KUALA LUMPUR (March 10): The stronger ringgit is expected to weigh on Malaysian tech firms' earnings in the first quarter of 2026 (1Q2026), according to CIMB Securities.

On a quarterly basis, the research house expects a softer 1Q2026, citing guidance from industry players including Malaysian Pacific Industries Bhd (KL:MPI), Unisem (M) Bhd (KL:UNISEM), ViTrox Corporation Bhd (KL:VITROX), and Mi Technovation Bhd (KL:MI).

"...sales expected to decline by 6-14%, largely owing to forex headwinds and seasonally weaker demand," CIMB Securities said in a note on Tuesday.

On a yearly basis, the four companies project higher sales in the March quarter despite the stronger ringgit, signalling underlying demand resilience, it added.

“ViTrox, for example, is guiding for about 80% y-o-y (year-on-year) sales growth in 1QFY2026, supported by a sizeable backlog of over RM300 million as of February 2026 that will likely spill over into 2QFY2026,” the research house said.

For the next two years, CIMB Securities anticipates the sector to deliver an average revenue growth of 9% and a core net profit compound annual growth rate (CAGR) of 25%, which will be supported by a “broad-based recovery across the outsourced semiconductor assembly and test (OSAT), electronics manufacturing services (EMS) and automated test equipment (ATE) subsectors”.

The ATE subsector is poised to lead with a projected 30% y-o-y net profit CAGR, followed by EMS at 25% and OSAT at 23%.

CIMB Securities maintained its 'neutral' rating for the Malaysian tech sector. 

“We expect more robust performance in 2026 as tariff impacts become clearer and supply-demand conditions continue normalising, supporting gradual inventory replenishment across consumer, industrial and automotive applications,” it said. 

It upgraded its call for ViTrox to 'buy', with a target price of RM5.90, underpinned by a strong demand outlook, commencement of a new product refresh cycle, and the securing of tax incentives from the Malaysian Investment Development Authority. 

For MPI, the research house maintained its 'buy' call on the stock, with a target price of RM41, supported by its growing exposure to the industrial segment. 

On the ongoing tension in the Middle East, CIMB Securities noted that the ongoing conflict has a minimal impact on the tech sector as there is a limited semiconductor manufacturing footprint in the region.

Yet, it said that Israel remains an important semiconductor research and development hub for major global technology players, and “any escalation could indirectly affect innovation pipelines”.

“If conflict persists over an extended period, the industry may face higher energy and logistics costs, as well as potential disruptions in semiconductor fabrication.” 

It added that cloud service providers with data centre projects in the region may need to reassess their artificial intelligence (AI)-related investments amid infrastructure security concerns from drone strikes. Any slowdown in AI data centre build-outs could lead to softer demand for AI chips.