
Semiconductor sector holds steady for now
Tradeview Capital fund manager Neoh Jia Man said demand for local semiconductor products and services is expected to remain inelastic over the next few years, as customers struggle to find alternative suppliers quickly.
However, in the long run, they will still look to diversify.
'Customers will almost certainly seek to renegotiate prices, expecting local suppliers to help share the cost burden from tariffs.
'In the end, it depends on how big the local semiconductor companies' profit margins are and how much cost they can absorb,' Neoh told StarBiz.
'I wouldn't say there's no impact on demand, but for now, US customers don't have much choice – at least for the next few years. It would take time for them to fully establish alternative supply chains.'
The United States recently announced a 25% tariff on Malaysia, up from 24% previously, effective Aug 1, 2025.
By comparison, Vietnam will face a lower 20% rate. It was also reported that the US is working on an interim trade deal with India that could reduce its proposed tariffs to below 20%.
For sectors like semiconductors, the Trump administration has signalled since April that a special tariff rate would be applied. While some semiconductor products are exempted from the tariffs announced in April, it remains to be seen if this will continue beyond Aug 1.
Earlier this month, US President Donald Trump said he will 'soon' announce the tariff rate for the chip industry.
Vietnam's success in negotiating a lower tariff, along with India's push into higher-value semiconductor activities, may increase competitive pressure on Malaysia.
This may also accelerate the Malaysia+1 trend, where companies shift some operations out of Malaysia.
Neoh said Vietnam and India 'could pose serious threats' to Malaysian semiconductor companies over the long run, as both countries have the advantage in terms of labour costs and market size.
'Hence, if Malaysia is unable to negotiate a better tariff rate with the United States compared with these countries, then we will definitely lose more business to them over the next decade,' he said.
Phillip Nova senior analyst Danish Lim noted a silver lining: Malaysia's overall tariff rate remains lower than some neighbours such as Thailand, Indonesia and Cambodia.
'The tariff saga could also accelerate the China + 1 shift, with US fabless companies that still run test and packaging facilities in China likely to fast-track (moving) their facilities to Penang or Kulim.
'This would also apply to other countries that have higher tariff rates than Malaysia,' Lim added.
Neoh opined that the China+1 trend may still outweigh the Malaysia+1 phenomenon, as players continue relocating from China to Malaysia.
'As such, we are still a net beneficiary amid the ongoing tariff developments.'
While the risk of gradually losing market share is real, Neoh said the rate at which Malaysian chip companies gain market share from Chinese players might still outpace the rate at which India and Vietnam erode theirs, at least for the next few years.
Between India and Vietnam, Phillip Nova's Lim said the latter poses a bigger risk given its lower tariff rate of 20%, more competitive labour costs and proximity to China. Crucially, Vietnam also has one of the world's largest rare earth deposits, he added.
Nevertheless, he noted that both Vietnam and India have less mature ecosystems than Malaysia, particularly in the outsourced semiconductor assembly and test (Osat) space.
'Both still face challenges such as talent availability and infrastructure development. Hence, as the semiconductor space becomes more globally competitive, we believe market share erosion will be gradual, not abrupt.
'Volume relocations by US companies are very unlikely in the near term,' Lim said.
Lim is of the view that if the 25% tariff remains post Aug 1, Malaysia's electrical and electronics exports, and consequently semiconductor players, could take a hit, as supporting industries like raw materials, industrial components and machinery remain subject to tariff.
He added that the structural drivers for artificial intelligence or AI remains intact, and demand for Osat is likely to grow as more advanced chips hit the market.
'Provided the exemptions for semiconductors remain, Malaysia's key role in the global semiconductor supply chain is unlikely to take much of a hit, even with rising competition from neighbours like Vietnam,' he said.
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles

