Against a backdrop of resilient semiconductor momentum, accelerating artificial intelligence (AI)/ high-performance computing (HPC)-driven capital expenditure (capex), firmer autos, and contained tariff risk, Kenanga Research has turned positive on Malaysia’s technology sector and foreseen the firms are well placed to ride the global recovery.

The research house said in a note on Tuesday that July global semiconductor sales have reclaimed the more than 20 percent year on year growth threshold, signaling not only resilience but also sustainability of the current up-cycle.

Growth continued to be led by logic and memory on robust data-center spending and early artificial intelligence (AI)-edge adoption.

Importantly, the clearer direction on global tariff policies has reduced trade uncertainty, reinforcing visibility into demand momentum.

With structural tailwinds from AI, HPC, 5G, and next-generation smartphones, the present 21-month rally is showing no sign of fading.

“We believe the current cycle could extend beyond 30 months – the historical longest upcycle period – marking a potential new peak for the industry,” Kenanga said.

Meanwhile, Kenanga expects Budget 2026, scheduled for tabling on October 10, 2025, to deliver targeted support for Malaysia’s semiconductor ecosystem in line with the National Semiconductor Strategy (NSS) – potentially via incentives, talent programs and enablement for advanced packaging/design.

With more than MYR 63 billion ($14.98 billion) of investments already secured since launch, the government has identified 13 NSS-flagged champions across the value chain and several integrated circuit (IC) design firms that are well placed to benefit from favorable policies, subsidies, and capacity-building measures.

Kenanga, however, highlighted the global auto outlook is turning more constructive, with electric vehicle (EV) penetration and software-defined features driving incremental content growth.

According to the research house, China remains the largest market, Europe continued to benefit from decarbonization-linked incentives, and U.S. demand is stabilizing ahead of tax credit expiries.

“A firmer fourth quarter is anticipated as subsidies resume and seasonal demand improves, further supporting the recovery,

“This backdrop should benefit the broader automotive semiconductor and light-emitting diode (LED) ecosystem,” it said.

Kenanga’s channel checks suggest that recent tariff adjustments have had contained direct impact on Malaysian technology companies, as most players sit mid-to-downstream with low direct U.S. exposure.

While second quarter saw temporary headwinds due to order push-outs and uncertainty as customers revisited supply strategies, finalized tariff treatment has brought much-needed clarity, said the research house.

“Importantly, we gathered that orders are now resuming, with minimal cancellations and costs largely passed through to clients.

“While we see reciprocity risk higher for some electronics manufacturing service (EMS) exposures, customer pass-through remains the base case. We expect business operations to normalize in the third quarter, improving earnings visibility across the sector,” it said.

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