BIMB Research said Malaysia is actively diversifying its semiconductor ecosystem.
PETALING JAYA: The technology sector is well-positioned to see a structural shift as the country moves up the semiconductor value chain, targeting higher-value segments such as integrated circuit (IC) design, advanced packaging, and artificial intelligence (AI)-focused chips.
Selangor and Penang are emerging as key hubs for this transformation, supported by government initiatives and private investment.
According to BIMB Research, Malaysia is actively diversifying its semiconductor ecosystem, with multiple states rolling out targeted initiatives to attract investment in IC design, advanced packaging, and wafer fabrication.
“Under the National Semiconductor Strategy, the country aims to transition from ‘Made in Malaysia’ to ‘Made by Malaysia’, with the ultimate goal of becoming a global leader in IC design.
“This reflects a strategic shift from traditional contract manufacturing toward higher-value segments of the semiconductor value chain, including design, advanced packaging, and AI-enabled chips,” the research house says.
BIMB Research maintains a “neutral” outlook on the broader technology sector but remains bullish on fabless semiconductor firms.
It noted that Selangor is positioning itself as a strong contender to Penang’s long-established semiconductor hub, highlighting that the Selangor Information Technology and Digital Economy Corp is spearheading the development of an IC design hub in Puchong, projected to become the largest in South-East Asia.
“This initiative involves collaboration between the federal government, global semiconductor companies, and venture capital investors,” BIMB Research noted, highlighting the multi-stakeholder approach.
The government is also proposing a 30% local content policy for data centres in Selangor to encourage the adoption of domestically designed chips, signalling a push to strengthen local capabilities while attracting global players.
Selangor’s IC design ambitions are complemented by advanced training programmes, including a partnership with UK-based Arm Holdings to license chip designs and train 10,000 engineers over the next decade.
A second IC design park in Cyberjaya, set to focus on advanced chip testing and design, is expected to come online by late 2025.
Meanwhile, Penang continues to reinforce its pioneering role, BIMB Research said.
Additionally, the Silicon Research & Incubation Space at GBS TechSpace in Bayan Lepas provides a 36,000 sq ft innovation centre to support startups and local IC design firms.
The Penang state government has committed RM60mil, with an additional RM50mil in federal co-funding, to provide subsidies for operating expenses such as rental, utilities, multi-project wafer services, testing, and talent development.
“Complementary programmes such as the Penang Chip Design Academy, established in 2025, aim to address the talent gap and build a sustainable pipeline of IC design engineers,” BIMB Research said.
The research house specifically highlighted the upcoming SkyeChip initial public offering as a key opportunity to capitalise on the accelerating global demand for AI-centric hardware.
“As demand for AI-specialised hardware continues to surge, SkyeChip’s focused technology stack and scalable execution model position it to capture a meaningful share of the expanding AI semiconductor market,” it explained.
Meanwhile, Maybank Investment Bank Research (Maybank IB) echoed cautious optimism following its recent site visits to Penang, observing that industry conditions appear to be improving into 2026.
“We returned from our recent visit to Penang on a road trip feeling optimistic, as tech hardware players suggest that industry conditions are improving into 2026,” the research house said.
Furthermore, it noted that persistent US dollar weakness against the ringgit remains a key risk, potentially capping earnings through margin compression in the near term.
The research house maintained a “neutral” stance on the sector, with Frontken Corp Bhd
remaining its top pick, with a target price of RM5.19.
Maybank IB also highlighted growth concentrated in AI and data centre applications, citing players such as Unisem (M) Bhd, UWC Bhd, and EG Industries Bhd, where dedicated capacities are projected to be filled.
While optimism persists, the research house warned of potential headwinds from US dollar volatility, rising raw material prices, and escalating labour costs, which could unevenly affect margins across the sector.
Overall, investors should prioritise firms with clear exposure to AI and high-value IC design, as these are likely to capture the strongest growth in the coming years, rather than chasing broader hardware names with more cyclical earnings.
“Selective positioning in fabless semiconductor companies and targeted infrastructure plays, supported by government initiatives, offers the best risk-reward balance in the current environment, especially given currency and input cost pressures,” one fund manager told StarBiz.