The Star
8 minutes ago
- The Star
M'sia proposes general border committee to resolve Thailand-Cambodia conflict, says Tok Mat
JERTIH: Malaysia has proposed that Thailand and Cambodia use the General Border Committee as a mechanism to resolve diplomatic disputes between the two countries, says Datuk Seri Mohamad Hasan. The Foreign Minister said that if the proposal is agreed upon during negotiations, leaders of the two countries should then welcome the proposals put forward by the committee. "This is because both Thailand and Cambodia want the other side to apologise first. I suggest they use the General Border Committee mechanism because each has its strength, and they just don't want to give in," he told reporters after officiating at the Besut Umno meeting on Saturday (July 26). Mohamad said he had been and would continue to be in contact with his counterparts, Maris Sangiampongsa of Thailand and Prak Sokhonn of Cambodia, to ask for the dispute to stop. "I have asked them to stand down so that a ceasefire can be held as soon as possible, because the two countries are friends, neighbours, and have long-standing family ties. We need to find a solution together through dialogue and diplomatic channels. "So, Insya-Allah, I will try to contact them again and also some friends there (in Thailand and Cambodia) who have influence," he said. Meanwhile, Mohamad mentioned that Wisma Putra had already issued a ban on Malaysians in both countries from going to or approaching the troubled areas. He said the Malaysian embassies in Bangkok, Thailand, and Phnom Penh, Cambodia, were always open for Malaysians to report any problems, including those related to the conflict. Media previously reported that Thai and Cambodian troops clashed last Thursday (July 24) in a disputed border area, with both sides pointing fingers at each other over who was considered to be the initiator of the latest confrontation. Tensions between the two Southeast Asian countries have escalated since May 28 following a bloody incident in the Preah Vihear area that killed a Cambodian soldier. The two countries have been in conflict over the 817-kilometre border issue that has not been resolved for several decades, which continues to affect their diplomatic relations. Prime Minister Datuk Seri Anwar Ibrahim was reported to have contacted Cambodian Prime Minister Hun Manet and Thai Acting Prime Minister Phumtham Wechayachai on Thursday to express Malaysia's concerns over the escalating tensions. – Bernama

Barnama
2 hours ago
- Barnama
AirAsia Launches Direct KL, Kuching–Pontianak Routes From Sept 12
BUSINESS KUALA LUMPUR, July 26 (Bernama) -- AirAsia Malaysia has launched two new direct routes connecting Kuala Lumpur and Kuching to Pontianak, the capital city of West Kalimantan, Indonesia, with AirAsia as the only airline operating international flights to the city starting Sept 12, 2025. In a statement, the company said the expansion follows AirAsia's rapid growth in Indonesia, including the recent launch of the Kuala Lumpur–Palembang route in July and the upcoming Kuala Lumpur–Semarang service in September. 'With the introduction of Pontianak, AirAsia Malaysia will operate to a total of 17 destinations in Indonesia through 223 weekly flights between the two countries, solidifying its position as the airline with the widest network serving Indonesia,' it said. The launch of these new routes strengthens regional connectivity and supports both governments' targets, including Malaysia's goal of attracting 4.3 million Indonesian tourists in 2025 and Sarawak's target of five million visitor arrivals by year-end. It also aims to contribute to Indonesia's national target of 16 million international arrivals, with Malaysia remaining one of its top source markets, it said. The new routes were unveiled during the Sarawak Travel Fair, organised by the Sarawak Tourism Board in Pontianak, and officially launched by West Kalimantan Governor Drs Ria Norsan. He said the new direct routes will not only facilitate easier access for travellers but also bolster trade, investment and tourism flows. 'West Kalimantan stands ready to welcome more Malaysian visitors while providing convenient access for Indonesians seeking business opportunities, leisure travel and medical services in Sarawak and Kuala Lumpur,' he said. Consulate of Malaysia in Pontianak, Consul Azizul Zekri Abd Rahim said the new connectivity marks a pivotal moment in fostering stronger bilateral ties between Malaysia and Indonesia, particularly West Kalimantan.


New Straits Times
4 hours ago
- New Straits Times
Expert: House arrest can ease prison crowding, but must include safeguards
KUALA LUMPUR: The government's move to introduce house arrest as an alternative to imprisonment has been welcomed as a timely measure to reduce prison overcrowding. However, an expert says its implementation must come with clear guidelines, targeted eligibility, and strong monitoring systems to ensure its effectiveness. The Human Rights Commission of Malaysia (Suhakam) former Commissioner and academic Professor Datuk Noor Aziah Mohd Awal said the initiative reflects a progressive step towards reforming the penal system, especially for low-risk and remand detainees. "I certainly welcome the government's intention to implement home arrest. "As a former Suhakam commissioner, I have been involved in efforts to address prison congestion and overcrowding. "Home arrest will definitely reduce the number of detainees. More importantly, it would allow individuals to continue working and supporting their families while serving their sentence at home under certain conditions," she told the New Straits Times. Home Minister Datuk Seri Saifuddin Nasution Ismail recently announced that the ministry is in the final phase of finalising a bill on house arrest. The proposal has already received policy approval and is aimed at curbing overcrowding in Malaysian prisons. Noor Aziah said that while house arrest offers a practical solution, it should be one of several alternatives in a broader reform framework. "It's definitely an effective measure, but just one option. We must also ensure that it applies to remand prisoners, who currently make up nearly one-third of the prison population." She proposed that the policy focus on specific categories of offenders to maximise its impact, especially those who pose minimal public safety risks. "We hope house arrest will apply to groups such as senior citizens (65 and above), women, and those with chronic illnesses." On enforcement, she expressed confidence in the Prisons Department, citing their existing systems for monitoring individuals on parole and those released with licence conditions. "I am sure the government is studying models from other countries that have successfully implemented home arrest," she added.