Analysts have foreseen risk-fraught restoration for Malaysia’s know-how sector in 2026, regardless of optimistic international progress tailwinds and bettering second half (2025) income progress momentum amongst home backend gamers.
CGS Worldwide mentioned in a latest report that regardless of third quarter (2025) file turnover supply and bettering orderbook visibility by heavyweights throughout the availability chain, margin compression from value elevation and better tax expenses continues to weigh on earnings progress – it expects this to proceed into 2026 with increased efficient tax charges (ETRs) anticipated in 2026 as pandemic period tax incentives expire.
“Outsized publicity to a globally weak automotive trade may additionally weigh on working margins for some gamers,” it added.
In the meantime, the World Semiconductor Commerce Statistics (WSTS) has forecasted international semiconductor gross sales progress to surge by 26 % yr on yr in 2026.
“Whereas international progress will largely be pushed by sustained demand robustness in main edge logic/reminiscence ICs, we anticipate home downstream gamers which can be primarily concentrated in lagging edge built-in circuits (ICs) (analogue, micro) in addition to discrete, optoelectronics and sensors to solely develop modestly – the WSTS expects these 5 sub-categories to develop by about 5 % to 10 % in 2026,” mentioned CGS Worldwide.
In the meantime, the analysis home expects a extra sanguine 2026 on the commerce coverage entrance with the latest signing of the USMART post-ASEAN Summit that successfully exempts US-bound semiconductor exports from Malaysia being levied the 19 % reciprocal tariff.
It famous a dovish US Federal Reserve easing rates of interest can also be accommodative for the cyclical, high-growth/beta know-how sector, albeit partially offset by the influence of a declining US greenback versus Malaysian Ringgit that might weigh on exporters’ toplines.
MBSB Analysis additionally mentioned in a latest report that whereas WSTS’ 2026 projection the worldwide semiconductor gross sales is predicted to develop at a quicker tempo, the analysis home considered that that is primarily contained to the unreal intelligence (AI) house.
“The macro elements are additionally one other component to maintain abreast of because of the potential disruption,” it famous.
Nevertheless, on the native entrance, it mentioned that Malaysian authorities are placing efforts to help and progress the semiconductor trade.
That is anticipated to ease among the difficulties the native semiconductor corporations are dealing with, it added.
Trying on the finish market, MBSB mentioned the smartphone market may face additional challenges in 2026, led primarily by the numerous hike in reminiscence value.
“Thus, we view that having presence within the premium smartphone section could be essential to alleviate this concern,” it mentioned.
On one other observe, it highlighted that outlook for the automotive section stays unsure at this juncture, owing to financial headwinds, commerce wars and provide chain problem.
“We opine that 2026 automotive manufacturing could also be stagnant at finest,” it mentioned.
Whereas AI stays the important thing catalyst, MBSB mentioned the native semiconductor corporations has restricted involvement at this juncture.
“We anticipate that there could possibly be a extra widespread optimistic spillover influence ought to the expansion of AI is being supported by frontier know-how,” it added.
Whereas the WSTS’s projected semiconductor progress is anticipated throughout all merchandise segments, MBSB famous that the tempo of progress different.
The IC product section is predicted to develop on the quickest tempo, supported primarily by reminiscence and logic at 39.4 % yr on yr and 32.1 % yr on yr respectively.
“We opine that AI and high-performance computing (HPC) could possibly be the key drivers for high-end logic course of chips, excessive bandwidth reminiscence (HBM) and excessive bandwidth flash (HBF),” MBSB mentioned.
In the meantime, in accordance with the analysis home, different segments are anticipated to develop at a extra modest tempo, with the optoelectronic segments are forecasted to develop by 5.7 % yr on yr solely.
This could possibly be because of the weak spot within the automotive purposes.
“On condition that the native outsourced semiconductor meeting and check (OSAT) corporations have minimal publicity to the AI provide chain at this juncture, we don’t anticipate a powerful restoration in 2026,” mentioned MBSB.
The analysis home additionally famous that the influence of the tariff struggle appears to have eased.
“Nevertheless, there may be now a quest for semiconductor self-sufficiency. That is primarily led by rising geopolitical stress, nationwide safety issues in addition to the earlier incident of provide disruptions emanated from the Covid-19 pandemic,” it famous.
In line with MBSB, there’s a geopolitical chessboard with the U.S, China, Taiwan, the European Union, Japan, South Korea and India being the important thing gamers.
It’s famous that the U.S has shaped strategic alliance with Japan and the E.U. to restrict China’s entry to the most recent cutting-edge applied sciences.
“On this regard, Malaysia has positioned itself as a impartial geopolitical hub to draw semiconductor funding amidst the worldwide tech rivalry,
“Nevertheless, we anticipate any escalation within the geopolitical struggle may have a unfavourable oblique influence on the native semiconductor trade,” it added.
Analysts see Funds 2026 to spice up Malaysia’s know-how sector
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