AI-driven demand fuels uneven rebound in Malaysia's semiconductor industry

TA Securities projects a positive outlook for Malaysia's semiconductor industry but warns that the recovery will be uneven across subsectors. Strong structural drivers—including AI-related spending, expanding data-centre capacity and demand for advanced semiconductor applications—should boost integrated-circuit designers, optoelectronics firms and packaging and testing companies, especially those linked to AI and data-centre infrastructure.

Companies focused on traditional end-markets such as personal computers and smartphones may encounter a more challenging environment, partly because of rising memory prices. The firm expects the recent US interest-rate increase to have only a modest direct effect on Malaysian chip makers' earnings, though tighter monetary conditions could compress valuations, a risk that may be mitigated by a potentially stronger US dollar supporting export-oriented revenue. TA Securities maintains a neutral stance on the sector, naming Dagang NeXchange Bhd as its top pick and upgrading Unisem M Bhd and Malaysian Pacific Industries Bhd to buy, while holding Inari Amertron Bhd and trimming forecasts for Elsoft Research Bhd.