British semiconductor leader Arm Holdings reached a deal with Malaysia to enhance the Southeast Asian nation's capabilities in producing high-end semiconductors amid the ongoing US-China technology trade conflict.

Malaysia plays a significant role in the essential chip industry but has primarily concentrated on packaging, assembly, and testing services, which are the lower tiers of the market.

Under this agreement, Softbank-owned Arm is set to supply chip designs and other technologies, assisting Malaysia in transitioning to higher-value production such as wafer fabrication and integrated circuit design.

The Southeast Asian nation is paying $250 million over a decade to receive support from the British company, journalists were told at a briefing by Malaysia's economic ministry.

"Through a comprehensive partnership with Arm, we have conceived one of the most ambitious technological plans Malaysia has ever seen to pioneer Made-by-Malaysia AI chips," says Prime Minister Anwar Ibrahim.

These chips will be designed, manufactured, tested and assembled here, and sold to the rest of the world.

In addition, Arm will also establish its first office in Southeast Asia in Kuala Lumpur, aiming to expand the company's reach in the region as well as Australia and New Zealand, Anwar said.

"We won't let you down. This is going to be an extremely exciting 10 years and more," says Arm chief executive Rene Haas.

Malaysian Economy Minister Rafizi Ramli says the collaboration would enable Malaysia and Arm to build a complete supply chain in advanced industries such as AI (artificial intelligence) data servers, autonomous vehicles, IoT (internet of things), robotics and others. Around 10,000 local semiconductor engineers would be trained under the deal.