Malaysia’s semiconductor industry, concentrated on assembly, test, and packaging (ATP), is relatively insulated from immediate supply disruptions caused by rising tensions in the Middle East, Maybank Investment Bank said Thursday.

While global wafer fabrication hubs face risks from liquefied natural gas (LNG) and helium shortages, Malaysia’s downstream role reduces direct exposure to energy and critical gas supply shocks, the research house said in a note.

Nonetheless, Malaysian players are not immune to indirect pressures, it noted.

It highlighted that rising logistics and raw material costs, driven by surging oil prices and potential disruptions along strategic shipping routes such as the Strait of Hormuz and the Red Sea, are squeezing profit margins, particularly for electronics manufacturing services (EMS) companies with historically thin operating buffers.

Over the medium term, it sees output disruptions in Taiwan and South Korea—the world’s wafer fabrication centers—could affect ATP volumes, delay capital expenditure cycles, and dampen demand for Malaysian downstream services.

According to the research house, Taiwan, home to major foundries, is highly exposed to LNG-related risks.

LNG fuels approximately 47 percent of the island’s electricity, almost entirely sourced from imports, with reserves covering only 11 days.

The complete decommissioning of nuclear power in May 2025 removes a key baseload buffer, meaning a prolonged supply disruption could halve electricity output, forcing fabs to rely on coal and constraining chip production.

It is noted that key LNG suppliers include Qatar and Australia, each contributing roughly 30 percent of imports, with Qatar’s share fully vulnerable to tensions in the Strait of Hormuz.

Meanwhile, South Korea, benefits from stronger energy resilience. LNG accounts for 27 percent of electricity generation, with only 15 percent of imports sourced from Qatar.

The country maintains 52 days of LNG reserves and 31 percent nuclear generation, allowing flexible substitution in case of supply interruptions.

Yet helium supply remains a shared risk, as South Korea sources roughly 65 percent of its helium from Qatar, said Maybank.

It is also noted that helium, though representing less than 1 percent of fabrication costs, is indispensable for wafer cooling, plasma processes, and leak detection in advanced chipmaking.

Maybank noted that any LNG disruption at Qatar’s Ras Laffan facility — which produces helium as a byproduct — would simultaneously constrain both electricity generation and critical process gas supply.

This single compounding event underscores how Middle East tensions could indirectly ripple to Malaysian ATP operators, even if they do not directly depend on LNG or helium imports, it added.

Near term, Maybank sees Malaysian semiconductor players are facing elevated operational costs.

Escalating freight rates due to higher oil prices and potential shipping route disruptions are raising logistics costs, while broader commodity inflation is driving up raw material prices, it said.

It sees EMS companies are particularly vulnerable, given their structurally thin margins and limited ability to pass on costs.

In contrast, service and maintenance firms such as are expected to be more resilient, as their earnings are less dependent on clients running at peak utilization levels.

Despite these pressures, it said Malaysia’s ATP sector benefits from its structural positioning.

Unlike wafer fabrication hubs in Taiwan and South Korea, it said Malaysia’s downstream role means its exposure to energy and helium shortages is indirect rather than immediate.

Any disruptions upstream would likely affect ATP volumes, delay shipments, and moderate demand, but the impact is expected to unfold over the mid-to-long term rather than abruptly, it added.

From a market perspective, Maybank sees Malaysia’s semiconductor growth remains uneven.

Legacy segments such as automotive, industrial, and consumer electronics continue to face cyclical pressures, while demand in artificial intelligence (AI) and data center-related applications remains robust.

It also noted that global technology capital expenditure freezes could further weigh on near-term order flows, affecting EMS and ATP operators who rely on steady production volumes.

Overall, Maybank maintains a neutral stance on the Malaysian semiconductor sector.

While Malaysia is structurally insulated from direct energy or helium disruptions, it said indirect pressures — rising logistics costs, raw material inflation, and potential upstream production constraints — pose challenges.

Investors and market watchers should note that Middle East tensions create not two separate risks but a single, compounding supply shock that simultaneously impacts electricity generation and critical process gases in wafer fabs, which in turn can ripple to downstream ATP operations, it added.

Malaysia’s tech hardware industry conditions to improve this year – Maybank