Economic uncertainty: Trump recently announced tariffs on importing semiconductors, with flexibility on some companies in the sector. — CHAN BOON KAI/The Star
PETALING JAYA: Malaysia’s semiconductor industry must brace for potential ripples from fresh tariffs that may be imposed by the United States, says an industry veteran.
While it remains uncertain what the new tariffs may entail, Malaysia Semiconductor Industry Association president Datuk Seri Wong Siew Hai said any announcement from the United States will have some level of impact on Malaysia.
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“It’s just a matter of more or less,” he said.
On April 13, US President Donald Trump said he would be announcing the tariffs on imported semiconductors, adding that there would be flexibility on some companies in the sector.
Wong pointed out that even before tariff tensions escalated, Malaysia had begun benefiting from the China Plus One strategy where companies diversify their manufacturing from China.
“Our position as a neutral and non-aligned country makes us a natural choice. We’re prepared to take up a bigger role in the global semiconductor supply chain,” he added.
However, Wong warned that while Malaysia currently enjoys a more favourable tariff rate, even a 24% rate is considered high.
On April 2, Trump announced reciprocal tariffs for countries around the world, including Malaysia, which was hit with a 24% tariff.
On April 9, he announced a 90-day pause for countries hit by the higher tariffs.
The Trump administration, however, exempted smartphones, computers and other electronics from its reciprocal tariffs.
Wong said that with the potential for supply chains to be impacted, Malaysian companies must be ready to respond proactively.
“If the final product is assembled in the United States but components come from elsewhere, tariffs may apply depending on where the parts originate.
“We need to study the supply chain thoroughly to see where we might be affected,” he said.
Wong also called for quick implementation of industry upgrades and for local companies to move up the value chain.
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“Accelerating value creation within the supply chain is key. That’s how we stay competitive – by going higher in value, not just bigger in volume,” Wong added.
Meanwhile, economist Geoffrey Williams said the current situation places the United States in a negotiating position to encourage countries, including Malaysia, to be flexible across all sectors or risk being targeted on semiconductors.
He said local semiconductor suppliers should consider the implications of new tariffs and not overreact towards them.
“It is imperative that the Malaysian government is flexible on removing barriers to trade across the board to avoid targeted tariffs on Malaysia’s semiconductor companies,” said Williams.
He said Trump’s announcement of a 90-day pause on reciprocal tariffs and an exemption on electrical and electronic products showed a willingness on the part of the United States to be flexible.
“This flexibility is clearly signalled in the possible semiconductor tariffs.
“So, it is too early to consider shifting production bases for such a highly complex industry.
“It would be very costly and even with tariffs, it is likely that Malaysia can compete on quality and price,” added Williams.
Shafiq Kadir, an equity analyst at CGS International, said the impact of the tariffs on semiconductors would be minimal, as re-shoring such an extensive back-end process to the United States is a tall order.
“It will take years to pull in investments and integrate the back-end production to the existing supply chain,” he said.
When asked if the move could put Malaysia in a more advantageous position compared to China, he said there is a possibility given the difference in tariffs.
“Malaysia’s established semiconductor ecosystem is also a key advantage that should attract foreign direct investments,” he said.
“The electronics manufacturing services sector could see further positive spillover from this trade diversion as it acts as a final assembly point for electronic goods.”
