Chips The Key To Reviving Stalled India-Malaysia Ties

India-Malaysia economic ties arguably peaked with the signing of MICECA. Since then, efforts to expand commercial and investment ties have tapered. The two countries have signed several memoranda of understanding (MoUs) in various areas, including information technology, over the past decade.

That said, many have lacked follow-up and follow-through. Business forums such as the Malaysia-India CEO Forum also lost momentum after a promising start early in the last decade. The convening of the forum's 10^th meeting on February 7 signals fresh impetus driven by Modi's visit.

In relative terms, India-Malaysia trade has stagnated, with each country accounting for a shrinking share of the other's overall trade. Bilateral commerce also remains heavily concentrated in traditional sectors such as palm oil and mineral fuels, rather than diversifying into emerging industries like information technology and semiconductors.

During Modi's visit, both leaders acknowledged collaboration between their central banks to promote the use of local currencies in settling bilateral trade and investment, and encouraged industries to facilitate such transactions. However, its impact is unlikely to be substantial given the limited scale of bilateral trade.

Energized cooperation in semiconductors could particularly help to revive stalled ties. In 2021, the Indian government launched the Indian Semiconductor Mission (ISM) for manufacturing, packaging and design.

In his 2024 Independence Day speech, Modi called on India to become a global leader in semiconductor production. At the Semicon India 2024 summit, he reiterated the aspiration.

Malaysia accounts for about 7% of the global semiconductor market, ranking as the sixth-largest exporter, and aims to double that share to 14% by 2029. National policies support the ambition.

Under the New Industrial Master Plan 2030, the National Semiconductor Strategy (NSS) and the 13th Malaysia Plan, the semiconductor industry has been designated a“high-growth, high-value” sector, with emphasis placed on targeted investment, supply chain integration and innovation-led growth.

With its already extensive electronics manufacturing ecosystem, Malaysia could help India realize its aspiration to become a major global semiconductor industry player.

In that direction, in March 2025, Deputy Investment, Trade, and Industry Minister YB Liew Chin Tong visited India to explore potential cooperation opportunities. He expressed interest in participating in India's semiconductor growth via supply chain partnerships.

The two sides also agreed to develop structured engagements at government, business and industry association levels. Given the highly complementary nature of their ecosystems, semiconductor cooperation could become a key new pillar of future bilateral economic ties.