Semiconductor trade group calls for big rise in tax breaks

 The semiconductor industry association calls for an increase from RM10 million to RM100 million in the automation capital allowance, and a 200% tax deduction for R&D.

The semiconductor industry said the government must provide the right environment for companies to continuously reinvest, expand and undertake more R&D.

KUALA LUMPUR:

The semiconductor industry has proposed raising the expenditure limit for the automation capital allowance by 10 times, and a 200% tax deduction for research and development expenditure be provided in the federal 2027 budget.

The Malaysia Semiconductor Industry Association said the proposals were needed in the face of intense competition for investment, technology and talent; it said government policies must evolve alongside industry needs.

Association president, Wong Siew Hai said: “We must also create the right environment for companies already in Malaysia to continuously reinvest, expand their operations, undertake more R&D and move into higher-value activities”.

The proposals are part of the association’s budget recommendations, which include recommendations to strengthen reinvestment incentives through accelerated capital allowance and reinvestment allowance, alongside enhanced support for automation and advanced manufacturing.

It proposed broader coverage of eligible R&D activities and expenditure under the 200% tax deduction, with stronger support across the full R&D lifecycle to encourage more engineering, design, testing, validation and technology development in Malaysia.

It also proposed targeted R&D grants, shared research infrastructure and stronger industry-university collaboration to strengthen domestic capabilities.

The association said Malaysia’s semiconductor subsector recorded RM16.9 billion in approved investments in 2025, reflecting the country’s continued importance in global semiconductor production networks. - FMT