KUALA LUMPUR: The domestic electrical and electronics (E&E) sector is expected to continue maintaining its uptrend momentum despite predictions made by analysts that the industry's demand has reached its highest point.
Local E&E players said global semiconductor sales are still on an uptrend, although demand for consumer products such as smartphones and personal computers is moderating due to various factors such as inflationary concerns, recession risk and the impact of the China lockdown.
Kelington Group Bhd chief executive officer Raymond Gan said the industry is currently undergoing an 'inventory adjustment' after years of rapid capacity expansion in the semiconductor and electronics industry.
He said that although lead times for semiconductor chips and equipment have reduced, they are still high compared to pre-pandemic levels. This signifies that the shortage still remains.
"However, higher-end chips used in new technology applications in electronic vehicles, autonomous driving, 5G and the Internet of Things (IoT) remain strong.
"Over the long term, surely demand for semiconductors and electronics will definitely rise due to its growing importance in our digital world," he told The New Straits Times.
Gan said the global semiconductor players would continue to expand production capacities to meet the growing demand for semiconductor chips.
"At Kelington, we see many tender invites from semiconductor companies setting up new fabrication lines or expanding their existing lines.
"From our tender book of RM1.5 billion, almost 50 per cent are from projects in China, followed by 28 per cent in Singapore.
"With operations in Malaysia, Singapore, China and Taiwan, Kelington has benefited from the capacity expansion of the various global semiconductor and electronics companies in these countries," Gan said.
CGS-CIMB Research, in a recent sector report, opined that shipments of E&E products would start to come down in the quarters ahead.
The research firm said global demand for semiconductors has eased as the sector's business cycle likely peaked, indicating more normalised demand in the E&E product space.
Quoting US-based technological research and consulting firm Gartner Inc report, JF Technology Bhd managing director Datuk Foong Wei Kuong said the shipment of mobile phones and consumer electronics would fall in 2022 due to a culmination of geopolitical tensions, rising inflation and supply chain disruptions that have dampened consumer demand worldwide.
He said this would, in turn, slow down the growth of global semiconductor sales going forward.
"Against this challenging backdrop, we are confident that our proven resilient business model with recurring and compounding sales of test consumables will provide crucial support to us.
"The fact that we serve a multitude of clientele industries certainly helps diversify our risks as well," he said.
"Regarding the global supply chain disruptions, the situation has been
manageable thus far for us. However, on a positive note, it has been improving with material lead time gradually returning to normal," Foong said.
XTS Technologies Sdn Bhd founder and managing director Xteven Teoh Hoe Seong (subs: name spelt correctly) expects demand to start recovering in the first or second quarters of 2023 from the lingering effects of the Covid-19 pandemic on demand, China's slowdown and the Russia-Ukraine War.
"From what we have observed and from speaking to industry players, there is an expectation that the global supply chain will recover gradually into 2023, but this will be selective within the subsectors of the manufacturing sector.
"In particular, we have been told that there is still demand for automation products while certain E&E products may see less demand," he said.
Teoh said there are still opportunities to fulfil demands and expressed confidence that consumer sentiment will gradually return and businesses will be able to capitalise on opportunities.
"In my opinion, to mitigate or buffer a slowdown, all businesses, particularly those that are technology-intensive, should focus on research and development that can be commercialised to offer the market choice. This is true, especially for consumer electronics and other E&E products.
"Given the importance of semiconductors in our exports and the critical role it plays in the manufacturing ecosystem in the country, Malaysia will definitely be affected, but so will other countries in the semiconductor value chain," Teoh said when asked about supply chain disruptions in the E&E space.
Kobay Technology Bhd chief executive officer and managing director Datuk Seri Koay Hean Eng said that despite the global supply chain shock and labour shortages, the company continues to receive huge orders from semiconductor, E&E, and aerospace customers.
"While we acknowledge certain global headwinds going forward, our high-precision manufacturing business enjoyed a breakthrough year on the back of higher technology usage worldwide and the reopening of economies," he said.
Koay said that apart from the semiconductor, E&E, and aerospace customers, the company also sees orders from oil and gas (O&G), medical, and life science sectors.