While global semiconductor sales are projected to continue growing, TA Securities has maintained a cautious outlook on Malaysia’s semiconductor sector given the lingering uncertainties surrounding US trade policy.

The research house said in a note on last Friday that any substantial tariff on semiconductors would inevitably weigh on Malaysia as the industry is deeply integrated
into global supply chains.

According to TA, Malaysia is one of the world’s top six semiconductor exporters, accounting for roughly 7 percent of global exports and about 13 percent of the global assembly, testing, and packaging market.

In 2024, the country exported approximately MYR 120 billion worth of electrical and electronic (E&E) products to the United States, representing around 20 percent of total E&E exports.

Notably, semiconductors made up MYR 60.6 billion of that figure, highlighting the sector’s strategic role in Malaysia–US trade.

“Therefore, a steep tariff could undermine Malaysia’s export performance, as higher tariffs would drive up production costs, part of which may be passed on to customers, ultimately weighing on demand,” it said.

However, against the backdrop of looming tariffs, TA believes the impact will likely be less severe than initially anticipated, as roughly 65 percent of Malaysia’s semiconductor exports to the US come from American
firms operating in Malaysia, which could be eligible for exemptions.

“Generally, we believe there is a high likelihood that most major US-based multinational companies have the financial strength and capabilities to invest in the US to mitigate the impact of these semiconductor tariffs,” it noted.

On top of that, it expects more conditional exemptions to be introduced over time, given the complexity and interdependence of the global semiconductor supply chain.

“Overall, we believe it would be extremely difficult for the US to fully repatriate the semiconductor value chain in the near term, as building a self-sufficient ecosystem would likely take decades,” it added.

It is noted that US President Donald Trump stated that he will impose “fairly substantial” tariffs on semiconductor imports soon.

However, he indicated that exemptions may be granted to companies relocating production to the US or planning to invest in domestic manufacturing facilities.

To recap, semiconductors are currently exempt from reciprocal tariffs.

Earlier this year, the Department of Commerce initiated a Section 232 investigation into semiconductor imports, citing potential national security risks.

Trump had initially suggested a 100 percent tariff before later raising the possibility of rates ranging from 200 percent to 300 percent.

TA believes he is likely awaiting the outcome of the investigation before finalizing the tariff rate and implementation framework.

On the domestic front, TA expects the Malaysian government to remain committed to the National Semiconductor Strategy, which aims to strengthen the country’s position in the global semiconductor value chain.

It is noted that in July 2025, the global semiconductor sector sustained its upward trajectory, with sales registering another notable increase.

According to the Semiconductor Industry Association, global semiconductor sales rose to $62.1 billion in July 2025 (+3.6 percent month on month, +20.6 percent year on year), marking the 21st consecutive month of year on year growth, underpinned by sustained demand for artificial intelligence (AI) and high-performance computing applications.

The year on year growth was supported by all regions except Japan (-6.3 percent year on year).

The Asia Pacific/All Other led the growth (+35.6 percent year on year), followed by Americas (+29.3 percent year on year), China (+10.4 percent year on year), and Europe (+5.7 percent year on year).

By geography, July 2025’s sales increase of 3.6 percent month on month was primarily driven by the America (+8.6 percent month on month) and Asia Pacific/All Other (+4.9 percent month on month).

Meanwhile, the slowdown was observed in China (-1.3 percent month on month) and Japan (-0.2 percent month on month).

According to TAH, key downside risks for the sector include: i) U.S. policy risks that may weigh on economic growth and disrupt supply chains, ii) weaker-than-expected sales, iii) a weakening of the US dollar against the Malaysian Ringgit, and iv) a sudden spike in commodity prices.

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