MIDF Research has foreseen artificial intelligence (AI) and electric vehicle (EV) as bright spots in Malaysia’s tech sector next year.

The research house said in its recent report that while 2024 has been a challenging year for the automotive sector due to a combination of weakened demand and high interest rates, EVs are the only growing segment, mainly supported by the China market.

“The EV market may only be the only bright spot in the industry. However, this may differ according to region,” it noted.

According to MIDF, the United States and European regions may continue to face challenges, owing to consumers’ concern on range, and declining resale value due to the rapid changes in technology and competition.

Meanwhile, MIDF anticipates China’s EV market to continue to grow given the aggressive rollout by various Chinese EV makers with competitive pricing packages.

“This, however, may not necessarily bode well for semiconductors companies as the Chinese EV makers are now requesting their suppliers to reduce the product prices by as much as 10 percent in a bid to remain competitive,” it noted.

Cited Newswire, it highlighted BYD and SAIC, Maxus Automotive are among the EV makers who made the request.

On another note, MIDF has observed a wave of troubling news among the global automotive marque with restructuring and cost-cutting measures being executed.

Some notable names include Stellantis, Aston Martin, GM, Mercedes, Volkswagen, BMW, Ford and Nissan.

Meanwhile, AI is expected to drive growth across the various segments of the semiconductor value chain or ecosystem in the coming years, said MIDF.

According to the research house, the amount of data processed and stored by AI applications is massive. Thus, this will shape the semiconductor design and production.

“With the continuous breakthrough in AI technology, we can expect even more innovative and ground-breaking AI applications in the future,” it said.

However, it views that the application of AI is rather limited at this juncture.

“We see that AI is currently making an incredibly positive impact on high-performance computing and hyperscale data centers,

“As such, much of the focus is on the use of high performance graphics processing units for new AI workloads,” it said.

MIDF reckons that the main beneficiary now is rather limited to notable names such as Nvidia Corp., Taiwan Semiconductor Manufacturing Corp., Broadcom Inc. and Qualcomm Inc.

“On the contrary, we have yet to see the proliferation of AI for consumer electronics,” it noted.

According to MIDF, currently, available AI-powered smartphones and personal computers (PCs) are still in their infancy.

“In due time, we should also see AI being incorporated into other devices,” it added.

Overall, MIDF does not see a great rebound in Malaysia’s technology end demand.

“Looking forward to 2025, we continue our conservative stance that the industry will continue to recover at a tepid pace,” it said.

To be more specific, it noted the pace of recovery would vary according to which supply chain the semiconductor companies reside in.

It is noted that in the latest release of 2025 sales forecasts by WSTS, it has made a slightly higher revision to the 2025 sales forecast of +1.4 percent from its previous forecast shared in June 2024.

However, the upgrades are not uniform across all product segments. This is also the case for different regions around the world.

“Meanwhile, we note that the escalating trade tensions between the U.S. and China create more uncertainty in the semiconductor supply chain,” said MIDF.

While the near-term impact is positive for ASEAN countries including Malaysia, it noted it may lead to further decoupling of the supply chain.

“Looking at the end market, we are of the view that there is not much bright spot except for hyperscale data centers which is supported by the application of AI,” it said.

In this regard, it thinks that the full potential of AI-powered smartphones has yet to be seen.

“Outlook for the automotive market remains challenging, in view of the profit warnings by various global automotive players,

“These would translate into depressed production volume and pressure on the average selling prices,” it noted.

MIDF also sees lack of catalyst to drive smartphone replacement cycle.

Cited Digitimes, it noted the global smartphone shipments will hit 1.18 billion units in 2024 which translates into a growth of +4.9 percent year on year.

The momentum will continue in 2025, albeit at a slower pace of +3.6 percent year on year, to 1.22 billion units.

“This is in line with our expectation of a tepid improvement in demand,” said MIDF.

Its view is mainly predicated on the lack of a killer app to drive smartphone replacement.

“We are of the opinion that AI in smartphones is still at the very nascent stage as the integration of AI into various applications and services has yet to become prevalent,” it added.

In the case of the iPhone, MIDF also views that there is a mismatch between the hardware and software.

“While the hardware has been built to support AI function, the iOS update that comes with the AI capability will be gradually rolled out in three tranches over the next few months up to March 2025,

“This further provides another competitive edge to the Chinese smartphone companies,” it said.

In the latest quarterly earnings, Apple shared that iPhone sales grew by +5.5 percent year on year as compared to +2.8 percent year on year when the iPhone 15 was launched.

Moving forward, MIDF is taking a more conservative view on the demand for iPhone. T

his was mainly in view of the challenging outlook in China caused by heightened competition from the local competitors notably Huawei, Oppo, Xiaomi and Vivo.

Notably, the iPhone market share in China has been on the decline.

This was also seen in October 2024 whereby the market share has reduced to slightly below 20 percent from more than 30 percent in 2023, according to MIDF.

In addition, the growing tension between the U.S. and China has encouraged the switch from Apple to Huawei, especially for the premium segment, it said.

It is noted that Huawei has been aggressively rolling out a series of new smartphone models with attractive propositions.

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