Malaysia’s semiconductor industry could benefit from the growing share of global foreign direct investment (FDI) in Southeast Asia, as this is an indication that Asean countries are benefitting from the supply chain shifts.
In its Market Outlook 2024 report, Eastspring Investments projected that in the semiconductor supply chain, Malaysia has an edge in advanced packaging and testing and could attract more FDI in the sector.
Exacerbated by events including the geopolitical conflict between the US and China, Covid-19 and Russia’s invasion of Ukraine, supply chain security and diversification are at the forefront of most companies’ medium-term investment plans.
“A structural recalibrating of global supply chains away from China and towards other markets is taking place. The beneficiaries of this
move are spread across Latin America, EMEA, Asean and India.
“Asean countries possess cheap labour, have decent manufacturing bases and are producers of important commodities. A fast-growing population and rising middle-income consumers add to the region’s appeal,” it said in the report published yesterday (Nov 23).
Vietnam, for example, increasingly relevant to the global supply chain, as companies such as Samsung, Google, Microsoft, and Apple have shifted portions of their supply chains there as part of their “China plus one” strategies, according to the Eastpring Investment report.
Further priming the potential investment in the Malaysia’s semiconductor industry is the advancements in Artificial Intelligence (AI).
“Advancements in AI are very much dependent on high-end semiconductor chips which have the power to process and analyse data.
“In Asia, the clear beneficiaries are Taiwan, which has full industry supply chainn to support AI trends, and Korea. Other Asian companies
within the semiconductor supply chain such as advanced packaging and testing players in Malaysia should also benefit,” it said.
Meanwhile, the report also highlighted that Asian local currency bond yields exhibit good value at current levels and present an attractive entry point for investors looking to position themselves for the start of the rate cutting cycle.
“The Korean central bank may be the first Asian central bank to cut rates. Meanwhile, low beta markets such as Thailand and Malaysia are likely to be more resilient if bond volatility rises,” it said.
On environmental, social, and corporate governance (ESG), Eastspring highlighted emerging markets such as Malaysia will require significant public and private investments of around USD 2 trillion per year going forward to transition to clean energy through 2030, to achieve net-zero emissions by 2050.
“The available opportunity set of pure green investments is more limited in Asia compared to developed markets. In the Asian investment world, capturing a company’s progress in sustainable practices is a crucial step in identifying early transition winners.
“Many companies in EMs and Asia were sold off as investors sought only pure green stocks, resulting in a big investible universe of attractively valued companies with good growth and return potential,” it added.
