This article first appeared in The Edge Malaysia Weekly on June 1, 2026 - June 7, 2026

AS Malaysian Pacific Industries Bhd (KL:MPI) enters its 54th year in business, the Hong Leong Group-controlled outsourced semiconductor assembly and test services (OSAT) player is already thinking one step ahead. It is positioning for the next wave of chip demand amid the artificial intelligence (AI) boom.

For decades, the semiconductor industry has evolved in cycles, with each wave defined by a dominant end market. First, there were personal computers, then came smartphones and servers. More recently, electric vehicles (EVs), AI-driven tools and next-generation data centres have emerged as the industry’s latest growth engines.

Each cycle has followed a familiar pattern — rapid demand growth, aggressive capacity buildout and eventually periods of correction. Yet, beneath these cyclical swings lies a longer-term secular upward trend driven by the increasing penetration of semiconductors across industries.

It is perhaps this structural trajectory that tycoon Tan Sri Quek Leng Chan anticipated early on.

In July 2020, Quek accumulated 7.28 million shares in MPI, a stake estimated to be worth nearly RM90 million at the time. Two decades earlier, during the dotcom boom in February 2000, he famously disposed of five million MPI shares at about RM46 apiece, fetching more than RM230 million.

Market observers noted that Quek had accumulated substantial blocks of MPI shares at about RM3 to RM5 each during the 1997/98 Asian financial crisis — a move widely regarded as one of his more astute investments.

With combined direct and indirect interest of 58.3% as at Sept 12, 2025, Quek has remained steadfast in his position as the largest controlling shareholder of MPI over the years as the company weathered multiple semiconductor booms and busts, and now stands at the cusp of the most disruptive technological transition yet — one where rapid shifts in chip architecture and manufacturing requirements can quickly render expensive investments obsolete.

In an exclusive interview with The Edge, MPI managing director Manuel Zarauza Brandulas says the OSAT player is benefiting directly from the rapid buildout of AI data centres.

“Everyone speaks about AI servers, but it has just started. Most of the business until now is still normal servers — not AI servers,” he points out.

The surge in demand is evident from the sense of urgency among MPI’s customers. Zarauza lets on that he has taken 22 flights over the past three weeks to meet clients globally. “They are now asking for more capacity,” he remarks.

The driver lies not only in AI processors themselves, but increasingly in the supporting power infrastructure required to run them. As computing intensity rises, the electricity consumption of AI systems is surging — driving stronger demand for chips that regulate, convert and manage power efficiently across AI servers and data centres.

Analog and power semiconductors are central to controlling electricity flow in these systems — in which MPI has built deep expertise over the years.

A major inflection point emerged in the industry last October when Nvidia Corp and Infineon Technologies AG announced a collaboration to implement an 800-volt direct current power architecture for Nvidia’s next-generation Vera Rubin AI computing platform.

The shift is significant because the existing 54-volt power architecture is increasingly struggling to support the rapidly rising energy requirements of next-generation AI processors as thermal loads and electricity consumption escalate sharply.

Central to this transition are wide-bandgap semiconductor materials such as silicon carbide (SiC) and gallium nitride (GaN) — technologies MPI began investing in seven years ago. These materials enable higher voltage operation, lower energy loss and improved thermal efficiency, making them increasingly critical in AI infrastructure.

Outside China, MPI is believed to be among the few OSAT players capable of handling advanced packaging involving these materials.

The strong demand environment is already translating into tangible financial results. For the three months ended March 31, 2026 (3QFY2026), MPI’s revenue rose 25.3% year on year to a record RM651.57 million. Revenue contribution from the US, Europe and Asia grew 44%, 22% and 10% respectively.

“If not for the ringgit’s strength, revenue would have grown more than 40% in US dollar terms,” says Zarauza. “When you grow at this level in OSAT, you see it maybe once every five or six years — typically during the start of a new cycle,” he adds, commenting on the top-line growth. AI-related products currently account for 13% of MPI’s revenue mix, up from 10% a quarter earlier. Management expects this contribution to eventually reach 20% — even assuming that other business segments will continue expanding concurrently.

