Hong Leong Bullish on Malaysia OSATs and Semiconductor Equipment Growth Amid Global Demand Surge and China+1 Tailwinds

Hong Leong Investment Bank Research forecasts a solid outlook for Malaysia's OSATs and semiconductor equipment players driven by robust global demand.

Structural tailwinds such as China+1 diversification and supply chain localization are key supporters of this positive momentum.

Key Structural Tailwinds Fueling Expansion

Relocation strategies under China+1 alongside localization efforts by global equipment makers enhance Malaysia's competitive edge.

Growth in optical and power semiconductors, coupled with Intel's resurgence, further bolsters the sector's prospects.

Resilient 2026 Guidance Despite Headwinds

Malaysian companies have provided strong 2026 guidance, echoing exceptional global semiconductor sales and equipment spending.

This upward trajectory offsets the Ringgit's sharp 4.6% appreciation since early 2026, limiting earnings revisions.

Historically, these firms trailed global peers due to minimal direct AI supply chain exposure, but current dynamics are shifting that narrative.

EMS Lags Amid Broader Risks

Conversely, electronics manufacturing services (EMS) players grapple with depressed 50-60% utilization rates and soft orders.

Geopolitical risks like the US-Iran conflict and a forecasted 13% decline in smartphone shipments add uncertainty to non-AI segments.

Despite macro overhangs, Hong Leong affirms confidence in the achievable growth for OSATs and equipment firms, paving the way for sustained impact on Malaysia's tech ecosystem.