KUALA LUMPUR, March 17 (Bernama) — Malaysia’s technology (tech) sector earnings are projected to grow this year, riding on stronger demand and overall recovery in the semiconductor space amid the United States (US) tariff headwinds, said analysts.
In a research note today, RHB Investment Bank Bhd (RHB IB) expects earnings in the country’s technology sector to grow this year on stronger demand, with potential upside in the immediate term due to urgent order deliveries ahead of the impending US tariffs.
“We expect earnings to surge by 37.2 per cent year-on-year (y-o-y) in 2025, as we anticipate a stronger year from a recovery in the semiconductor space,” it said.
In the fourth quarter (4Q) of 2024, RHB IB said results were mostly below expectations, with four of the nine companies under its coverage missing estimates, mainly due to margin compression despite overall revenue growth and higher loadings.
The investment bank noted that the Bursa Malaysia Technology Index (KLTEC) tumbled to a four-year low after a sharp decline in recent months, driven by weaker-than-expected company results, the US tariff risk, and an overall risk-off sentiment in the market.
“However, we continue to observe a stronger y-o-y revenue growth trend in 4Q 2024, on a gradual recovery that we believe will gain pace moving further into the financial year 2025,” RHB IB said.
Despite uncertainties stemming from the US-China trade war, technology players’ management teams indicate stronger orders ahead, supported by a recovery in key segments such as smartphones, artificial intelligence, servers, and power management integrated circuits.
RHB IB also anticipates 1Q 2025 earnings growth to be flattish to slightly higher quarter-on-quarter, supported by a stronger US dollar against the ringgit and stable loading factors, despite the seasonal weakness of the first quarter.
Meanwhile, in a separate note, CIMB Securities Sdn Bhd expects 16 per cent sector net profit growth this year, down from its previous estimate of 25 per cent.
It said this is due to lower growth across all three sub-segments, namely, the automated test equipment, outsourced semiconductor assembly and test, and electronics manufacturing services, despite a broader semiconductor industry recovery and inventory replenishment.
“However, demand recovery remains uncertain owing to weakening consumer sentiment amid escalating global economic uncertainties, further exacerbated by the introduction of new tariffs and the risk of recession in the US.
“As a result, downside risks to our sector earnings growth forecast persist,” CIMB Securities said.
CIMB Securities also noted that the new intellectual property collaboration between the Malaysian government and Arm Holdings Plc will expedite Malaysia’s push into front-end semiconductor integrated circuit design, bringing potential benefits such as foreign investment, ecosystem expansion, and high-value job creation.
“However, success will hinge on effective execution, industry readiness, talent retention, and global competitiveness.
“Companies with established market access will have a competitive edge in advancing beyond customer-specific solution, successfully taping out chips, and elevating Malaysia’s role in the semiconductor value chain,” the firm said.
— BERNAMA
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