Trump policy risk remains a key overhang for Malaysia’s technology sector – Ta Securities

Ta Securities has highlighted three major factors potentially influencing Malaysia’s technology sector’s earnings in 2026 – the United States’ sectoral tariffs on semiconductors; global semiconductor sales and progress of National Semiconductor Strategy. The research house said in its recent report that US weighs sectoral tariffs on semiconductor imports remains a key overhang for Malaysia’s technology sector. “If US President Trump were to impose a significant sectoral tariff on semiconductor imports, it would pose a major setback for Malaysia,” it noted. It is noted that in 2024, Malaysia exported approximately MYR 120 billion ($29.67 billion) worth of electrical and electronic (E&E) products to the US, accounting for around 20 percent of total E&E exports. Notably, semiconductors alone represented MYR 60.6 billion ($14.98 billion) of this figure, underscoring the strategic importance of the sector in Malaysia–US trade. That said, Ta believes there may be a silver lining. “We believe the impact may be manageable, given that many US-based multinational companies in Malaysia likely have the financial capacity and flexibility to invest in the US to mitigate the effects of potential tariffs,” it added. It does not rule out the possibility that Trump may broaden the exemption criteria, given the complexity and interdependence of the global semiconductor supply chain. Meanwhile, Ta expects the positive momentum in the semiconductor market to sustain in 2026, with artificial intelligence (AI) related demand continuing to serve as the primary growth driver. Cited the World Semiconductor Trade Statistics Organization, it said global semiconductor sales are projected to reach $975.5 billion in 2026, representing a year on year increase of 26.3 percent. This growth will be led by strong expansion in the logic and memory segments, supported by AI driven applications and continued demand across computing and data center infrastructure. For the consumer side, the research house observed mixed sentiment across different segments. Shipments of personal computing devices are expected to grow 5.6 percent year on year in 2025, largely driven by the Windows 10 migration cycle, based on data from the International Data Corporation (IDC). IDC also forecasts that PC shipments will grow at a five-year compound annual growth rate (CAGR) of 1.5 percent, supported by sustained demand for high performance devices. In the automotive segment, global new car sales are projected to rise by 2.5 percent in 2026, according to the Economist Intelligence Unit. “The growth will be supported by stronger demand from developing markets, alongside declining electric vehicle (EV) prices as supply from China continues to increase, “Asia is expected to remain the largest new-car market, accounting for roughly 64 percent of global annual sales in 2026, which should help offset slower growth in Europe and North America,” Ta noted. However, worldwide smartphone shipments are expected to decline by 0.9 percent in 2026 due to component shortages and adjustments in product cycles. “The ongoing global memory shortage is expected to constrain supply and increase prices, which will likely have a greater impact on low to mid-range smartphones, as the lower end segment is usually more price sensitive,” said Ta. Ta also expects the Malaysian government to remain focused on implementing the National Semiconductor Strategy (NSS), a key initiative aimed at positioning Malaysia higher in the global semiconductor value chain. Since the launch of the NSS in May 2024, the government has introduced various initiatives and measures to strengthen the local semiconductor ecosystem. Among the most notable is the strategic collaboration with the United Kingdom based Arm Holdings plc, under which Malaysia will invest $250 million over ten years to acquire semiconductor design licenses and technology. This move is intended to accelerate the development of Malaysia’s chip design capabilities. Cited the latest data from the Ministry of Investment, Trade and Industry of Malaysia, Ta highlighted the NSS has attracted MYR 54.9 billion ($13.57 billion) in investments and facilitated the establishment of six local integrated circuit design companies in the the first half of 2025. In addition, the NSS has produced 13,679 engineers and skilled workers and created 25,430 jobs. During Budget 2026, the federal government has also reaffirmed its commitment to digital transformation and artificial intelligence by allocating substantial funding for research, development, commercialization, and automation initiatives, along with incentives for talent development. “Overall, these developments collectively bode well for the local technology sector,” said Ta. Despite the continued growth projected for global semiconductor sales, driven by robust AI related demand, the research house remains cautious in the local technology sector. “In general, the global AI boom has not significantly benefited Malaysian technology players, as most still rely heavily on legacy consumer, industrial, and automotive segments, with limited exposure to higher value AI related products,” it noted. Meanwhile, although the probability appears low, it opined that the implementation of hefty sector specific tariffs on semiconductor imports by the US without exemptions could materially affect end market demand and corporate earnings. “On a brighter note, the ongoing implementation of the NSS, together with the initiatives outlined under Budget 2026, is expected to support the development of the local technology sector,” it added. Malaysia’s technology up-cycle remains intact in the first quarter of next year – Kenanga