PETALING JAYA: Rising memory costs have exerted margin pressure on some semiconductor players, with a portion of these costs being passed through to end users via higher device prices.
TA Research said it remains cautious on the semiconductor sector despite continued growth projected for global semiconductor sales, supported by robust artificial intelligence-related demand.
It said the rising memory prices could potentially dampen end-user demand, particularly within the consumer electronics segment.
It applied a two-times discount to its target price-earnings ratio multiples across outsourced semiconductor assembly and test players with meaningful exposure to the consumer segment.
The persistence of elevated memory prices, driven by ongoing supply tightness, continues to weigh on the broader semiconductor value chain.
This, in turn, could dampen demand, particularly in price-sensitive consumer segments, resulting in slower upgrade cycles and softer shipment volumes.
TA Research believes the memory shortage is unlikely to ease in the near term, as meaningful capacity additions typically require at least 12 months to materialise.
This is after taking into account the timelines for facilities construction, equipment installation, and yield ramp-up.
However, the ongoing implementation of the National Semiconductor Strategy, together with the initiatives outlined under Budget 2026, is expected to support the development of the local semiconductor sector. TA Research retains its “neutral” stance on the semiconductor sector.
The key downside risks cited include the US policy risks that may weigh on economic growth and disrupt supply chains, as well as weaker-than-expected sales.
The weakening of the US dollar against the ringgit and a sudden spike in commodity prices, are also key downside risks.
For 2025, the semiconductor sector registered record sales of US$795bil, a 26.2% rise year-on-year (y-o-y).
The global chip market sustained its strong growth momentum into January 2026, with sales reaching US$82bil, representing a 3.7% month-on-month increase and a 46.1% y-o-y expansion, according to the Semiconductor Industry Association.
This marked the 27th consecutive month of y-o-y growth.
Growth in 2025 was broad-based across most semiconductor product categories, with logic and memory emerging as the key drivers.
TA Research said, looking ahead, the global semiconductor market is expected to achieve another record year, with sales projected to approach US$1 trillion in 2026.
