PETALING JAYA: Are the days of the semiconductor export boom over?
Economists think Malaysia would have to brace for a deceleration in semiconductor exports, as global demand for electrical and electronics (E&E) start to normalise.
As final demand weakens, the slower growth seems unavoidable, even though there will be a continued global demand for chips as electronics turn more complicated and advanced.
The normalisation in semiconductor exports will have a significant impact on Malaysia’s external trade, considering that semiconductors formed 62% of the country’s total E&E exports with a value worth RM281.38bil in 2021.
Malaysia’s exports of E&E products in 2021 were valued at RM455.73bil and accounted for 36.8% of the country’s total exports.
CGS-CIMB Research economist Nazmi Idrus expects shipments of E&E products will start to come down in the quarters ahead.
“Global demand for semiconductors has eased as the sector’s business cycle likely peaked, indicating more normalised demand in the E&E product space,” he said in a note yesterday.
This factor, alongside a moderating trend in commodity prices and the stiffer competition faced by palm oil, would pose further headwinds to Malaysia’s exports, he said.
Meanwhile, AmBank Research chief economist Anthony Dass said downside risks are building up for Malaysia’s trade position especially related to the semiconductor industry.
In a note, Dass said the escalating tension between the United States and China over Taiwan will significantly impact the global economy.
“(This is) considering that China is a manufacturing powerhouse linked to economies everywhere, while Taiwan holds the lion share in global semiconductor manufacturing. For 2022, we expect the global trade volume to slow to 3.5% from 10.1% in 2021.
“This is reflected in the recent Purchasing Managers’ Index reading where new export orders among manufacturers declined for the first time since March.
“Companies such as Micron Technology, Nvidia Corporation, Intel Corporation and others have already warned of the same moving forward,” he said.
Taking these factors into account, Dass expects Malaysia’s external trade growth to slow down over the next coming months.
CGS-CIMB Research’s Nazmi said the exports growth strength seen in July might signal a inflection point. On a year-on-year basis, exports expansion in July remained robust at 38%, but was softer than the prior month’s growth of 38.7%. On a month-on-month basis, exports contracted by 8 .2% in July.
“On the trade balance perspective, lower July trade surplus marks a soft start for the third quarter. The concern is if the expectation of weaker export performance materialises, along with continued robust imports from the domestic recovery momentum, we could see a weaker goods surplus going forward,” he added.
Speaking to StarBiz, Sunway University economics professor Yeah Kim Leng highlighted that Malaysia’s trade performance is feeling the heat from the overall growth slowdown globally, especially in advanced economies like the United States, Europe and China.
“Strong headwinds are expected to build up in the coming months with output close to turning negative,” according to him.
Yeah noted exports will continue to register slower growth, leading to the narrowing of trade surplus.
“The narrowing of trade surplus is also in part due to the sustained imports that include capital goods to meet rising investment requirements.
“This can be viewed in a positive light as there has been a consistent growth of private investment from 2021.
“The pace of investments and the country’s gross domestic product in turn will increase on the back of higher imports of machinery and goods this year,” he added.