The United States’ potential implementation of a 100 percent tariff on semiconductors would be negative for Malaysia’s technology sector, although there could be potential exemptions for certain multinational corporations (MNCs) that may renegotiate terms through strategic investment commitments in the US, a research house said Friday.

CIMB Securities said in a note that beyond demand risks, the uncertainty surrounding US tariff policy could delay new investments and expansion plans in Malaysia, especially for MNCs whose operations are closely tied to US end-demand.

“A prolonged overhang from potential tariffs may prompt US-based semiconductor and electronics firms to pause or reallocate capital expenditure,” it noted.

According to the research house, Malaysia’s exports of electrical and electronic (E&E) products to the US reached RM119.9bn in 2024, accounting for approximately 20 percent of Malaysia’s total E&E exports.

Notably, semiconductor exports to the US stood at MYR 60.6 billion ($14.31 billion), equivalent to roughly 20 percent of Malaysia’s total semiconductor export value in 2024.

US President Donald Trump has proposed a sweeping 100 percent tariff on all imported semiconductors.

However, companies that demonstrate a strong commitment to US manufacturing such as Apple are expected to be exempt.

Apple has announced a $100 billion investment under its American Manufacturing Program (AMP), which includes supplier partners such as Corning, Coherent, GlobalWafers,

Applied Materials, Texas Instruments, Samsung, GlobalFoundries, Amkor, and Broadcom, while TSMC is also listed on Apple’s website as part of its US expansion plan.

“While no implementation date has been set, we anticipate a wave of front-loading activity across the semiconductor supply chain in anticipation of the new tariff measure,” CIMB said.

It opined that this could provide a temporary boost to demand, followed by a potential slowdown once the tariff comes into effect.

“Among Malaysian names, automated test equipment (ATE) makers could face the most direct near-term impact given their relatively high US revenue exposure,

“That said, some may benefit over the longer term from increased domestic capacity build-up in the US,” it noted.

Overall, CIMB estimated that less than 10 percent of the outsourced semiconductor assembly and test (OSAT) sector’s revenue is ultimately shipped to the US, as most production volumes are routed through downstream assemblies in China, Mexico, or India, catering to demand in China, Europe, and the rest of Asia.

According to the research house, potential catalysts for the sector include better-than-expected demand recovery in the semiconductor industry, increasing supply chain diversification from North Asia towards Malaysia, new incentives and grants under the National Semiconductor Strategy (NSS), and weakening of the MYR against the USD.

Potential downside risks include delays in global semiconductor demand recovery, insufficient funding and incentives under the National Semiconductor Strategy (NSS), introduction of new tariffs for the semiconductor sector by the Trump administration, shortage of labor and engineering talent, and appreciation of the MYR against the USD.

In a separate note, CIMB said the 65 percent of Malaysia’s semiconductor exports to the US that originate from US firms operating locally — and a portion of the remaining 35 percent from firms with US affiliations—may still qualify for exemptions.

“Nevertheless, if tariff implementation is worse than the base case of 65 percent exemptions, every additional 10 percent of semiconductor exports affected could translate to a 0.29 percent drag on the Malaysia’s gross domestic product (GDP),” said the research house.

In the short term, it noted the US may need to recognize the complexity of the semiconductor supply chain and production relocation will take a considerable amount of time.

“We also believe that the US administration will be mindful of the potential impact of elevated tariffs on corporate earnings and consumer prices,” it said.

Over the longer term, however, it opined that companies may be compelled to relocate production, potentially impacting investment decisions in the future.

“While the headline tariff is aggressive, the exemption mechanism may partially shield Malaysia’s semiconductor sector, given the significant presence of US firms operating within the domestic supply chain, and other MNCs that are currently operating in both Malaysia and the US,” it said.

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