February 24, 2024

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Malaysia’s tech sector expected to record upcycle

A finance service company recently upgraded Malaysia’s technology hardware sector to positive from neutral as they expect the sector will ride an imminent upcycle that appears to be heralded by positive growth of the global semiconductor industry.

In a note today, the research house’s analysts stated that they adopt a positive growth outlook for the tech sector due to rollout of 5G networks, the ramp-up of semiconductor components and equipment, development of sub-sectors such as the Internet of Things (IoT), artificial intelligence (AI) and electric vehicles (EVs), and Industry 4.0.

They said that these should bode well for Outsourced Semiconductor Assembly and Test (OSATs), automatic test equipment (ATE)/automation manufacturers and electronics manufacturing services (EMS)/precision engineering companies.

Meanwhile, the World Semiconductor Trade Statistics projected that the global semiconductor market will grow by 6.2% year-on-year to US$452 billion in 2021 while the global industry association SEMI estimated that global semiconductor manufacturing equipment sales will grow by 11% year-on-year to US$70 billion in 2021.

It was noted that this upcycle would also be driven by the rollout of 5G networks across key cities — accelerated by the growing number of 5G-enabled devices (i.e. smartphones and IoT) and high adoption rates of 5G by key countries (i.e. China, US and South Korea).

They expect semiconductor equipment component and module suppliers, OSAT companies and ATE manufacturers to be key beneficiaries of such a favourable outlook, attributed to rising supply and demand for advanced chipsets and components (i.e. sensors).

This, in turn, would also lead to higher spending and stronger demand for semiconductor equipment. They also anticipated growth from up-and-coming tech sub-sectors — namely IoT, EVs and AI.

While such sub-sectors would be considered to be more niche (relative to the larger core semiconductor market), the firm believes there are selective opportunities for semiconductor equipment/ATE manufacturers while the booming of any tech sub-sectors would generally entail demand for components and chipsets.

Elsewhere, the progressive transition into Industry 4.0 is expected to benefit automation companies.

While the Malaysian technology realm is trading at an average forward price-to-earnings ratio (PER) of 35 times, they think the rich valuations are justified by the potential earnings growth catalysts and upsides, in tandem with the sector’s upcycle, as well as strong domestic equity fund flows.

Malaysia’s Budget 2021 will push tech investment

According to another report, following the budget announcement in early November, the tech industry saw an increased allocation for 2021. Despite some grievances on allocations towards certain sectors, the overall budget allocated to the tech industry was well-received by all parties.

The cybersecurity industry in Malaysia, in particular, was glad that RM27 million has been allocated to CyberSecurity Malaysia to heighten cybersecurity in the country. CyberSecurity Malaysia Chief Executive Officer regarded the government’s initiative as recognition to prevent the threat of cybercrime and at the same time, ensure a safe and conducive cybersecurity infrastructure in Malaysia.

He said that, based on data from the Cyber999 Aid Centre, which was operated by CyberSecurity Malaysia, 9,042 reports had been lodged up to last month, compared with 8,770 last year. He said the three most reported cases were fraud, intrusion and malicious code.

Tech firms lauded the emphasis on digital technologies and upgrading telecommunication networks which will propel Malaysia further, accommodating the needs of digital lifestyles while spurring economic growth for the nation.

The Managing Director of the Malaysia branch of a US-based networking hardware company commended the focused measures to accelerate digital transformation in various areas and industries, including the emphasis on IR4.0 technologies such as automation in the commodity and SME sector.

This includes the allocation of RM1 billion under the Industry Digitalisation Transformation Scheme and additional RM150 million under the SME Digitalisation Scheme Grant and Automation Grant that will spur the manufacturing and labour-intensive industries to rethink their strategies as reliance on human capital decreases, the impact of border control measures continues and market demands changes.

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SIRIM is a premier industrial research and technology organisation in Malaysia, wholly-owned by the Minister​ of Finance Incorporated. With over forty years of experience and expertise, SIRIM is mandated as the machinery for research and technology development, and the national champion of quality. SIRIM has always played a major role in the development of the country’s private sector. By tapping into our expertise and knowledge base, we focus on developing new technologies and improvements in the manufacturing, technology and services sectors. We nurture Small Medium Enterprises (SME) growth with solutions for technology penetration and upgrading, making it an ideal technology partner for SMEs.

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HashiCorp provides infrastructure automation software for multi-cloud environments, enabling enterprises to unlock a common cloud operating model to provision, secure, connect, and run any application on any infrastructure. HashiCorp tools allow organizations to deliver applications faster by helping enterprises transition from manual processes and ITIL practices to self-service automation and DevOps practices. 

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IBM is a leading global hybrid cloud and AI, and business services provider. We help clients in more than 175 countries capitalize on insights from their data, streamline business processes, reduce costs and gain the competitive edge in their industries. Nearly 3,000 government and corporate entities in critical infrastructure areas such as financial services, telecommunications and healthcare rely on IBM’s hybrid cloud platform and Red Hat OpenShift to affect their digital transformations quickly, efficiently and securely. IBM’s breakthrough innovations in AI, quantum computing, industry-specific cloud solutions and business services deliver open and flexible options to our clients. All of this is backed by IBM’s legendary commitment to trust, transparency, responsibility, inclusivity and service.

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