PETALING JAYA: After sitting out the artificial intelligence (AI) upcycle between 2024 and 2025, Malaysian outsourced semiconductor assembly and test (Osats) players have now reached their inflection point in 2026, as AI data centre (DC) power semi emerges as the new demand driver for the analog suppliers.
In a report on the technology sector, Hong Leong Investment Bank (HLIB) Research said two major shifts were driving this, namely, Nvidia Corp’s transition to 800 volts direct current (VDC) to support the step-change in rack power requirements, alongside rising silicon carbide and gallium nitride usage, given their superior efficiency in high-voltage workloads, and a wider adoption of vertical power delivery at the compute-board level.
“The thesis is playing out faster than we flagged early this year, with the analog supply chain tightening and integrated device manufacturers (IDM) system raising prices ahead of the 800VDC ramp,” it said.
HLIB Research further said Malaysia’s Osats largely sat out the first leg of the AI upcycle in 2024 to 2025, tracking instead the protracted analog downcycle as post-pandemic inventory correction weighed on soft auto/industrial demand.
As AI DC buildout accelerates, high-performance power management chips are emerging as the new demand driver for analog suppliers, therefore offering a new growth vector for Malaysia Osats as well.
HLIB Research added it flagged Unisem (M) Bhd
and Malaysian Pacific Industries Bhd as primary beneficiaries of AI DC power semi content expansion in its sector outlook at the start of the year.
“Despite the strong performance year-to-date, we do not think either stock fully reflects the earnings revision potential embedded in the 800VDC transition through 2027 to 2028 yet,” it noted, adding that an additional tailwind to this is the accelerating China+1 diversification, further benefitting Malaysian players.
A tech analyst with HLIB Research told StarBiz that AI DCs were not just storing data but they were training “for the future”.
“They are becoming the power plants of the digital age.”
HLIB Research further noted that Malaysia’s Osat sector has its roots in the analog supply chain, tracing back to early 1970s when global IDMs began offshoring assembly and test operations into South-East Asia.
Local Osats evolved as an extension of these IDMs and fabless companies, while higher-value logic and memory IC or integrated circuit packaging remained either captive in-house or concentrated within the Taiwan ecosystem.
Consequently, Malaysia’s Osat players naturally developed a structural tilt towards analog end-markets, with limited exposure to advanced packaging.
“As AI DC buildout accelerates, high-performance power management chips are emerging as a new demand driver for analog suppliers, therefore offering a new growth vector for Malaysia Osats,” it said.
HLIB Research added for Malaysia’s Osats, it sees it as a meaningful re-rating catalyst from 2026 onwards, with revenue growth expected to track the accelerating order momentum across their analog customer base.
