Malaysia’s technology export boom has yet to translate into stronger competitiveness, wages and investment, as the surge has been driven largely by higher global demand for memory-related products rather than gains in market share, CGS International said on Tuesday.
The research house said in a note that Malaysia’s technology-related exports rebounded strongly in 2026, with exports rising about 55 percent year-on-year in September, while the monthly trade surplus reached a second record high of MYR 34 billion ($8.38 billion).
However, the growth was concentrated in electrical and electronics (E&E) products, particularly memory, solid-state devices and integrated circuit (IC) parts, which together benefited from rising demand linked to artificial intelligence (AI) and data center development.
Electrical machinery accounted for about 40% to 50% of Malaysia’s export growth year-to-date, with the US emerging as the largest contributor to the increase in shipments, adding about 10 percent to 15 percent to export growth.
CGS International said Malaysia’s widening trade surplus with the US was offset by deficits with China and Taiwan, reflecting the country’s role as a conduit within the global technology supply chain.
Despite the export surge, the research house said Malaysia had yet to demonstrate a meaningful improvement in competitiveness, based on its Revealed Comparative Advantage (RCA) analysis.
While Malaysia already has a competitive position in IC parts and solid-state devices, recent data showed no significant improvement in its RCA index despite the sharp increase in exports.
This suggests that Malaysia is largely benefiting from the expansion in global demand rather than outperforming other countries in the sector, it said.
Malaysia’s memory exports increased 243 percent year-on-year in the year-to-date period, broadly in line with the World Semiconductor Trade Statistics’ (WSTS) forecast of 249 percent growth in global memory sales.
CGS International noted that the export gains were driven mainly by higher volumes rather than pricing power, with memory shipment volumes in mid-2026 reaching about three times their 2023 levels.
It said volume-driven growth was dependent on manufacturing capacity, while pricing gains were likely to accrue mainly to front-end semiconductor producers rather than back-end manufacturers, where Malaysia has a stronger presence.
Nevertheless, the research house noted that Organization for Economic Co-operation and Development (OECD) Trade in Value Added data indicated that Malaysia was capturing a larger share of domestic value added, suggesting some progress in retaining more economic value from its participation in global supply chains.
The benefits of the export boom have also yet to become evident in the broader economy.
CGS International said employee compensation in the E&E sector had remained broadly flat since 2022-2023, while employment in the industry did not record a significant increase in the first eight months of 2026.
Investment approvals in the sector also remained within the RM5 billion to RM10 billion quarterly range, well below the MYR 40 billion to MYR 80 billion peaks recorded during the previous investment boom in 2021-2023.
However, the research house said the impact on wages, hiring and investment could still emerge, as these typically lag export growth.
Manufacturing capacity utilization rose to 87.7 percent in June 2026, its highest level since 2015, pointing to potential plant expansions and higher capital expenditure as companies respond to stronger demand.
Looking ahead, CGS International expects the current momentum in E&E exports to moderate, with WSTS forecasting global semiconductor sales growth to slow from about 90 percent year-on-year in 2026 to 27 percent in 2027.
Malaysia’s exports are likely to follow a similar trajectory, with its back-end position in the semiconductor supply chain potentially resulting in a lagged response to changes in global demand.
The research house said the government’s key challenge would be to sustain the sector’s growth beyond the current demand cycle by moving Malaysia up the semiconductor value chain, particularly into advanced packaging and semiconductor services.
It noted that the National Semiconductor Strategy reflected a more pragmatic approach, with more realistic targets for developing the industry and capturing a larger share of value added.
However, further growth could be constrained by potential US Section 232 tariffs, with the second phase of the tariff measures still pending, as well as shortages of skilled workers, electricity and other resources.
CGS International said these constraints could limit Malaysia’s ability to capitalize fully on the global semiconductor upcycle and attract further investment.
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