CIMB Research said it forecasts a broader semiconductor market recovery.
PETALING JAYA: The technology sector’s revenue is expected to grow by an average of 13% for this year and next, versus 1% in 2024, according to CIMB Research.
It said this would be mainly driven by a pickup in industry demand recovery, riding on the acceleration of supply chain diversification to Asean and inventory replenishment.
“We project the automated test equipment (ATE) segment to register the highest year-on-year (y-o-y) sector net profit growth of 41% in 2025, followed by outsourced semiconductor assembly and test (Osat) with 26% and the electronic manufacturing services (EMS) segment with 23%.
“We project the technology sector to register a three-year (2023 to 2026) core net profit compounded annual growth rate of 17%,” the research house noted.
The brokerage believes the Osat and EMS segments are likely to outperform the ATE segment in the first half of the year, as it expects the electrical and electronics (E&E) supply chain to focus on raising capacity utilisation and digesting existing capacity before moving into a new expansion cycle.
In December last year, the World Trade Semiconductor Statistics upgraded its global semiconductor sales growth forecast for 2024 to 19% from 16% y-o-y, but slightly lowered its 2025 growth forecast to 11.2% from 12.5%.
This revised outlook reflects robust demand in the logic and memory segments, fuelled by growing investments in artificial intelligence (AI) infrastructure.
The forecast aligns closely with the industry’s average growth estimate of 10.8% for 2025.
CIMB Research said it forecasts a broader semiconductor market recovery, led by inventory replenishment in the automotive, wireless and industrial segments.
“However, we anticipate that inventory corrections in the automotive and industrial segments will persist, with a bottoming out phase likely between the fourth quarter of financial year 2024 (4Q24) and 1Q25.
“Despite the near-term challenges, the electric vehicle (EV) market remains a key growth driver for the automotive sector,” it said.
The research firm is maintaining its “overweight” rating on the technology sector owing to its attractive risk-reward potential, driven by increased demand recovery visibility, favourable government policies promoting the E&E industry and improving investor sentiment.
“We like Malaysian Pacific Industries
Bhd for its exposure to the Malaysian Osat sector, supported by its growing industrial segment, which benefits from higher capital expenditure from cloud service providers driven by generative AI and recovery in the general-purpose server market.
“In the ATE segment, Genetec Technology Bhd is our top pick, leveraging opportunities in electric vehicle (EV) assembly and components manufacturing for a leading North American EV player.
“In the EMS segment, we like VS Industry Bhd as a proxy to supply chain diversification, owing to its growing manufacturing footprint across South-East Asia and margin-accretive potential from its vertical integration initiatives,” it said.
Among some of the potential downside risks for the sector include delays in global semiconductor demand recovery, escalating global geopolitical tensions, shortage of labour and engineering talents and appreciation of the ringgit against the US dollar.
