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New Straits Times
an hour ago
- Business
- New Straits Times
Some Malaysian chip exports may escape US 100pct tariff
KUALA LUMPUR: A portion of Malaysia's semiconductor exports may qualify for exemptions from the United States' 100 per cent tariff on imported chips, according to CIMB Treasury and Markets Research. Its head of research Michelle Chia and senior economist Azhar said this reflects the presence of US firms and other multinationals that depend on Malaysia's chip supply chain and have ongoing or planned capital investments in the US. "The 65 per cent of Malaysia's semiconductor exports to the US that originate from US firms operating locally, and a portion of the remaining 35 per cent from firms with US affiliations, may still qualify for exemptions," they said in a note. GDP IMPACT IF EXEMPTIONS FALL SHORT However, they said if tariff implementation is worse than the base case of 65 per cent exemptions, every additional 10 per cent of semiconductor exports affected could translate to a 0.29 per cent drag on the gross domestic product. They added that in the short term, the US may need to recognise the complexity of the semiconductor supply chain and that production relocation will take a considerable amount of time. "We also believe that the US administration will be mindful of the potential impact of elevated tariffs on corporate earnings and consumer prices. "Over the longer term, however, companies may be compelled to relocate production, potentially impacting investment decisions in the future," they said. PRE-ORDER SURGE EXPECTED Meanwhile, CIMB Securities Sdn Bhd analyst Mohd Shanaz Noor Azam said the planned 100 per cent tariff on semiconductors is expected to trigger a wave of front-loading activity across the global supply chain. He said the activity could provide a temporary boost to demand, followed by a potential slowdown once the tariff comes into effect, though no implementation date has been confirmed. He flagged the situation as negative for the sector, but did not rule out possible exemptions for certain multinational corporations (MNCs) that could renegotiate terms through strategic investment commitments in the US. "Among Malaysian names, automated test equipment (ATE) makers could face the most direct near-term impact given their relatively high US revenue exposure. "That said, some may benefit over the longer term from increased domestic capacity build-up in the US," he said. MOST EXPOSED MALAYSIAN FIRMS Mohd Shanaz said among local ATE players, Greatech Technology Bhd and Genetec Technology Bhd are the most exposed to the US market, with 65 per cent and 76 per cent of their FY24 revenue derived from US customers, respectively. Outsourced semiconductor assembly and test (OSAT) players such as Unisem (M) Bhd and Malaysian Pacific Industries Bhd derive about 67 per cent and 20 per cent of their FY24 revenue from US customers. Inari Amertron has minimal direct US exposure at less than one per cent, as most of its products are shipped to customer facilities in Malaysia and Singapore. "Overall, we estimate that less than 10 per cent of the OSAT sector's revenue is ultimately shipped to the US, as most production volumes are routed through downstream assemblies in China, Mexico, or India, catering to demand in China, Europe and the rest of Asia. "Within the electronics manufacturing services (EMS) segment, VS Industry Bhd and SKP Resources Bhd derive around 50 per cent and 20 per cent of their revenue, respectively, from US customers," Mohd Shanaz added. INVESTMENT SENTIMENT AT RISK Beyond demand risks, he said the uncertainty surrounding US tariff policy could delay new investments and expansion plans in Malaysia, especially for MNCs whose operations are closely tied to US end-demand. He said a prolonged overhang from potential tariffs may prompt US-based semiconductor and electronics firms to pause or reallocate capital expenditure. Exports of electrical and electronic products to the US reached RM119.9 billion in 2024, accounting for about 20 per cent of Malaysia's total E&E exports. Notably, semiconductor exports to the US stood at RM60.6 billion, equal to roughly 20 per cent of Malaysia's total semiconductor export value in 2024.
