Malaysia is the world 's second largest exporter o f semiconductors to the U S A after Japan , and was the wor ld leader until 1986. Despite occasional fears that the industry's per f o rmance was unsustainable, product ion and exports have grown at rapid rates year after year. M a n y observers celebrate Malaysia's semiconductor industry as an example o f successful high-tech industrialization in the developing wor ld and predict further success. A n examination o f the industry's structural characteristics, however, reveals critical weaknesses that create important d i lemmas and place the industry's l ong-term prospects in doubt .