Malaysia's Semiconductor Industry Faces Uncertainty Despite Dodging Initial U.S. Tariff Strikes | Global Expansion & Geopolitics (AI Translation)

避开美关税“首轮打击” 马来西亚半导体产业仍存变数｜出海·地缘

The U.S. "reciprocal tariff policy," particularly under former President Donald Trump, has significantly impacted Southeast Asian nations, with Cambodia and Laos facing the highest tariffs at 49% and 48%, respectively. Malaysia, while faring relatively better with a 24% tariff rate, experiences notable economic volatility. Trump recently suspended high tariffs on 75 countries for 90 days, lowering these to a 10% baseline, but simultaneously increased tariffs on Chinese goods to 145%, further escalating the China-U.S. trade conflict. Malaysia sees this temporary tariff relief as an opportunity, though its semiconductor sector faces supply chain challenges amid global economic shifts. Malaysian leaders contend that the U.S.’ measures violate WTO rules and are working with ASEAN and China for collaborative responses. [para. 1][para. 2][para. 3][para. 4][para. 5][para. 6]

Malaysia’s semiconductor industry, critical to the U.S. and Chinese markets, has avoided direct U.S. tariffs temporarily. However, other segments of the electronics and electrical (E&E) sector, contributing over half of Malaysia’s exports to the U.S., face a 24% tariff, posing risks to profitability and competitiveness. A survey by the Malaysian Semiconductor Industry Association reveals that 65% of firms expect negative impacts from U.S. tariffs, with 74% concerned about declining investment attractiveness. Companies are contemplating production relocations to mitigate tariffs, underscoring the broader uncertainty in Malaysia’s trade landscape. [para. 7][para. 8][para. 9][para. 10][para. 11]

Malaysia exported 601 billion ringgit worth of E&E products in 2024, accounting for 40% of its total exports, with 120 billion ringgit bound for the U.S. While semiconductors dominate these exports, other E&E products remain significant. Penang, a semiconductor hub hosting 350 foreign enterprises—including over 50 Chinese firms—faces intensified challenges due to reciprocal tariffs. Malaysia’s National Semiconductor Strategy (NSS), launched in May 2024, aims to elevate the sector through fiscal support, leveraging U.S.-China competition to attract investments, particularly from Chinese companies relocating operations. However, Penang-based export industries are reassessing strategies and profitability under the tariff burden. [para. 10][para. 12][para. 13][para. 14][para. 15]

Amid global supply chain restructuring, Malaysia has emerged as a strategic player, benefiting from the U.S.-China trade rivalry. Historical trade shifts have cemented Malaysia's role as a destination for relocated Chinese manufacturing. The U.S.’ imposition of additional tariffs on high-tech economies, such as China and South Korea, may expand Malaysia’s opportunity to attract investments. Efforts to enhance localization and align with U.S. markets—while balancing ties with China—form part of Malaysia’s strategy to capitalize on its positioning. However, competition from Vietnam, Cambodia, and Mexico adds pressure, given these nations' advantages under other trade agreements or proactive tariff negotiations. [para. 15][para. 16][para. 17][para. 18]

Malaysia is actively diversifying its markets to mitigate tariff risks and over-reliance on the U.S. economy. Current regional trade accounts for only 20% of Malaysia’s exports. To counter global trade fragmentation, Malaysia is enhancing ties with ASEAN, the Middle East, Africa, and South America. It is also pursuing new Free Trade Agreements with the UAE, South Korea, and the EU while upgrading existing agreements. These strategies, combined with measures such as the proposed Asia-led Monetary Fund, indicate Malaysia’s long-term focus on economic resilience and reduced dependence on U.S.-dominated markets. While the tariffs create uncertainties, Malaysia is proactively pursuing avenues for economic growth and collaboration. [para. 17][para. 19][para. 20][para. 21]