Malaysian Semiconductor Sector: Navigating Challenges Towards a Brighter 2024

In the ever-evolving landscape of the Malaysian semiconductor sector, the outlook for 4Q23 remains cautiously optimistic, despite the hurdles it has faced. MIDF, a reputable financial institution, maintains a neutral stance, citing the slow recovery of Global Semiconductor Sales (GSS) and the sluggish performance of end markets, such as smartphone sales.

However, the local semiconductor companies are expected to show improved sequential earnings in 4QCY23. Looking ahead to 2024, the sector anticipates a significant uptick, aligning with the World Semiconductor Trade Statistics (WSTS) forecasts. To be conservative, a more substantial recovery is expected in the second half of 2024, coinciding with a series of product launches, particularly in the smartphone market.

Semiconductor Sector

Challenges persist on the international front, with the ongoing tensions between the United States and China impacting the industry. The restriction on exporting AI chips to China adds complexity to an already intricate situation. Given this, microchip companies with manufacturing facilities in both Malaysia and China are favoured for their resilience, says MIDF in its report today.

The real turnaround is expected in 2024, with the semiconductor market projected to experience a robust rebound of +11.8% YoY. The Americas region is anticipated to lead the charge with a growth rate of +17.7% YoY, followed by Asia Pacific (+10.7% YoY), Japan (+7.8% YoY), and Europe (+7.7% YoY).

The economic environment in 2023 poses its own set of challenges, with trade numbers indicating a decline in exports and imports. The negative impact of monetary policy tightening in major economies, along with China’s slower-than-expected recovery, has affected Malaysia’s external trade performance.

Revival of Malaysia Exports

Nonetheless, this sector is expected to spearhead the revival of Malaysia’s exports in 4QCY23. The recovery of exports, particularly in semi conductor and other Electrical and Electronics (E&E) products, is driven by the absence of further monetary policy tightening in major economies and an improved outlook for China’s economic recovery, supported by stimulus measures.

Semiconductor exports, which comprise a significant portion of Malaysia’s E&E exports, remained robust, growing by +3.3% YoY in the first three quarters of 2023. This resilience contributes to the positive outlook for 2024.

The Malaysian semiconductor sector is poised for a resurgence, with the second half of 2024 looking especially promising. While challenges exist, the industry’s adaptability, diversified manufacturing presence, and the broader landscape of international trade contribute to its resilience and potential for a brighter future.

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