Apex Securities said the tariff war could result in a realignment of orders.
PETALING JAYA: As the tariff war takes shape, a full-scale relocation of electronic manufacturing services (EMS) factories from Malaysia to the United States remains unlikely, according to analysts.
High costs, capacity constraints and the expected continuation of outsourcing activities are seen as the key factors preventing a full-scale relocation.
However, Apex Securities stated that the tariff war could result in a realignment of orders.
This is particularly for low-complexity consumer devices.
Meanwhile, Maybank Investment Bank Research (Maybank IB) expects shipment delays to affect EMS players due to ongoing US negotiations and subdued consumer electronics demand.
In the near term, the research house believes customers are expected to absorb tariff costs under existing agreements.
With a positive outlook for the EMS sector, Maybank IB said the ongoing tariff war may still put Malaysia in a favourable position compared to other Asean countries.
This is given the lower tariff rates imposed on Malaysia for the time being.
“We may still be able to drive foreign direct investment inflow into the region but we do foresee delays.”
Maybank IB advocates that investors position themselves into companies with diversified operations or products and services that have strong customer retention.
“However, valuations now appear more attractive, in our view,” it said in a note.
Based on its sensitivity analysis, Maybank IB said for every 10% decline in revenue, valuations could contract by up to 10% to 30%, depending on margin structures.
