PETALING JAYA: Improvement in price adjustments and growing exposure to artificial intelligence data centres (DCs) within analogue semiconductors are positive factors supporting the local technology sector, moving forward.
Hong Leong Investment Bank (HLIB) Research in a note to clients said channel checks suggest selected outsourced semiconductor assembly and test (Osat) companies are already engaging customers on potential price increases from the second quarter of financial year 2026 (2Q26), with a higher likelihood of successful pass-through supported by tight global back-end capacity and ongoing China Plus One tailwinds.
“Nearly all major analogue integrated circuit (IC) suppliers have issued price adjustment notices (5% to 30%, effective 2Q26) over the past month – a rare, synchronised move that we view as a positive read-through for Osats,” added HLIB Research.
It also viewed the synchronised price hikes across analogue IC suppliers will make it easier for Malaysian Osats to push through their own price increases – customer acceptance is also more likely, given tight global back-end capacity and ongoing China Plus One supply chain diversification in favour of Malaysia.
Apart from addressing rising material costs, these adjustments will help mitigate foreign exchange headwinds, as the US dollar has weakened by 7% to 8% against the ringgit in 1Q26 versus the 2025 average, which was one of the key overhangs on the sector sentiment during the quarter.
Meanwhile, analogue semi-inventory remains elevated at approximately 165 days, more than 50% above pre-Covid-19 levels. According to HLIB Research, the pace of inventory digestion over the next one to two quarters will be the key indicator in assessing the sustainability of recent price hike initiatives.
“We look forward to the commentary from analogue semiconductor suppliers in the upcoming results season for guidance.”
For local Osats, the positive narrative is further reinforced by tailwinds from ongoing programme ramps and capacity migration into Malaysia by their key customers such as Infineon and MPS.
The research house, which has an “overweight” call on the sector, said it saw valuations now partly reset to more compelling levels and risk-reward skewing favourably.
“This also led to our buy upgrade on Unisem (M) Bhd
and Inari Amertron Bhd recently.”
These additions complement HLIB Research’s existing buy list and current top picks such as UWC Bhd and Frontken Corp Bhd.
