PETALING JAYA: The outlook for Malaysia’s semiconductor sector is promising, but the recovery in demand is likely to be uneven across various subsectors according to TA Research.
The research house stated growth in the local tech sector is expected to be spearheaded by companies with direct exposure to the artificial intelligence (AI)-related supercycle and related infrastructure investments such as data centres (DCs).
“Conversely, Malaysian players heavily involved in traditional end markets, such as personal computers and smartphones, may face a more challenging environment as rising memory costs could dampen shipment growth,” it noted in a sector report.
The operating environment for tech companies is disrupted by potential risks from geopolitical tensions and a stronger ringgit.
On the macro front, Manulife Investment Management (MIM) noted the prospects for the Asian tech sector heading into the second half of financial year 2026 are highly constructive, driven by a powerful structural expansion and AI boom despite major central banks having turned more hawkish and looking at higher-for-longer interest rate environments.
In a webinar yesterday, the international investment firm, however, stated the energy shock has not had a material impact on global economic activity so far.
June Chua, head of Asia Equities at MIM said a recovery in Chinese company earnings as the country’s economic recovery broadens and the industrial cycle stabilises could present opportunities across areas such as AI, semiconductors, advanced manufacturing, and power equipment.
“Taiwan and South Korea continue to benefit from strong momentum in the AI ecosystem, where deep and resilient supply chains, combined with ongoing technological upgrades, are translating into tangible earnings growth across semiconductors and related industries”, she added.
“Across Asean, while near-term challenges persist, we are seeing coordinated policy efforts and strengthening domestic demand that could support a more durable recovery,” she said.
On a global scale, the semiconductor industry continues to be supported by the AI supercycle backdrop.
In May 2026, global semiconductor sales reached US$120.6bil, up 9.2% month-on-month and a staggering 104.1% jump year-on-year (y-o-y).
For the first five months of 2026, cumulative global sales rose by 77.4% y-o-y to US$502.1bil with the expansion primarily fuelled by the build-out of DC infrastructure to support generative AI workloads, which has led to a spike in demand for high-performance logic chips and high-bandwidth memory, TA Research noted.
“The AI buildout is creating strong support and opportunities for select real assets, including commodities directly linked to the expansion of tech infrastructure,” MIM added.
The World Semiconductor Trade Statistics forecasts that global semiconductor sales will increase by 90% to reach US$1.5 trillion in 2026, and this momentum is expected to carry into 2027, with sales projected to surpass US$1.9 trillion, supported by sustained investments in cloud computing and accelerated computing platforms.
TA Research maintained a neutral stance on the overall sector but identified Dagang Nexchange Bhd
(Dnex) as its top pick.
It has a “buy” call on Dnex with a target price (TP) of 66 sen a share. It is viewed as a compelling local AI proxy as its subsidiary, SilTerra, benefits from strong order flows for silicon photonics products.
TA Research also has a “buy” call on Elsoft Research Bhd with a TP of 27 sen a share and hold recommendation on Inari Amertron Bhd (TP: RM2.32).
It has a sell call on Unisem (M) Bhd (TP: RM3.45) and Malaysian Pacific Industries Bhd (TP: RM44).
