Malaysia electronics exports seen rising through 2026 despite trade and cost pressures

Malaysia’s export resilience stems from its deliberate strategic ambiguity amid U.S.-China tech rivalry. Technologically, it’s transitioning from legacy OSAT to advanced packaging and compound semiconductors, drawing heavy investments from ASE Group and Intel—differentiating itself from Singapore and Vietnam. While U.S. CHIPS Act restrictions and EU CBAM raise compliance costs, Kuala Lumpur mitigates impact via localized material certification and energy subsidies, enhancing supply chain stickiness. Competitors like Thailand and India are replicating tax-incentive models but lack Malaysia’s engineering talent density and industrial clustering. Over the next 18 months, surging demand for HBM and AI chips offers a critical window: if Malaysia integrates silicon photonics and CoWoS-like packaging domestically, it could evolve from a cost hub to a tech node. Failure to resolve power constraints and talent gaps, however, risks squandering this momentum.