Malaysia's Selangor Mandates 30% Local Procurement for New Data Centers to Boost Domestic IC Design

Selangor is leveraging the rapid growth of its data center industry to create new demand for local integrated circuit (IC) design firms, requiring that new data center facilities source at least 30% of their procurement from domestic suppliers. The Selangor Information Technology and Digital Economy Corporation (SIDEC) said the local procurement requirement covers areas including IC design, cooling systems and related engineering services, with the aim of channeling a portion of data center investment toward local companies and strengthening the domestic supply chain.

The policy is part of Selangor's broader semiconductor development strategy, designed to ensure that local companies not only possess technical capabilities but also gain access to customers and market support so they can scale from the startup stage. In an interview with Selangor Media, SIDEC chief executive Yong Kai Ping said the state had deliberately built its support system around three interconnected pillars: funding, customers and market access. "Even with strong engineering capabilities, a company will struggle to grow if any one of these links is missing," he said.

Under the Second Selangor Plan (RS-2), the state aims to become an advanced industrial and innovation hub by 2030, reducing reliance on imports while strengthening local enterprises and driving sustainable wage growth through higher automation, a more robust domestic supply chain and high-value economic activities. Under its economic leadership mission, related measures include building an internationally benchmarked semiconductor center, establishing the Selangor Semiconductor Fund to invest in semiconductor companies, and developing the second phase of the IC Design Park in Cyberjaya to help Malaysian IC design firms build partnerships with global players.

Yong said the strategy is particularly important for achieving RS-2 targets, including creating 500 high-paying jobs through the IC design ecosystem and nurturing five companies valued at more than RM500 million each. The local procurement mandate is expected to deepen the spillover effects of data center investment into Malaysia's semiconductor and engineering sectors, giving domestic IC design and cooling technology firms a more reliable domestic customer base as they seek to compete internationally.