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MONDAY | JULY 14, 2025

Malaysia must strengthen semiconductor sector buffers

Manufacturing to maintain recovery momentum: MIDF Amanah KUALA LUMPUR: MIDF Amanah Investment Bank Bhd expects Malaysia’s manufacturing sector to maintain its recovery momentum, driven by im proved factory output and resilient domestic demand, though external headwinds remain a concern. The investment bank based its outlook on the latest S&P Global Manufacturing Purchasing Managers’ Index (PMI), which rose to 49.3 in June – the highest reading since October 2022 – indicating stronger production and a more moderate decline in new orders. “In other words, we expect Industrial Production Index (IPI) growth to pick up, as the improvement in manufacturing output reflects a continued, albeit temporary, boost to external trade. “Sentiment in financial markets also suggests expectations are beginning to move beyond tariff-related uncertain ties,” it said in a note. However, it cautioned that persistent weakness in mining output could con tinue to weigh on overall IPI performance in the months ahead. In a statement issued earlier, the Department of Statistics Malaysia re ported that manufacturing sales rose 2.4% year-on-year (y-o-y) to RM158.7 billion in May, easing from 4.7% growth in April. Chief Statistician Datuk Seri Dr Mohd Uzir Mahidin said the May growth was largely driven by the food, beverages and tobacco sub-sector, which recorded a 13% y-o-y gain, following April’s 10.8% expansion. MIDF Amanah expects manufacturing sales to continue expanding in the short term, supported by a temporary lift from the current pause in tariff hikes ahead of the implementation of new rates from Aug 1. Meanwhile, despite ongoing uncer tainties and the impact of US tariff hikes potentially constraining production in export-oriented sectors, the firm foresees that growing domestic consumption and encouraging progress in construction activity would continue to support pro duction in domestically oriented seg ments. “Following the moderation in overall IPI growth, we maintain our projection that Malaysia’s IPI growth will moderate to 2.0 per cent this year. “Continued external uncertainties, particularly from the impact of higher tariffs on final demand, could cause export-oriented companies to scale back production, in addition to fading support from front-loading activities as the US is expected to begin imposing reciprocal tariffs in August 2025,” it said. Nevertheless, MIDF Amanah expects the IPI to remain in expansionary territory, underpinned by stronger out put in industries with higher domestic exposure, supported by resilient house hold spending, a healthy labour market, and rising income levels. – Bernama

PETALING JAYA: With the United States still investigating whether to impose tariffs on semiconductors under Section 232 of the Trade Expansion Act of 1962, Malaysia is urged to bolster its semiconductor ecosystem to shield itself from any potential demand shocks. Although no tariffs have been formally introduced, the Malaysia Semiconductor Industry Association (MSIA) warned that downstream repercussions from such a move could ripple through local supply chains, particularly in manufacturing-intensive segments. “If US tariffs are imposed arising from the investigation, manufacturing-intensive semi conductor segments will likely face the most immediate pressure,” MSIA executive director Andrew Chan Yik Hong told SunBiz in a written response. Chan stressed that Malaysia must consider proactive policy buffers to maintain its global competitiveness if geopolitical tensions escalate. “Malaysia must continue to engage constructively with US trade counterparts to ensure we remain a trusted, neutral and strategic partner in the global chip ecosystem,” he said. “But more importantly, we must double down on what we can control.” Despite growing geopolitical headwinds, Malaysia’s electrical and electronics (E&E) sector, of which semiconductors are a major component, remains robust. From January to May 2025, E&E exports surged by 20% year-on-year, far outperforming the country’s total export growth of 5.5% during the same period. “This underscores the resilience and competitiveness of our semiconductor ecosystem,” Chan noted. However, he cautioned that the sector’s exposure to global demand fluctuations remains a critical vulnerability. A major shift in US trade policy could trigger ripple effects across Malaysia’s electronics o Industry association lists three main areas of focus – talent development, ecosystem resilience and supply chain agility Ű BY DEEPALAKSHMI MANICKAM sunbiz@thesundaily.com

Malaysia, which holds 13% of the global chip packaging and testing market, could face ripple effects if global demand shifts. – BERNAMAPIC manufacturing, testing and packaging in dustries, key pillars of its export economy. approved E&E investments between 2021 and 2024 as a sign that Malaysia is at a strategic sweet spot.

“Semiconductors are the building blocks of modern life. A slowdown in global demand, whether due to tariffs or macroeconomic uncertainty, would inevitably affect Malaysia’s semiconductor output,” Chan said. He outlined three major contingency areas that Malaysia must invest in to insulate itself from future shocks and position itself as a long term chip powerhouse – talent development, ecosystem resilience and supply chain agility. “We must develop world-class engineers, operators and innovators through deep industry-academic collaboration and remain the most attractive hub for semiconductor design, manufacturing and advanced pack aging in the region. “Malaysia must also expand and diversify upstream and downstream capabilities to absorb global shocks more effectively,” Chan said. Malaysia currently plays a key role in the back-end and increasingly mid-stream seg ments of the global chip supply chain. While the nation lacks front-end fabrication capacity at scale, its strong foothold in testing, assembly and advanced packaging positions it as a critical node in the Asia-Pacific semicon ductor landscape. Chan pointed to the RM319 billion in

“We must capitalise on this with the right policies, long-term vision and execution,” he said. “Malaysia can emerge stronger, not just weathering global shifts, but positioning itself as a semiconductor powerhouse for the next decade.” While US tariff decisions remain pending, Chan’s message is clear: Malaysia must prepare now, not react later. “The global semiconductor race is no longer just about who can produce the most chips. It’s about who can adapt fastest and Malaysia has what it takes to lead, if we stay focused,” he said. The US launched a Section 232 investigation in April to assess whether semiconductor imports pose a national security threat, potentially paving the way for tariffs. While no tariffs are in place yet, the move signals rising protectionism amid geopolitical tensions. Malaysia, which holds 13% of the global chip packaging and testing market, could face ripple effects if global demand shifts. As a key player in the back-end and midstream supply chain, Malaysia has seen over RM319 billion in E&E investments since 2021. The country is positioning itself as a resilient, strategic semiconductor hub in the face of global trade realignments.

Be innovative and forward-thinking, minister tells halal industry SANDAKAN: Malaysia continues to lead the global halal ecosystem but must remain competitive, innovative and forward-thinking to sustain its position. Entrepreneur and Cooperative Development Minister Datuk Ewon Benedick ( pic ) said “halal” is not solely about certification but also reflects values of quality, cleanliness, trans parency and integrity. “The Ministry of Entrepreneur and Cooperative Development (Kuskop) is committed to championing the growth of small and medium enterprises and cooperatives within the halal industry,” he said when opening the Kuskop Halal Success Programme here yesterday. He said the halal industry is no longer exclusive to Muslims but has evolved into a thriving global economy with a market value of more than US$3 trillion (RM12.76 trillion). Ewon urged entrepreneurs to embrace innovation and step beyond their comfort zones, seizing opportunities not only in the domestic market but also by building brands that can penetrate inter national markets. “Make full use of programmes like Halal Success. It is more than just a training initiative. It is a platform opportunity to build the future. Take advantage of the guidance provided, expand your networks, and use this opportunity to build market credibility,” he added. The Kuskop Halal Success Programme offers a comprehensive intervention platform, including technical, business and financing guidance for aspiring halal industry players. – Bernama