (R&D), it sought a tax deduction of 200% on qualifying expenditure and wider eligibility for sector-related activities and costs. It also proposed dedicated grants for semiconductor and E&E research, shared infrastructure and closer collaboration between universities and industry.
MSIA said incentives should distinguish between new strategic investors, established businesses expanding their operations and Malaysian-owned firms pursuing international growth. It argued that policy should support reinvestment by companies already in Malaysia, as well as attract new investment.
The association also sought customs changes for Licensed Manufacturing Warehouses (LMW) and Free Industrial Zones (FIZ). These would permit R&D at qualifying facilities and exempt certain imported used machinery and testing equipment from duty and sales tax for higher-value E&E manufacturing.
On training, MSIA proposed dividing Human Resource Development Corp (HRD Corp) levies between company-led training at 65%, industry-led programmes at 15%, and strategic localisation and capability-development projects at 20%.
It also requested easier entry for specialised foreign talent when domestic expertise is insufficient, subject to knowledge-transfer requirements. Eligible international graduates of Malaysian universities in critical disciplines should be permitted to work locally for up to two years after graduation, it proposed.
Other requests covered updated stamp duty rules, more semiconductor incubators and shared research and testing facilities, and support for Malaysian businesses moving into higher-value supply-chain segments.
