PETALING JAYA: Malaysia’s technology sector remains well-positioned to benefit from sustained artificial intelligence (AI)-driven demand for semiconductors, advanced packaging and optical connectivity.
However, the country must accelerate investments in higher-value capabilities to stay competitive, said BIMB Securities Research.
Maintaining its “overweight” recommendation on the sector, the research house said the long-term outlook remained constructive.
It sees the global semiconductor market potentially expanding from about US$800bil currently to US$1.5 trillion over the coming years.
However, the key challenge is no longer demand but execution.
This comes as regional competitors ramp up investments in advanced packaging, semiconductor design, materials and research and development (R&D).
“Malaysia risks being caught in the middle,” BIMB Securities said in its latest technology sector thematic report.
While the country has spent more than five decades building its assembly, testing and packaging capabilities, Singapore is re-entering advanced packaging, and Vietnam is strengthening its semiconductor ecosystem, while China continues to invest heavily across the value chain.
The research house said Malaysia’s strong export performance had yet to translate into sufficient domestic value-creation.
This is partly due to the industry’s reliance on imported components and technologies.
It added that the opportunity lay not merely in increasing export volumes, but in capturing a larger share of higher-margin activities within the semiconductor value chain.
The next phase of AI growth is expected to be shaped by bottlenecks in high-bandwidth memory or HBM, dynamic random-access memory or DRAM, advanced packaging and optical connectivity, including near-packaged optics and co-packaged optics.
Advanced packaging is becoming increasingly important as traditional transistor scaling becomes more difficult and expensive.
Technologies such as two-and-a-half-dimensional and three-dimensional packaging allow logic chips, memory and specialised accelerators to be integrated into a single package, improving performance and power efficiency.
This transition could benefit Malaysian companies involved in semiconductor equipment, precision engineering, automation, testing and materials, provided they invest in the necessary capabilities and talent.
BIMB Securities highlighted NSW Automation’s plans to expand its production footprint by about five times over the next year, alongside higher R&D and engineering investments, to capitalise on rising demand for precision dispensing equipment.
The research house said local technology companies generally had healthy balance sheets and access to capital markets at favourable valuations, giving them scope to invest in capacity and technology development.
It believes the sector’s recent pullback presented an attractive accumulation opportunity, naming Inari Amertron Bhd
(“buy” call with a target price or TP of RM2.90) and SkyeChip Bhd (“buy” call with a TP of RM3.79) as its top picks.
