KUALA LUMPUR (April 28): Unisem (M) Bhd (KL:UNISEM) is eyeing an earnings recovery as its heavy capital expenditure cycle winds down, with new capacity expected to be absorbed by demand from artificial intelligence (AI), power management and automotive segments.

Chairman and group managing director John Chia Sin Tet told The Edge after the company’s annual general meeting that the group has completed its investment phase, which saw nearly RM1 billion deployed over the past three years.

This included RM600 million for its state-of-the-art Gopeng plant and RM400 million for the expansion of its Chengdu Phase 3 facility in China.

“We built these two plants concurrently during Covid, and they are now ready to take on new projects. If we were to build them today, costs would be far higher,” Chia said.

He acknowledged that near-term earnings were weighed down by qualification costs and underutilisation, as new facilities typically generate “near zero revenue” during customer onboarding.

However, he expressed confidence that utilisation will improve as projects ramp up. 

“We are betting that the industry upcycle has barely begun,” he said, noting that growth is increasingly tied to power management chips used in AI and data centres.

Depreciation has also risen sharply, with charges at RM65 million in the quarter ended March 31, 2026 (1QFY2026), translating to RM260 million annually.

Traditional segments such as radio frequency (RF) have plateaued, while newer areas like power management — particularly for AI servers and automotive electronics — are gaining traction. 

“People are now talking about power, especially in relation to AI and data centre infrastructure. That’s where the growth is,” Chia said.

Unisem has already secured major customers in these themes.

“We have moved out of legacy products. We are going more into complicated processes and packages,” he added. 

The group’s margins had been pressured in recent years as it ran two factories simultaneously, with Gopeng incurring utilities, headcount and depreciation before revenue contributions kicked in.

Chia said utilisation at its China operations remains strong, with facilities running at about 85% even at expanded capacity, supported largely by multinational customers. “More than half of our customers are Americans and Europeans… and these customers have big business in China,” he noted.

At the same time, he highlighted Malaysia’s role as an alternative manufacturing base amid geopolitical considerations, particularly for customers seeking supply chain diversification within Asean. “For geopolitical reasons… where else in the world can you go? Asean,” he said, pointing to Malaysia’s established semiconductor ecosystem.

While startup expenses in Malaysia weighed on earnings due to low load factors, Chia expects the ramp-up in production to turn operations profitable this year.

Currently, Chinese operations contribute 60% of group sales and 80% of the bottom line.

Addressing perceptions that Unisem is a China-affiliated company — given Tianshui Huatian Technology Co Ltd’s 44.4% stake — Chia dismissed such concerns. “Tianshui is just a financial investor. They do not have a single say in management. It is stated in the public document [the collaboration agreement],” he said.

“Unisem will always remain a Malaysian company because Malaysians, including me, own 56%. Tianshui is capped at their stake, and to be fair, they don’t interfere in management.”

He noted that Western customers continue awarding jobs to Unisem, showing that such concerns have not materially affected order flow.

By midday Tuesday, Unisem’s shares were up five sen or 1.5% at RM3.35, valuing the group at RM5.4 billion. Over the past year, the stock has surged 73.6%.