Kuala Lumpur: Malaysia’s technology sector is expected to see an earnings increase this year, driven by heightened demand and a rebound in the semiconductor industry, even as US tariff challenges loom, analysts have suggested.
According to BERNAMA News Agency, RHB Investment Bank Bhd (RHB IB) predicts that the country’s technology sector earnings will grow due to stronger demand, with potential immediate-term benefits from urgent order deliveries prompted by upcoming US tariffs. RHB IB forecasts a 37.2 percent year-on-year earnings surge in 2025, underpinned by a semiconductor recovery.
In the fourth quarter of 2024, RHB IB reported that results largely fell short of expectations, with four out of nine companies under its coverage missing targets. This shortfall was attributed to margin compression despite revenue growth and increased loadings. The Bursa Malaysia Technology Index (KLTEC) dropped to a four-year low, impacted by disappointing company results, US tariff risks, and a general risk-averse market sentiment.
Nevertheless, RHB IB notes a positive year-on-year revenue growth trend in the fourth quarter of 2024, and anticipates this recovery will accelerate into the 2025 financial year. Despite uncertainties from the US-China trade war, tech firms’ management teams forecast stronger orders, bolstered by recovery in segments such as smartphones, artificial intelligence, servers, and power management integrated circuits.
RHB IB also projects that first-quarter 2025 earnings growth will be stable to slightly higher quarter-on-quarter, aided by a stronger US dollar against the ringgit and stable loading factors, despite typical first-quarter seasonal weakness.
In a separate analysis, CIMB Securities Sdn Bhd forecasts a 16 percent sector net profit growth for this year, a reduction from its earlier 25 percent estimate. This revision is due to lower growth across automated test equipment, outsourced semiconductor assembly and test, and electronics manufacturing services, despite a broader semiconductor industry revival and inventory replenishment.
CIMB Securities warns of persistent demand recovery uncertainties due to weakening consumer sentiment amid global economic uncertainties, compounded by new tariffs and potential US recession risks. The firm emphasizes ongoing downside risks to their sector earnings growth forecast.
The new intellectual property collaboration between the Malaysian government and Arm Holdings Plc is expected to accelerate Malaysia’s entry into front-end semiconductor integrated circuit design, potentially attracting foreign investments, expanding the ecosystem, and creating high-value jobs. However, CIMB Securities stresses that success depends on effective execution, industry readiness, talent retention, and global competitiveness. Companies with established market access will likely have an advantage in advancing beyond customer-specific solutions and enhancing Malaysia’s role in the semiconductor value chain.