The Star
2 days ago
- Business
- The Star
CIMB: Portion of Malaysia's semiconductor exports may qualify for us tariff exemption
KUALA LUMPUR: CIMB Treasury and Markets Research economists believe that a portion of Malaysia's semiconductor exports may qualify for exemption from the United States' (US) 100 per cent tariff on imported chips. Its research head Michelle Chia and senior economist Azri Azhar said this is due to the presence of the US firms and multinational corporations (MNCs) that rely on Malaysia's chip supply chain and, at the same time, have ongoing or planned capital expenditure in the US. Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz told the Dewan Rakyat that 65 per cent of Malaysia's semiconductor exports to the US originate from US companies operating in this country. Chia and Azri said these exports, along with a portion of the remaining 35 per cent from firms with US affiliations, may still qualify for exemptions. "While the headline tariff is aggressive, the exemption mechanism may partially shield Malaysia's semiconductor sector, given the significant presence of US firms operating within the domestic supply chain, and other MNCs that are currently operating in both Malaysia and the US,' they said in a note late Thursday. According to reports, US President Donald Trump has threatened to impose a 100 per cent import tariff on semiconductors, with exemptions for US companies relocating production back to the US. Nevertheless, Chia and Azri noted that if tariff implementation is worse than the base case of 65 per cent exemptions, every additional 10 per cent of semiconductor exports affected could translate to a 0.29 per cent drag on the gross domestic product (GDP). They opined that in the short term, the US may need to recognise the complexity of the semiconductor supply chain and production relocation will take a considerable amount of time. "We also believe that the US administration will be mindful of the potential impact of elevated tariffs on corporate earnings and consumer prices,' they said. However, over the longer term, companies may be compelled to relocate production, potentially impacting investment decisions in the future, they added. The analysts said Malaysia exported RM437.5 billion worth of semiconductor products globally in 2024, with RM56.2 billion destined for the US. - Bernama
New Straits Times
2 days ago
- Business
- New Straits Times
Majority of Malaysian chip exports to US may escape 100pct tariff
KUALA LUMPUR: A portion of Malaysia's semiconductor exports may qualify for exemptions from the United States' 100 per cent tariff on imported chips, according to CIMB Treasury and Markets Research. Its head of research Michelle Chia and senior economist Azhar said this reflects the presence of US firms and other multinationals that depend on Malaysia's chip supply chain and have ongoing or planned capital investments in the US. "The 65 per cent of Malaysia's semiconductor exports to the US that originate from US firms operating locally, and a portion of the remaining 35 per cent from firms with US affiliations, may still qualify for exemptions," they said in a note. However, they said if tariff implementation is worse than the base case of 65 per cent exemptions, every additional 10 per cent of semiconductor exports affected could translate to a 0.29 per cent drag on the gross domestic product. They added that in the short term, the US may need to recognise the complexity of the semiconductor supply chain and production relocation will take a considerable amount of time. "We also believe that the US administration will be mindful of the potential impact of elevated tariffs on corporate earnings and consumer prices. "Over the longer term, however, companies may be compelled to relocate production, potentially impacting investment decisions in the future," they said. US President Donald Trump on Thursday has threatened to impose a 100 per cent import tariff on semiconductors, with exemptions for US companies relocating production back to the US. In response, the Investment, Trade and Industry Ministry (Miti) said 65 per cent of Malaysia's semiconductor exports to the US originate from US firms operating locally. The ministry also acknowledged that the exemption for semiconductor products is still subject to an ongoing investigation by the US Department of Commerce. Notably, Malaysia exported RM437.5 billion worth of semiconductor products globally, with RM56.2 billion destined for the US in 2024.
New Straits Times
01-08-2025
- Business
- New Straits Times
Malaysia dodges steep US tariff, still faces export pressure
KUALA LUMPUR: Malaysia may have clinched a deal with Washington to limit the incoming United States (US) tariff to 19 per cent on its exports, but analysts say the move still spells turbulence for trade flows and investor sentiment. CIMB Treasury and Markets Research said while Malaysia avoided the steepest end of the 10 to 41 per cent US tariff range, the 19 per cent levy remains significantly higher than pre-existing levels and is expected to weigh on export competitiveness. "The tariff reprieve offers short-term clarity, but it does not reverse the broader direction of US trade policy, which has clearly tilted towards protectionism," the research house said in a note. Malaysia, along with Thailand, secured the reduced tariff through direct negotiations with the US, while other countries like Canada and Mexico faced steeper or delayed penalties under President Donald Trump's new executive order. The tariff framework, effective Aug 7, targets countries based on their trade balances and bilateral deal status, with higher rates reserved for those without agreements or deemed uncooperative. CIMB Research said Malaysia's insistence on maintaining national economic policies, such as Bumiputera equity quotas, during negotiations likely curtailed the extent of tariff concessions. "Malaysia drew a red line on sovereignty and that limited room for further trade-offs," the firm said, adding that the final rate mirrors those granted to Vietnam and Indonesia in similar talks. The research house noted that while the 13th Malaysia Plan (13MP) provides a medium-term blueprint with fiscal reforms and a 4.5 to 5.5 per cent growth target, new trade headwinds could complicate its execution. In currency markets, the ringgit closed 0.6 per cent lower at 4.2650 against the US dollar, giving up earlier gains ahead of the 13MP tabling. The tariff news added pressure to Asian currencies more broadly, with the Thai baht and Indonesian rupiah also retreating. "Market reaction reflects both uncertainty around implementation and the geopolitical tone underpinning these measures. Investors are increasingly pricing in trade frictions as structural rather than transitory," CIMB Research said. Despite the downgrade in tariff severity, the firm does not expect a significant rebound in near-term investor flows, noting that capital markets remain sensitive to geopolitical risk. "Investors will likely stay on the sidelines until there's more visibility on enforcement and retaliatory risks." The Investment, Trade and Industry Ministry is scheduled to hold a press conference later today to issue an official response to the revised tariff. The US has set Aug 12 as the deadline to finalise its trade deal with China, which could further reshape regional dynamics.
