The Malaysia Semiconductor Industry Association (MSIA) said these initiatives were also essential to help industry players manage the rising cost of doing business.
MSIA executive director Andrew Chan said that apart from relief on stamp duty, there should also be targeted exemptions from the sales and service tax and some relief on electricity tariffs to reduce cost.
Chan said these exemptions and tax breaks should also come with incentives for investment in energy efficiency and automation.
There was also a need to roll out policies to diversify export markets and introduce a qualified refundable tax credit to offset the impact of the 15% global minimum tax (GMT), he said.
The GMT is an internationally agreed upon minimum tax rate.
Chan also called for speedier approvals for investment incentives to facilitate business operations.
He said the government should also offer incentives for science, technology, engineering, and mathematics education and implement targeted tax relief to retain engineers in Malaysia.
“In short, the industry hopes Budget 2026 will deliver targeted relief on costs, regulatory streamlining, talent incentives, and strategic investment tools.
“These measures would accelerate Malaysia’s ascent in the semiconductor value chain in support of innovation, resilience, and sustainable growth,” Chan told FMT.
He added that the association had shared these recommendations with both the finance and the investment, trade and industry ministries.
Chan’s proposals come on the heels of a hint by finance minister II Amir Hamzah Azizan on Monday that good news awaited the semiconductor industry, which he described as crucial, in the 2026 budget.
Chan said that MSIA appreciated the government’s recognition of the semiconductor sector as an important driver of Malaysia’s economy.
He added that the semiconductor industry should be accorded special strategic and priority status to maximise its growth potential.
Such recognition would “unlock enhanced fiscal and non-fiscal support”, including preferential workforce approvals, permits, and regulatory clearance as well as lead to more favourable loan conditions for capital-intensive projects.
“Elevating semiconductors in this way would send a strong signal of Malaysia’s long-term commitment to the industry, enhance resilience against geopolitical shocks, and accelerate the nation’s climb up the global semiconductor value chain,” he said.