PETALING JAYA: Domestic electronics manufacturing services (EMS) players remain well-positioned to benefit from the ongoing US-China trade war.
The recently announced blanket tariffs on the rest of world has reinforced Malaysia’s attractiveness as a manufacturing base compared with China, according to analysts.
Maybank Investment Bank Research (Maybank IB) said its recent visit to Penang for meetings with EMS and metal fabricators was insightful.
The research house said the sentiment on the ground remained largely “business as usual” despite ongoing tariff developments.
“Some EMS players appeared well positioned to benefit from current headwinds, while businesses tied to global semiconductor capital expenditure (capex) may face near-term challenges,” the research house said in a report yesterday.
Maybank IB said it had expected local EMS and metal fabricator players to frontload production ahead of tariff implementation.
This was evident prior to US President Donald Trump’s announcement of blanket tariffs on the rest of world.
However, with the rest of world now subject to similar tariffs (excluding China), most companies that the research house had met described the current environment as “business as usual”.
“Concerns over tariff absorption are believed to have largely been addressed, with most customers expected to bear the cost, though partial cost-sharing may still be likely,” Maybank IB noted.
Even so, the research house highlighted that corporates flagged potential production declines for newer products, and particularly products caught in the crossfire of US-China tariffs or delayed due to the global capex cycle.
“In our view, while near-term earnings remain supported by existing operations, short-term growth could be constrained by the slowdown in new product launches and global capex initiatives,” Maybank IB said.
The research house added that while global multinational corporations are likely adopting a wait-and-see approach due to tariff uncertainties, corporates on the ground remain optimistic on the ongoing China+1 diversification trend, and are now flagging the emergence of a Vietnam+1 strategy.
“This followed Vietnam’s exposure to some of the highest tariff rates among Asean peers during the initial phase, which has raised red flags for customers operating in the region,” Maybank IB said.
Despite the uncertain backdrop, the research house noted that encouragingly, several companies also highlighted positive progress in onboarding new customers amid ongoing trade tensions, suggesting longer-term tailwinds despite near-term cautiousness.
