PETALING JAYA: The potential curbing of artificial intelligence (AI)-related chip exports by the United States is expected to have a limited direct impact on Bursa Malaysia's technology index, while AI exposure remains a key growth driver for the technology sector.
In a research note, Maybank Investment Bank (Maybank IB) Research pointed out that the divergence in growth prospects between the electronics manufacturing services (EMS) and semiconductor sub-sectors stems from differing levels of exposure to AI and data centre trends.
"Although semicon growth is likely to be subdued in 2025, we expect the sector to fare better in 2026 as macro headwinds ease and AI-related initiatives reach full gestation," it noted.
RHB Research, while acknowledging that Malaysia’s tech supply chains are not deeply embedded in the global AI ecosystem, sees limited direct impact from potential AI-related chip export curbs by the United States.
“The potential curbing of AI-related chip exports may directly affect only a few local names in the supply chains of graphics processing unit (GPU) and central processing unit (CPU) servers. Hence, the direct impact on Bursa Malaysia technology index is limited and the local tech supply chains are insignificant in the global AI supply chain,” it noted.
Maybank IB Research maintained its “neutral” rating on the semiconductor sub-sector, highlighting several headwinds, such as limited AI-centric product exposure, reliance on soft end-demand from China, and margin compression due to overhead cost pressures.
"We expect the outlook for semicon (OSAT/ATE/FAS) to remain challenging in the near term," it noted.
Despite these challenges, Maybank IB Research expects no downside surprises in first half of 2025 (1H25) results due to sustained plant utilisation rates above breakeven levels.
However, the research house remains cautious about the broader sector’s growth trajectory, noting that "the confluence of these factors is likely to throttle sectoral growth."
In contrast, RHB Research retained its “overweight” stance on the technology sector, supported by expectations of a broad-based recovery in 2025.
Citing the Semiconductor Industry Association’s (SIA) forecast, the research firm said world semiconductor sales is now expected to grow by 19% year-on-year to US$626.9bil in 2024 and an 11.2% y-o-y this year.
“Early recovery indications in the automated test equipment (ATE) space and traction in the front-end semiconductor space bolster our expectations of a sustained sector recovery, supported by technology advancements and the replacement cycle,” RHB Research noted.
"A broad-based recovery is expected in 2025, with growth from all segments," it added.
Meanwhile, Maybank IB Research highlighted a “positive” outlook particularly for local EMS players due to global outsourcing trends and growing exposure to data centres.
“We expect the EMS sector’s earnings to rebound in 2025, on the back of increased inbound FDI from trade diversion, new product/technology initiatives centered around the data centre boom, and order wins from new/existing customers,” it said.
Maybank IB Research also expects domestic EMS players to secure price adjustments from key customers to offset impending labour cost increases, thus allowing for a smooth cost pass-through with minimal impact on margins.
RHB Research also expressed optimism about the technology sector, citing opportunities arising from the "China Plus One" and "Taiwan Plus One" strategies, alongside favourable foreign exchange (FX) movements.
"Various new opportunities and clientele gained from likely circumstances related to the potential tariff hike are among the positives,” it noted.
RHB Research noted that the technology sector’s valuations remain attractive, trading at 20 to 25 times 2025 forecasted price-to-earnings multiple, aligned with its five-year historical mean.
“The sector is under-owned after the steep sell-down since 2H24 and is likely to return to an accumulation mode, supported by attractive valuations,” it stated.
RHB Research’s top picks include Malaysian Pacific Industries
Bhd for its exposure to semiconductor recovery and new customer programmes, CTOS Digital Bhd for its digitalisation and financial technology exposure, and Coraza Integrated Technology Bhd for its earnings rebound potential.
"Datasonic Group Bhd should benefit from sustained strong demand for its solutions, while its average selling price hike should continue to buoy earnings," it added.
Maybank IB Research’s recommendations are more selective, with Frontken Corp Bhd and Sam Engineering & Equipment (M) Bhd highlighted as top picks in the semiconductor sub-sector.
"We prefer auxiliary front-end names with direct exposure to the continued growth in global foundry utilisation in 2025," it said.
As for the EMS sub-sector, Maybank IB Research named PIE Industrial Bhd and VS Industry as its top picks.
