Due to the escalating tensions between the U.S. and China, particularly in the development of semiconductors for AI applications, Malaysia has emerged as a key location for chip manufacturing. As a result, tech companies worldwide are seeking to diversify their chip sources, and ARM Holdings is now attempting to capitalize on this opportunity.

On Wednesday, the SoftBank-backed chipmaker announced that it has entered into an agreement with the Malaysian government to enhance the country’s chip design ecosystem.

According to Reuters, as part of the agreement, Malaysia will pay ARM $250 million over a period of 10 years to acquire its chip designs and technology for local manufacturers. Specifically, the country will purchase intellectual property, including seven of ARM’s chip design blueprints, as stated by Economy Minister Rafizi Ramli, according to Reuters.

The partnership will also involve ARM training 10,000 engineers in Malaysia on its technology, as stated by the company.

ARM declined to comment on the $250 million investment from the Malaysian government. A representative of the Malaysian government did not respond to a request for comment prior to publication.

This move is the latest in Malaysia’s ongoing efforts to establish itself as a hub for chip manufacturing within the next decade. Earlier this year, Malaysia announced plans to manufacture its own GPUs to meet the demand for AI and data centers.

In May last year, the Malaysian government announced that it would allocate at least $5.3 billion in financial support and train 60,000 engineers as part of its National Semiconductor Strategy (NSS). The strategy aims to enhance the country’s current infrastructure, develop an advanced chip supply chain, and attract top global clients.

Malaysia has been involved in the chip industry for over 50 years and currently provides approximately 13% of global chip testing, assembly, and packaging services, according to a report by TrendForce that cited the Malaysian Investment Development Authority (MIDA).

In 1972, Intel established its first production facility outside the U.S. in Penang, Malaysia, with an initial investment of $16 million in an assembly site. In December 2021, the U.S. chip giant announced plans to invest over $7 billion to establish a chip assembly and testing factory in the country. Additionally, Intel is building its largest 3D chip packaging facility in Malaysia. Other companies, such as GlobalFoundries, which opened a new hub facility in Penang, Malaysia, in 2023, and Neways, a Dutch chip equipment maker, which plans to build a new plant in Malaysia, have also made significant investments in the country.

Furthermore, several tech giants, including Google, Microsoft, and Nvidia, have announced billions of dollars in investments in Malaysia since 2023, primarily focused on data centers, AI development projects, and cloud services.