Kenanga Research is positive on the outlook for technology sector in Malaysia as it sees the data center and smartphone sectors entering more exciting growth stages.
The research house said in its recent note that Malaysia’s data center sector is poised for significant growth, with information technology (IT) capacity set to increase from 500 megawatt (MW) to over 3,000MW.
The AI server market alone, valued at MYR 97.8 billion ($22.81 billion), presents substantial opportunities for local technology players.
Following a 12-18 month data center construction phase, it expects the fit-out phase to start between the fourth quarter of 2024 and first half of 2025, offering significant opportunities for Malaysian companies to leverage on the rising artificial intelligence (AI) infrastructure.
Meanwhile, generative AI smartphones, which transition user interactions from touch to voice, are projected to experience more than a three-fold increase in 2024, with another 73 percent growth expected in 2025, according to Kenanga.
It is noted that the global smartphone market grew 6.5 percent year on year in the second quarter of 2024, reaching 285.4 million units.
This marks the fourth consecutive quarter of growth, although demand remains uneven across many markets.
While Samsung (18.9 percent market share) and Apple (15.8 percent) continued to lead the premium segment, Chinese manufacturers are expanding in the mid-and low-end segments to capture volume.
“The anticipated smartphone replacement cycle, along with generative AI smartphones – expected to shift interactions from touch to intelligent voice commands – will be the next major growth catalyst,” Kenanga said.
Cited IDC, it noted generative AI smartphone shipments are projected to surge by 364 percent to 234 million units in 2024 and reach 912 million units by 2028, with a compound annual growth rate (CAGR) of 78 percent.
Meanwhile, the automotive semiconductor market is expected to experience sustained long-term growth, driven by the increasing adoption of electric vehicles (EVs), advanced driver-assistance systems (ADAS), and autonomous driving technologies, said Kenanga.
It, however, noted the recent tariff hikes on Chinese EVs – 100 percent in the U.S. (effective August 1, 2024) and 27.4 percent to 48.1 percent in the European Union (effective later in 2024) — pose risks to supply chains.
“Malaysia’s neutral stance in the ongoing trade conflicts positions it as a potential alternative production hub, although lengthy validation processes in the automotive supply chain may delay the impact for local players,” it said.
Meanwhile, the global semiconductor market is projected to continue its strong growth trajectory in 2024 and 2025, according to Kenanga.
It is noted that as of July 2024, semiconductor sales jumped 18.7% year on year (which marks the sales increased for the fourth consecutive month) to $51.3 billion, driven by robust demand across the Americas, China, and Asia Pacific, while Japan and Europe experienced slight declines.
The World Semiconductor Trade Statistics (WSTS) forecasts 16 percent growth in 2024, led by the logic and memory segments.
By 2025, the market is expected to expand by another 12.5 percent to $687 billion, with memory and logic surpassing $200 billion each.
Other segments, including discrete, optoelectronics, sensors, and analog, are also expected to see moderate growth.
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