Malaysia’s technology sector is positioned to benefit from ongoing demand driven by artificial intelligence (AI) advancements, particularly in semiconductors, advanced packaging, and optical connectivity. However, industry analysts emphasize the need for the country to accelerate investment in higher-value segments to maintain its competitiveness amid intensifying regional competition.
BIMB Securities Research, which retains an “overweight” rating on the sector, projects the global semiconductor market could nearly double from its current value of approximately US$800 billion to US$1.5 trillion in the coming years. Despite robust demand, the primary challenge has shifted to execution, as neighbouring countries enhance their capabilities in advanced packaging, semiconductor design, materials, and research and development.
Malaysia has long specialized in assembly, testing, and packaging, building over five decades of experience in these areas. Yet, BIMB Securities cautions that Malaysia risks losing ground as Singapore revitalizes its advanced packaging industry, Vietnam strengthens its semiconductor ecosystem, and China continues massive investments spanning the entire semiconductor value chain.
The research highlights that Malaysia’s strong export performance has not fully translated into value creation domestically. A significant reliance on imported components and technologies limits the capture of higher-margin segments within the semiconductor supply chain. The country’s future growth hinges not only on increasing export volumes but on securing a larger role in these advanced stages.
Looking ahead, the next wave of AI growth is expected to be shaped by bottlenecks in high-bandwidth memory (HBM), dynamic random-access memory (DRAM), advanced packaging, and optical connectivity technologies—including near-packaged and co-packaged optics. Advanced packaging techniques, such as two-and-a-half-dimensional and three-dimensional packaging, are gaining prominence as traditional transistor scaling becomes more costly and complex. These innovations enable closer integration of logic chips, memory, and specialized accelerators within a single package, enhancing performance and energy efficiency.
For Malaysian companies involved in semiconductor equipment, precision engineering, automation, testing, and materials, this shift presents an opportunity—provided they invest in the necessary capabilities and talent. BIMB Securities pointed to NSW Automation’s plans to expand production capacity fivefold over the next year, coupled with increased R&D and engineering efforts aimed at meeting rising demand for precision dispensing equipment.
The research firm also noted that local technology firms generally enjoy strong balance sheets and favorable access to capital markets, positioning them well to invest in technological advances and expand capacity. Following a recent sector pullback, BIMB Securities views current valuations as attractive and identified Inari Amertron Bhd and SkyeChip Bhd as top investment picks, with target prices of RM2.90 and RM3.79, respectively.