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MALAYSIA’s technology sector is set to experience growth in earnings this year, driven by stronger demand and an overall recovery within the semiconductor space, despite the challenges posed by US tariffs, according to analysts.
RHB Investment Bank Bhd (RHB IB) forecasted a 37.2% year-on-year (y-o-y) increase in earnings for Malaysia’s tech sector in 2025, driven by a recovery in the semiconductor industry.
The bank highlighted that the immediate term could see a potential boost in earnings due to urgent order deliveries ahead of the upcoming US tariffs.
"We expect earnings to surge by 37.2% y-o-y in 2025, as we anticipate a stronger year from a recovery in the semiconductor space," RHB IB said in a research note. However, the bank also pointed out that results for the fourth quarter (4Q) of 2024 were largely below expectations, with four of the nine companies under its coverage failing to meet estimates. This was primarily due to margin compression, despite overall revenue growth and higher loadings.
The investment bank noted that the Bursa Malaysia Technology Index (KLTEC) had fallen to a four-year low after a sharp decline in recent months.
This was largely driven by weaker-than-expected company results, the risk of US tariffs, and a broader "risk-off" sentiment in the market.
Nevertheless, RHB IB observed a stronger y-o-y revenue growth trend in 4Q 2024, which it expects to continue as the recovery gains momentum into the 2025 financial year.
Despite ongoing uncertainties stemming from the US-China trade tensions, technology companies’ management teams have indicated stronger orders ahead. This is supported by a recovery in key sectors such as smartphones, artificial intelligence, servers, and power management integrated circuits.
RHB IB also expects earnings growth in 1Q 2025 to be relatively stable, with growth expected to be flat to slightly higher quarter-on-quarter. This is anticipated to be supported by a stronger US dollar against the ringgit and stable loading factors, despite the usual seasonal weakness in the first quarter.
In contrast, CIMB Securities Sdn Bhd has revised its sector net profit growth forecast to 16% this year, down from a previous estimate of 25%.
The downgrade was attributed to lower growth across all three sub-segments: automated test equipment, outsourced semiconductor assembly and test, and electronics manufacturing services.
This is despite a broader recovery within the semiconductor industry and inventory replenishment.
"However, demand recovery remains uncertain due to weakening consumer sentiment amidst escalating global economic uncertainties, further exacerbated by the introduction of new tariffs and the risk of a recession in the US," CIMB Securities stated. "As a result, downside risks to our sector earnings growth forecast persist."
CIMB also highlighted the new intellectual property collaboration between the Malaysian government and Arm Holdings Plc, which is expected to accelerate Malaysia’s push into front-end semiconductor integrated circuit design.
This collaboration could potentially lead to benefits such as foreign investment, ecosystem expansion, and the creation of high-value jobs.
"However, the success of this initiative will depend on effective execution, industry readiness, talent retention, and global competitiveness," CIMB warned.
"Companies with established market access will have a competitive edge in advancing beyond customer-specific solutions, successfully tapping into chip production, and enhancing Malaysia’s position in the global semiconductor value chain."
The ongoing adjustments and strategic partnerships are expected to play a crucial role in shaping the sector’s performance in the coming year. March 17, 2025