New technologies related to the Fourth Industrial Revolution (IR 4.0) are driving changes in global value chains (GVCs). These changes are already impacting Malaysia which has been deindustrializing and losing its competitive advantage in labour-intensive manufacturing to neighbouring countries, which offer lower labour cost while they are quickly improving their infrastructure. While this is a general trend for Malaysia, a notable exception is the state of Pulau Pinang, which has maintained its industrial base and shifted towards high-technology manufacturing. The research findings suggest that IR 4.0 technology adoption are used to improve productivity and quality, and rely on close collaboration with local technology suppliers. The development of local technology suppliers is an area in which Malaysia can move up to higher value-added activities within the GVC, including R&D and design. Importantly, workers are generally receptive to IR 4.0 technologies, as it improves the quality of their work. However, these technologies can also reduce employment for low-skilled repetitive work, which is an area in which Malaysia’s manufacturing competitiveness is already declining. To achieve successful IR 4.0 technology deployment, manufacturing firms need government support, especially in the area of skills and training, both to upskill current workers, and to ensure new workers have the right educational foundation. Training programs initiated by industry, but funded by government, appear to be successful in addressing some of the skills gaps. Viewed more broadly, the improving quality of work and increased productivity due to IR4.0 technology adoption, could play a role in making small- and medium-sized manufacturers more attractive as employers. This would help them hire and retain skilled Malaysian workers, who might otherwise opt to work for multinationals, or overseas.