PETALING JAYA: Malaysia faces the steepest growth risk in Asia from the United States’ looming sectoral semiconductor tariffs, as uncertainty over exemptions continues to cloud the sector’s prospects, says Nomura.
The Japanese investment bank noted: “Relative to our baseline gross domestic product (GDP) growth forecasts for 2025, Malaysia (minus 0.5 percentage points) and the Philippines (minus 0.4 percentage points) face the most significant downside risks, given their vulnerability to the incoming Section 232 chips tariffs.”
Nomura’s current baseline GDP growth forecasts for Malaysia are 4.4% for 2025 and 4% for 2026.
Last week, US president Donald Trump threatened to impose a 100% tariff on semiconductor imports, with exemptions for companies that have committed to or are in the process of building manufacturing facilities in the United States.
In April, the Trump administration launched a Section 232 investigation into semiconductors, which will assess whether imports threaten US security and allow the president to impose tariffs in response.
The administration has signalled plans to fast-track the review, with some reports suggesting results may be announced months ahead of the original December deadline – possibly as early as August or September.
Nomura said the longevity of Asia’s low effective tariff rate (ETR) hinges critically on the timing of US tariffs on pharmaceuticals and semiconductors.
Currently, it noted that given a higher share of exemptions, the ETRs are substantially lower for Singapore and Malaysia.
“Our analysis reveals that, in electronics, Taiwan’s exposure is the highest in the region, with its ultimate exposure to the United States reaching 2.8% of GDP.
“Malaysia follows at 2.3% of GDP, with Singapore, South Korea and Thailand (1.3% to 1.4% of GDP each) completing the top five,” the investment bank said.
Nomura also noted that while transitioning investment takes time in sectors like chips and pharmaceuticals, companies could face immediate margin pressure.
“An exemption from sectoral tariffs for countries investing in the United States could offer some short-term relief but presents a longer-term dilemma: accelerated investment in the United States could undermine their established growth models,” it said.
Meanwhile, OCBC chief economist Selena Ling said affected firms in the semiconductor sector may rush to recalibrate their supply chains, since the 100% tariff will likely apply to all manufacturing hubs (like Taiwan and South Korea), but exemptions are given at the firm level.
Hence the net impact is still unclear.
“That said, there are likely to be ripple effects on the supporting ecosystem in the broader electrical and electronics sector, especially SMEs (small and medium enterprises) and those in the precision engineering industry,” she told StarBiz.
UOB senior economist Julia Goh said the scope of the exemptions remains unclear at this stage.
She added that a portion of Malaysia’s semiconductor exports to the United States – particularly those involving US companies operating in Malaysia – could receive exemptions from the 100% tariff.
“Additionally, there are still questions regarding the local supply chain.
“If local suppliers provide inputs to multinational corporations that receive exemptions, will they also be eligible for similar exemptions?”
Goh highlighted that any added tariffs on wafers, substrates, or critical chemicals will increase the landed cost of upstream inputs.
Malaysian assembly and test plants would either have to absorb compressed margins or pass costs downstream, making final chips less price-competitive, she noted.
“Such uncertainties may delay capital investment in new facilities until the US trade rules are clearly defined, potentially slowing Malaysia’s progress up the value chain.
“To stay on course, Malaysia’s best strategy is to strengthen domestic capabilities, diversify sourcing, and pursue stable trade arrangements.
“Malaysia may win new orders if it offers stable, tariff-free access – but only if it has the upstream ecosystem to produce or import alternatives at scale,” she said.
In a report, UOB Research estimated an ETR of 24% on Malaysia’s semiconductor exports to the United States, based on certain assumptions.
“This assumes 68% of exports are taxed at 19%, about 11% at 100%, and the remaining 21% – linked to multinational semiconductor firms – are exempt.
“The estimated 24% rate exceeds the 19% reciprocal tariff, reinforcing the Investment, Trade and Industry minister’s concerns about risks to Malaysia’s competitiveness in the global semiconductor supply chain,” the report stated.
