Semiconductor sector still expected to grow

The Star

16 hours ago

PETALING JAYA: Malaysia's technology sector is bracing for near-term challenges from tariffs and currency volatility, yet the country's role as a critical node in the global semiconductor and electronics manufacturing services (EMS) supply chain is unlikely to diminish.
The coming rounds of development expenditure, particularly in Penang and Johor, are expected to reinforce Malaysia's competitiveness as multinational corporations continue to expand capacity in advanced packaging, front-end semiconductor processes and value-added EMS solutions.
Maybank Investment Bank Research (Maybank IB Research) noted that its recent visits to Penang and Johor reaffirmed Malaysia's role in the semiconductor and EMS supply chain despite near-term volatility from order deferrals and a weaker US dollar, which may impact its upcoming quarterly earnings.
'We stay 'neutral' on technology but favour front-end semiconductor exposure and players that focus on higher-value products,' the brokerage said.
Maybank IB added that its company visits took place before Malaysia's recent 19% tariff announcement, meaning 'near term impact visibility' remains limited until corporate earnings updates in the coming season.
It anticipates weaker quarterly results as firms grapple with tariff uncertainty and softer foreign exchange dynamics.
Yet, it maintained that easing tariff pressures or a potential US Federal Funds Rate cut in 2025 could spur a rotation back into growth counters.
Its top picks include Frontken Corp Bhd , with a target price of RM5.19; CPE EMS Bhd at RM1; and Aurelius Technologies Bhd at RM1.19.
Maybank IB Research observed that despite industry unease, stabilisation signs are emerging across the ecosystem.
'CPE EMS expects a rebound by late 2025, while Wentel Engineering Holdings Bhd is seeing stronger demand for security-screening equipment and is progressing with new product introductions for a front-end semiconductor client,' it noted.
Meanwhile, MClean Technologies Bhd anticipates sequential earnings improvement through 2025 on the back of higher hard disk drive orders and operational efficiencies.
Companies such as EG Industries Bhd , Supercomnet Technologies Bhd , Chemlite Innovation Bhd and Crest Group Bhd are also lining up new projects and recovery strategies, underscoring that growth momentum may accelerate from 2026.
BIMB Research, meanwhile, has also struck a cautious tone, maintaining its 'neutral' stance on the sector.
It flagged ongoing structural headwinds and unresolved tariff negotiations as core risks.
'There is no concrete conclusion of the semiconductor tariff, though we believe that 300% is not sensible.
'The outsourced semiconductor assembly and test business by nature, will remain anchored in Asia.
'As such, their near-term outlook hinges more on the ability to secure advanced packaging mandates rather than where tariff rates ultimately land, be it 25%, 100%, 300%, or never materialises at all,' the brokerage said.
BIMB Research also warned that investor sentiment could quickly reverse if tariffs are implemented at extreme levels.
'Investors have long braced for a semiconductor tariff, but consensus never pencilled in rates approaching triple digits.
'Furthermore, the artificial intelligence (AI) euphoria stemming from Nvidia-driven capital expenditure cycles, and hyperscale build-out has masked a good chunk of the headline risk.
'But for non-AI players like Malaysia, if the United States actually pulls the trigger at today's suggested levels, sentiment could snap back fast,' it explained.
Malaysia's prominent role as the United States' largest semiconductor exporter in 2024 makes the country particularly exposed.
BIMB Research pointed out: 'On paper, this implies Malaysia would need to absorb the highest nominal impact.
'However, this figure can be misleading, as it includes multinational corporations operating within Malaysia, many of which are possibly US-owned entities themselves.'
Nevertheless, listed firms such as Malaysian Pacific Industries Bhd and Unisem (M) Bhd face direct earnings risks given their higher US revenue exposure compared with peers like Dagang Nexchange Bhd .