Malaysia is drawing chip and data center projects as companies reassess Middle East plans and use the country as a more stable base for AI-linked manufacturing.

A Chinese manufacturer whose products are used in chip production is studying a plant in Sarawak after conflict in Iran disrupted an earlier Middle East proposal, Medhini Group, a Malaysia-based engineering consultancy, said.

The company and the exact products have not been publicly identified.

The International Monetary Fund described Malaysia as one of the world’s four largest net exporters of AI-related hardware, alongside South Korea, Taiwan, and Thailand.

Approved data center investment totalled 144.4 billion ringgit (US$35.3 billion) between 2021 and the first half of 2025.

Growth may also face infrastructure and compliance risks.

Water demand from data centers in Johor, Selangor, and Negeri Sembilan exceeds current infrastructure, prompting more selective approvals.

The US also planned AI chip curbs on Malaysia and Thailand over concerns about access from China.

Malaysia’s gross domestic product rose 5.8% in the second quarter, above a 5.2% consensus estimate.

Investors are also watching political risk after Prime Minister Anwar Ibrahim’s coalition lost ground in the Negeri Sembilan state election.

🔗 Source: Bloomberg