The Trump administration’s stance and changes to its international trade policies could spell trouble for Malaysian technology manufacturing sectors, including the semiconductor equipment manufacturers. As the world’s largest economy decides to move manufacturing jobs back to its home soil, thousands of people are likely to lose their jobs here.
While stating that the new administration will create policies that won’t leave it at a disadvantage, the US withdrawal from the Trans-Pacific Partnership (TPP) and its protectionist policies will likely hurt export manufacturing economies such as Malaysia, particularly those in the technology sector, are going to be in for a rough ride.
Experts warn to stay clear of tech sector.
While the fallout of the Trump administration’s new policy has yet to not cause any significant fall in share prices, experts are warning investors to be careful about putting their money in the semiconductor equipment and technology sector.
Hong Leong Investment Bank Research (HLIB) says that the local tech industry is vulnerable to the US decision to move jobs back compared to other sectors of the economy, and that resource-based exports are less likely to be adversely affected by the move.
On the other hand, the US is a leader in technology and has a major influence on global supply. This means that it does not have to rely on export goods to get what it needs. The bad news for local manufacturers is that the US is a major importer of Malaysian manufactured products.
It does not, however, have the same edge in natural resources and would still have to import the raw materials it needs.
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Global companies like Apple Inc will likely face severe disruptions as its global supply chain relies heavily on international semiconductor manufacturers, including the semiconductor industry in Malaysia. As US companies turn inward, Malaysia and the region will lose a major importer and purchaser for their goods.
The Trump administration’s decision to impose higher import tariffs on Chinese products will also negatively affect local manufacturers. A decline in Chinese semiconductor equipment exports to the United States would in turn affect Malaysian production due to the close interdependence of Chinese and Malaysian manufacturing.
This complete reversal in US trade policy could mean long-term adverse effects for the Malaysian semiconductor equipment manufacturing sector.
Financial condition of local semiconductor equipment manufacturers on decline.
Although sales rose for the third quarter of 2016, local semiconductor equipment manufacturers have reported that their financial gains have not improved proportionately despite the Semiconductor Industry Association (SIA) announced that demand for semiconductor products drove global sales in September 2016 up 3.6% to US$29.4 million, primarily in NAND flash memory and microprocessors.
Unisem and MPI, both recorded falling sales and revenue from June 2016 to September 2016. Unisem’s net revenue declined 3.9% to RM38.6 million while MPI fell 15.3% to RM39.7 million. These losses are linked to weaker sales, predominantly smart phones, to Asian and US customers.
According to MIDF Research, semiconductor equipment sales are expected to recover in 2017, however, as the following months have shown positive signs of improvement. This can be achieved by introducing a better product mix.
AffinHwang Capital Research does not share the optimism, and says that both semiconductor manufacturers are likely to show negative earning and growth throughout 2017.
Despite the changes, Semiconductor Equipment Manufacturers in Malaysia remain highly professional and capable – Contact UPE Alliance Group for enquiries.