PETALING JAYA: After posting a record trade performance in the first half of financial year 2026 (1H26), economists caution that replicating the exceptional gains seen earlier this year could become challenging as favourable base effects fade.
While the electrical and electronics (E&E) sector remains Malaysia’s top export performer, accounting for nearly half of total exports and underscoring the country’s role in the global semiconductor supply chain, concerns remain over the quality of that growth.
Economist Doris Liew said Malaysia remains heavily concentrated in the downstream semiconductor segment, limiting its ability to capture higher-value activities such as chip design, intellectual property and advanced wafer fabrication.
“As a result, while exports may continue to expand, the gains may not translate into stronger domestic value creation or broader technology spillovers for local firms,” she said.
Liew added that Malaysia’s export mix is becoming increasingly reliant on E&E, semiconductors and energy-related products, sectors that generate relatively limited spillover benefits for employment and local supply chains.
During 1H26, trade expanded by 22.4% year-on-year to RM1.8 trillion, with exports rising 27.5% to RM971.59bil and imports expanding by 16.9% to RM824.44bil, resulting in a trade surplus of RM147.15bil, according to a report by the Investment, Trade and Industry Ministry.
In June 2026, exports of manufactured goods, which accounted for 88.4% of total exports, rose 47.3% to RM157.22bil, owing to robust exports of E&E products, petroleum products, as well as optical and scientific equipment.
The report highlighted that export growth was driven by Malaysia’s E&E products, with export value increasing by almost RM140bil, attributed to sustained global demand, technological advancements and continued adoption of digital technologies across major markets.
“Trade, exports, imports and trade surplus registered their highest values ever recorded for the January to June period, supported by Malaysia’s deep integration into regional and global supply chains,” it noted.
Meanwhile, Coface Asia-Pacific chief economist Bernard Aw pointed out that the semiconductor cycle remains supportive, particularly for artificial intelligence (AI)-related products, while stronger imports of intermediate and capital goods indicate that manufacturers are continuing to expand capacity rather than bracing for a slowdown.
“That said, the exceptionally strong growth rates seen in June are unlikely to persist as tariff front-loading fades and year-ago comparisons become more demanding.
“Geopolitical tensions also remain a wildcard, particularly if they disrupt global shipping or business confidence,” Aw highlighted.
Concurrently, Socio-Economic Research Centre executive director Lee Heng Guie said semiconductor exports face risks from renewed Middle East tensions, tighter export controls, geopolitical fragmentation and shifting trade tariffs.
“High bandwidth memory and advanced processor chips are strategic assets. Therefore, any severe regulatory scrutiny, supply chain chokepoints, and volatile market cycles would dampen revenue and export viability,” he said.
Lee also warned that AI-related demand in 2027 could face headwinds from a potential capital expenditure taper, a memory chip supply glut and weakening enterprise return on investment.
With that, economists noted Malaysia’s biggest opportunity also lies in its greatest challenge – capitalising on the global technology boom while moving up the semiconductor value chain.
Aw noted that the strongest investment pipeline remains concentrated in semiconductors, advanced electronics, electrical equipment, precision manufacturing and data centre (DC)-related industries.
However, he said that sustaining Malaysia’s export momentum will depend on continued AI-driven semiconductor demand, resilient global manufacturing activity and the impact of easing tariff- related front-loading in 2H26.
“The main risk is not a collapse in AI demand, but a moderation after the current investment surge,” Aw further pointed out.
“AI-driven demand is more durable because it is boosted by structural investment in DCs, cloud infrastructure and AI-computing.”
He said DCs are not major export products, however they catalyse investment across multiple export-oriented industries and deepen Malaysia’s role in global technology supply chains.
“This growth broadens out towards supporting components, such as analog chips, power management, industrial electronics and semiconductor manufacturing equipment,” he explained.
In turn, Malaysia’s technology supply chains are enhanced, fostering supplier clusters, technology transfer and higher value-added, technology-intensive exports, allowing Malaysia to continue benefiting even as the pace of AI accelerator demand normalises.
Separately, Aw said commodities export can remain resilient, but performance will differ across commodities.
“Outside electronics, liquefied natural gas (LNG) should remain relatively resilient due to steady Asian demand and tighter regional gas markets.
“Petroleum products, on the other hand, are likely to depend more on refining margins than crude oil prices, while traditional manufacturing exports should benefit if regional industrial production continues to recover,” he highlighted.
On a related note, Liew pointed out that Malaysia should capitalise on the current windfall from strong petroleum and LNG exports to diversify into higher-value manufacturing and services before the global transition to lower-carbon energy weakens long-term demand for carbon-intensive exports.
She urged that expanding services exports should also be a priority, as the sector remains comparatively underdeveloped.
Exports of manufactured goods soared by 30.5% to RM858.97bil compared to 1H25, buoyed by increased exports of E&E products and petroleum products, including optical and scientific equipment, in 1H26.
Meanwhile, mining exports rose 24.5% to RM54.84bil, led by higher shipments of metalliferous ores and metal scrap, including LNG.
Agriculture exports, however, slipped by 8.9% to RM48.44bil in 1H26, attributed to lower export value of palm oil and palm oil-based agriculture products, as well as natural rubber.
