KUALA LUMPUR (Jan 15): KESM Industries Bhd (KL:KESM) said it is bracing for a bumpy operating environment from geopolitical tensions, betting on its upgraded testing equipment to support more advanced applications.

KESM executive chairman and chief executive officer Samuel Lim Syn Soo is optimistic that the devices the company has invested in over the past 12 to 18 months will turn into opportunities for growth in the coming years.

“I’m feeling fairly comfortable that some of these devices will turn into big volume for us,” Lim said at the company’s annual general meeting. “If it doesn’t [come in] this year, it will spill over to the next year.”

The qualification process by its end customers will take six to 24 months, he noted.

KESM spent RM146.27 million in the past three years to gear up its capabilities to take up burn-in and test services for more advanced applications. The company has adjusted its portfolio and capacity to cater more for electric vehicles (EVs), power management and artificial intelligence (AI) applications.

The advanced chip restrictions put up by the US is expected to affect the industry, though “we just have to find ways” to manoeuvre around it, Lim said. “We have been doing it for the last five years.”

KESM’s factory in Malaysia currently serves the international market, and the company has been receiving a surge of orders from China. Meanwhile, its factory in Tianjin primarily serves China, and has been receiving growing orders related to EVs.

On Monday, the US announced controls on advanced computing and certain AI chips, alongside new licence exceptions and updates to the data-centre rules.

The rules provide exceptions for certain allies and for supply chains of the chips, as well as allows companies to obtain approvals to build data centres in select locations.

Asked about the poor financial performance in the past six years, Lim said the company was “trapped” by the trade war and supply-chain dynamics that went through a destocking period.

“[Post-Covid], when the market for mobile phones and cars cooled off, the manufacturers for semiconductors reduced their volume very quickly and it affected our volume,” he said. “As for the newer devices, they didn’t come out fast enough to add up.”

At Wednesday’s midday trading break, shares of KESM fell seven sen or 1.9% to RM3.71, giving it a market capitalisation of RM159.58 million.