Arm Holdings plc has agreed to provide chip designs and technology to Malaysia over the next decade, aimed at catapulting the Southeast Asian country beyond chip assembly and into more valuable semiconductor production.

Malaysia, which packages roughly a tenth of the world's semiconductors, has inked a pact to pay the SoftBank Group Corp-owned UK firm US$250 million over a period of ten years for a slew of semiconductor-related licenses and knowhow.

The government plans to use that to aid local companies in designing their own chips and target semiconductor exports of RM1.2 trillion ringgit by 2030.

"We have always wanted to move from the back-end — which is on testing and assembly — to the front-end," Economy Minister Datuk Rafizi Ramli said in an interview with Bloomberg Television on March 4. "The government has taken a radical approach" to work with Arm "with the perspective of building the whole ecosystem".

With the deal, Malaysia is aiming to create as many as 10 chip companies with total annual revenue of US$20 billion, the minister said. The pact could help add one percentage point to the country's GDP.

Malaysia is already a key hub for chip testing and packaging, but the country has yet to make a meaningful foray into chip design. The country now hosts a number of chip-packaging facilities for Intel Corp, GlobalFoundries Inc and Infineon Technologies AG. Local chip gear makers are also muscling their way into the global equipment supply chain, attracting the likes of Applied Materials Inc to build factories in the country.

Rafizi hoped Malaysia would begin producing its own chips in the next five to ten years after it pledged at least RM25 billion last year to support the semiconductor industry.