Analysts see Malaysia’s recent announced Budget 2026 will boost the country’s technology sector.
Kenanga Research said in a report on last Saturday that the government’s holistic push in artificial intelligence (AI) will complement tech upstream push.
“One positive surprise in terms of commitment shown is in holistically developing the eco-system especially in Government and industry adoption of AI, which is a game changer,
“This includes setting aside cross-ministerial allocation, and to implement an National Action Plan 2030,” said the research house.
It also said Budget 2026 aligned with its expectations, delivering favorable measures to accelerate the country’s National Semiconductor Strategy (NSS) ambitions.
“Budget 2026 reinforces NSS policy continuity and nudges the ecosystem upstream…We anticipate more pilot runs and IP spin-outs, a positive read-through for firms pivoting to higher-margin engineering services,” it added.
Kenanga also foresees a multi-year equipment/services cycle aligned to data-center and AI roll-outs.
It also highlighted that the tax deduction for AI/cybersecurity upskilling should prompt smaller electrical and electronics (E&E) suppliers to formalize AI-assisted QC and predictive maintenance, lifting productivity and margins over the medium to long term.
For the education funding for technicians, engineers and coding/AI tracks, it opined that over time, this should ease skilled-labour bottlenecks, improve utilization and cycle-times, and support migration into higher-complexity test and packaging.
Meanwhile, CIMB Securities said in a report on last Sunday that Budget 2026 reinforces Malaysia’s ambition to move up the technology value chain by channeling capital and incentives toward innovation-driven, higher-value E&E and semiconductor activities.
“We estimate that the combined funding pool of over MYR 1.2 billion ($280 millin)(via Khazanah, Retirement Fund Inc [KWAP], and BPMB) under the NSS and New Industrial Master Plan (NIMP) will primarily benefit outsourced semiconductor assembly and test (OSAT) and automated test equipment (ATE) players expanding into advanced packaging, system-in-package (SiP), and test-content co-development,” said the research house.
In addition, it opined that the establishment of the SemiconStart incubator by Malaysian Technology Development Corp Bhd (MTDC), in partnership with global players, represents a structural positive for Malaysia’s integrated circuit (IC) design ecosystem.
“By offering mentorship, discounted prototyping access, and early-stage financing, the initiative helps address key barriers such as high Electronic Design Automation (EDA) tool costs and limited foundry access, enabling domestic design houses to scale more efficiently,
“We believe this framework will particularly benefit fabless IC and intellectual property (IP) developers accelerating the development of upstream design capabilities,” it said.
It also sees the government’s moves to accelerate the national AI agenda will reinforce Malaysia’s positioning as a regional hub for AI and data infrastructure.
Concurred with Kenanga, it opined that the training fund should gradually alleviate the structural labor shortages that have constrained capacity expansion, particularly in precision engineering, automation assembly, and process design.
“Overall, we view the government’s proactive measures to expand incentives, promote industry collaboration and technology transfer, and strengthen the national talent pipeline as a meaningful step toward enhancing Malaysia’s semiconductor competitiveness and long-term ecosystem resilience,” it emphasized.
Hong Leong Investment Bank Research also said in a report on last Saturday that by deepening local-multinational corporation (MNC) collaboration, catalyzing private investment, and fostering talent development, the Budget 2026 measures aim to build a more resilient and competitive semiconductor ecosystem.
“In the longer term, we believe this will enhance Malaysia’s role in the global value chain,” the research house noted.
Maybank Investment Bank also said in a report on last Saturday that the outlook for the software segment is broadly positive, supported by ongoing national digitalization efforts.
“Measures such as full e-invoicing enforcement, expansion of MyDigital ID, and investments into AI, cloud, and blockchain infrastructure are expected to accelerate enterprise digital adoption and strengthen long-term demand visibility for local software firms,” said the research house.
PhilipCapital also said in a report on Monday that the government’s focus on strengthening the semiconductor industry through incentives, funding, and talent development bodes well for the tech sector.
“Efforts to promote IC design, research and development (R&D), and advanced packaging will help enhance Malaysia’s position within the global supply chain,
“Support from government-linked investment companies (GLICs), targeted financing, and the NSS are set to foster greater collaboration between local and international players, while start-up development and upskilling programs will drive innovation and sustain long-term competitiveness,” said the research house.
More importantly, it noted the MYR 8 billion ($1.89 billion) allocation for the development of AI infrastructure will cascade down the domestic supply chain over the longer term, benefiting local technology companies.
MBSB Research also said in a report on last Friday that the availability of more than MYR 1 billion ($240 million) in access to financing shows the government’s commitment to building up the high-impact sectors, including semiconductors.
“These will provide the much-needed financial support for
companies operating in the semiconductor industry, especially in meeting the capital expenditure requirement,” said the research house.
To recall, the industry is seeking funding to expand the offering, such as advanced packaging and go up the supply chain, especially in IC design, which has higher value added.
At this juncture, Malaysia’s local OSAT companies only have a minimal presence in the provision of advanced packaging.
Apart from financial support, MBSB also applaud the government for coming up with a program to support start-up companies to eventually market the products and/or services.
“The focus on talent would also help to create the necessary talent pool with the required skill, thus minimizing the concern of a shortage of talent,” said the research house.
Public Investment Bank, on the other hand, said in a report on Monday that one of the key highlights of Budget 2026 for the technology sector is the MYR 2 billion ($470 million) allocation to build a sovereign AI cloud.
Given the rapid growth in digitalization and increasing data traffic, the research house opined that there is a need for secure, sovereign data management in Malaysia to protect economic interests.
“We believe this could benefit Cloudpoint Technology, given its strong partnerships with various notable cloud services and software application providers, including ANT Group, Huawei Cloud, AWS, Alibaba Cloud, ServiceNow, and Microsoft Azure,” it said.
While the government is allocating resources on training for local talent development focusing on the high-tech and digital sectors, it believes this should start at earlier stage in the secondary education level.
“Various technology-centric universities from Taiwan, China and Singapore should also be invited to set up campuses in Malaysia in collaboration with the technology partners,” it added.