PETALING JAYA: The challenging European semiconductor market outlook may represent some downside risk for local semiconductor companies, MIDF Research says.
The research report said in terms of revenue exposure, D&O Green Technology Bhd could be affected more as compared to its peers as about 27% of the revenue is generated from Europe.
“This is followed by Unisem (M) Bhd
at around 14%. Meanwhile, we see minimal direct impact on Inari Amertron Bhd as a majority of the revenue is derived from Malaysia, Singapore and China.
“Outside our coverage, we note that Malaysian Pacific Industries Bhd’s revenue could be impacted as around 24% of its revenue comes from Europe,” the research house said in a report yesterday.
MIDF Research said Europe is one of the regions affected by the trade war between the United States and China, which has spread to other regions.
The European semiconductor market is expected to grow at a slower pace of 3.3% year-on-year (y-o-y), based on the World Semiconductor Trade Statistics (WSTS) forecast, as compared with its peers which are expected to grow at a faster pace of between 9% and 15% on a y-o-y basis.
“Premised on this, European semiconductor firms are calling for Chips Act 2.0 to improve their competitiveness. Meanwhile, the European Union (EU) is expected to take an aggressive stance against the United States should the Trump administration place tariffs on Europe.
“We view this would not bode well for Europe as well as the broader semiconductor market,” the research house said.
MIDF Research said the call for Chips Act 2.0 is to complement the existing European Chips Act with measures that support of the industry across the entire supply chain.
Chips Act 2.0 is aimed at additional research and development funds and measures to attract new investment and increase European competitiveness.
“”In 2023, the EU finalised a €43bil bid to bolster the domestic semiconductor production.
“This is aimed at doubling the EU’s market share in semiconductor development, manufacturing and material supply chain from 10% to 20% by the end of the decade,” the research house said.
For context, WSTS, in its latest forecast, is anticipating the European semiconductor market for 2025 to grow at a slower pace of 3.3% y-o-y to US$53.8mil. Comparatively, its peers, that are the Americas, Japan and Asia Pacific, are expected to grow at a faster pace of 15.4%, 9.4% and 10.4% y-o-y, respectively.
MIDF Research said on the European end, higher tariffs in the United States would inadvertently increase the selling price of products in the latter.
The research house added that should the tariffs be insignificant, manufacturers could look into further improving supply chain inefficiencies.
“However, if the rate is considerable, there may be a need to do a reform on the supply chain network.
“This usually involves relocation of production locations from one country to another to avoid the new duties. Such relocation might create further uncertainties,” the research house said.
MIDF Research said the EU had a “strong plan” to retaliate against tariffs imposed by US President Donald Trump, though it would prefer to negotiate.
“Such retaliation is necessary to protect national interest. Note that next sectors facing tariffs would include semiconductors, pharmaceuticals and timber,” the research house said.
MIDF Research maintained a “neutral” rating on the technology sector overall.
Yesterday, Trump announced a 10% baseline tariff on all imports to the country effective April 5.
In addition to the baseline tariff, higher reciprocal tariffs ranging from 20% to 49% was also applied to specific countries based on their trade barriers and practices, and will come into effect on April 9.
