The 2Q25 earnings season for the Malaysian tech/EMS sector was incrementally better than 1Q25 but remained uneven. Among the 15 names under review, the above-below ratio
improved: 5 missed consensus estimates, 9 were in-line, and 1 beat — compared to 1Q25’s 9 misses and 5 in-line.
“We note that consensus estimates had been prudently reset following widespread disappointments in 1Q25, setting a more reasonable bar for 2Q25,” said Hong Leong Investment Bank.
In addition, the sector has so far remained largely insulated from US tariff impacts, as semiconductors and major electronics products (such as PCs and smartphones) remain exempt until the Section 232 sectoral tariffs are announced.
This has also allowed forward guidance to remain fairly positive for now. Misses were primarily company-specific, with Unisem, SAM Engineering, and D&O continuing to deliver weak prints following similar trends in 1Q25.
More notably, we are beginning to see misses and weak numbers in EMS players (Nationgate, PIE Industrial), where customer caution amid tariff uncertainty weighed on order flows.
On the other hand, MPI was the sole clear beat (early signs of analog semi recovery), while we highlight Frontken also surprised positively with margin expansion for its key Taiwan subsidiary.
For the in-lines, some results were based on the expectations of a stronger 2H25 to meet full-year targets. This would typically hold under normal seasonal patterns, but front-loading effects and macroeconomic headwinds from tariffs could potentially derail the usual second-half strength.
Market reactions to tech/EMS stocks this earnings season can be summed up as almost entirely dictated by 3Q25/2H25 guidance. Share price has largely reacted positively when management provided good/upbeat forward guidance, even in cases where results came up short (Unisem, D&O).
Recent underperformers are clearly seen in SAM Engineering and UMS Integration (due to soft guidance from their key front-end customer), as well as the majority of EMS players. Overall, it seems there’s renewed optimism and risk appetite as investors believe the worst is behind them (peak tariff fear).
This optimism is also boosted by growing expectations of a Sept Fed rate cut, further lifting sentiment for the sector.
There are signs that the prolonged analog semi downturn since late 2022 has finally bottomed. In the 2Q25 earnings season, major global analog semi companies delivered aggregate revenue growth of 8.4% QoQ, ahead of their 5.9% guidance, and have guided for another 5.6% sequential growth in 3Q25.
However, the sector’s elevated inventory position has yet to meaningfully decline. Aggregate inventory rose 3% QoQ in 2Q25 while inventory days held steady at an elevated 171 days (vs. 175 in 1Q25), still ~55% above the pre-COVID 2016-2019 average, or nearly 9 weeks higher.
The latest update on sectoral tariffs came from President Trump during a dinner with US tech CEOs last week, where he reiterated plans to impose “fairly substantial” tariffs (previously flagged at 100%) on chip imports.
Market is largely looking right past this for now, treating it more as background noise than an imminent threat, with reactions muted. We believe two recent developments have also helped ease concerns: 1) The Trump administration has softened its stance, signalling potential exemptions for firms with meaningful US investments, and 2) Formal US-EU trade framework setting a 15% tariff cap on chips, raising hopes for similar deals with other regions.
In our view, this suggests that the worst-case scenario is likely off the table (severe supply chain disruption), though a 15% tariff, while manageable, would still put pressure on margins and demand. —Sept 9, 2025
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