PETALING JAYA: While the semiconductor boom has sent Malaysia’s exports soaring to record highs, the benefits are yet to be seen on the ground.
CGS International (CGSI) Research head of economics Nazmi Idrus said in a note that there was limited evidence that Malaysia’s growing role in the technology boom was translating into broader economic gains.
“If Malaysia is capturing a larger share of the value-added technology economy, we would expect it to show up in the wider economy through employment, wages and investment,” the research house pointed out.
Separately, OCBC senior Asean economist Lavanya Venkateswaran told StarBiz that in retrospect, the benefits of the semiconductor boom remained concentrated within the industry, rather than being widely felt across the Malaysian economy.
Even so, the trickle-down effect of Malaysia’s growth can be gauged through employment and investment approvals in the electrical and electronics (E&E) sector.
CGSI Research pointed to broadly flat employee compensation in the E&E sector between 2022 and 2023, with monthly pay in semiconductor-related segments such as electronic components and boards hovering at RM4,000 to RM5,000.
In addition, E&E employment grew 1.5% year-on-year (y-o-y) in the first eight months of 2026 (8M26), compared with 1.1% in the corresponding period last year.
While this outpaced overall labour force growth of 1.1%, the research house said hiring had yet to accelerate significantly.
Meanwhile, investment approvals have remained below the RM40bil to RM80bil peaks recorded during the 2021 to 2023 boom, with recent quarterly approvals ranging between RM5bil and RM10bil.
Malaysia’s technology-driven export performance has, nevertheless, been exceptional, according to CGSI Research.
For 9M26, exports rose 34% to RM1.57 trillion, with E&E products accounting for nearly two-thirds of the increase.
E&E exports surged 49.5% to RM766.38bil, lifting their share of total exports to 48.8% from 43.7% a year earlier.
The sector also generated RM171.87bil, or about 74%, of the country’s RM232.38bil trade surplus.
Export growth accelerated to around 55% y-o-y in September, when the monthly trade surplus reached a second record high of RM34bil. However, CGSI Research cautioned that higher volumes, rather than stronger pricing power, were driving much of the growth.
Memory volumes in mid 2026 were roughly three times their 2023 levels, it said, adding that volume-driven growth depended on production capacity, while price gains accrued mainly to front-end producers rather than back-end manufacturers.
Malaysia’s strength in assembly, testing and packaging means higher chip prices do not necessarily translate into equivalent earnings gains for local manufacturers.
Export values also include imported wafers and components, meaning higher prices can inflate shipments without a commensurate increase in domestic value-added.
The surge in exports also does not necessarily signal a significant improvement in Malaysia’s global competitiveness.
CGSI Research’s Revealed Comparative Advantage or RCA analysis showed that Malaysia retained an advantage across major semiconductor categories, with scores above one.
Integrated circuit (IC) parts recorded the strongest advantage, followed by solid-state devices, logic and analog chips, and micro ICs. However, these indicators showed no unusual upward movements in recent months despite the sharp acceleration in exports.
This suggested Malaysia is benefiting from a global technology upswing, rather than experiencing a substantial improvement in its relative competitive position.
Still, the country has made progress in capturing more value domestically.
The OECD’s Trade in Value-Added (TiVA) 2025 report showed foreign value-added accounted for 46.8% of Malaysia’s gross E&E exports in 2022, higher than Taiwan and China at 28.8% each and South Korea at 31.6%.
Although the foreign content share remains high, it has declined since the early 2000s, suggesting a gradual increase in domestic content as local suppliers and supporting services develop.
CGSI Research said Malaysia had built a niche in assembly, testing and packaging while localising more inputs and services, helping to narrow its value-capture gap.
So, rather than leapfrogging directly into front-end semiconductor manufacturing, moving progressively up from the back-end is a more realistic path, it added.
Lavanya said Malaysia had begun investing in advanced packaging, chip design and higher-value manufacturing, while strengthening its domestic supplier and skills ecosystem.
“The clearest test of competitiveness would be rising global market share alongside higher domestic value-added, productivity and investment,” she explained.
The challenge is to sustain these gains as the global electronics cycle normalises.
CGSI Research also pointed out US tariff risks, capacity constraints and geopolitical disruptions could further complicate efforts to move up the value chain.
Looking ahead, Lavanya expects semiconductor exports to remain supportive in the fourth quarter of 2026, although growth should moderate in 2027 as the exceptionally strong global electronics cycle normalises.
“Still, high-capacity utilisation suggests the investment cycle has further to run, so capital expenditure and capacity expansion could provide a more durable domestic tailwind even as export growth slows,” she said.
CGSI Research added that Malaysia’s semiconductor boom remains a significant growth opportunity, but its lasting economic value will depend on whether rising exports translate into stronger domestic value-added, better-paying jobs, higher productivity and sustained investment.