While AI remains the primary growth driver, MPI’s automotive business has rebounded, supported by recovering EV demand in Europe amid fuel-price pressures and policy-driven electrification trends, says Zarauza. Rising semiconductor content per vehicle is also supporting the long-term demand structurally.

For the first nine months of FY2026, MPI’s profit after tax and minority interest (Patami) grew 30.44% to RM143.82 million from RM110.25 million a year earlier, despite rising input costs — including logistics, electricity and raw materials such as gold and copper — as well as a stronger ringgit and higher labour expenses, particularly in 3QFY2026. Total revenue for the nine-month period rose 22.08% to RM1.91 billion from RM1.57 billion previously, putting the group on track for another record full-year performance.

To support the next phase of growth in AI servers, MPI has invested about US$65 million (RM256.7 million) in the relevant equipment, with production expected to be ramped up in the coming months.

When asked how long the current up cycle could last, Zarauza says the momentum could persist for another two years.

Drawing on more than 25 years of industry experience, he observes that semiconductor cycles are becoming increasingly compressed. Where it lasted six to seven years previously, the semiconductor cycle is now closer to three years, partly due to recurring structural shortages and faster technological transitions.

In MPI’s view, the period between 2026 and 2029 will represent “AI Wave 1”, characterised by rapid growth in AI servers, infrastructure deployment and deeper system integration. Beyond 2030, “AI Wave 2” is expected to focus increasingly on efficiency optimisation, an area where SiC- and GaN-enabled power architectures could become even more critical — directly benefiting MPI’s accumulated expertise in wide-bandgap technologies.

Zarauza believes that, within this framework, MPI is positioning itself for future end markets such as autonomous vehicles and humanoid robotics.

The group has also strengthened its positioning through the RM327.56 million acquisition of Infineon Technologies (Thailand) Ltd, which was completed in February and was subsequently renamed Carsem Semiconductor (Bangkok) Co Ltd. The acquisition adds automotive-grade memory capabilities to MPI’s predominantly analogue-focused portfolio, extending its reach into memory solutions relevant to AI applications.

“A humanoid robot could require more than 2,000 chips, spanning sensors, compute, memory and power management. We will be in full-stack positions and as a true one-stop solution,” says Zarauza.

MPI expects to progressively expand its technological capabilities across a broader semiconductor stack, from sensors and drivers to CPUs, timing devices and eventually memory applications that serve the automotive and AI markets.

“Give me all the parts … and we ship modules,” he says, describing the company’s long-term positioning strategy.

So how did MPI evolve into its current position?

When Zarauza, 54, took at the helm at MPI in 2016, the company was heavily exposed to consumer mobile devices — a segment characterised by rapid product cycles, intense pricing pressure and heavy upfront investment requirements. “The problem with mobile is that everything changes every six months, and prices go down and down,” he says.

The pivot to automotive became a turning point for MPI. Longer product lifecycles, higher reliability requirements and more stable pricing created a stronger foundation for building technical capabilities. That transition drove the company’s early leadership in copper clip interconnects and sensor packaging — technologies that form the backbone of safety-critical electronics.

Between 2021 and 2025, MPI further expanded into server-related applications amid soaring cloud demand, while advancing capabilities in flip-chip, system-in-package (SiP), quad flat no-leads (QFN) and land grid array (LGA) packaging technologies — all important building blocks for modern power management systems.

Over the same period, MPI expanded its manufacturing footprint across Malaysia and China, including a dedicated wide-bandgap facility in Ipoh, Perak, and a new facility in Suxiang, China.

Today, MPI is regarded as a leader in copper clip and sensor packaging, while positioning itself among the early movers in advanced packaging for SiC applications. That positioning could place the group at the centre of emerging technologies such as AI infrastructure, autonomous vehicles and humanoid robotics.

Despite the growing excitement surrounding AI, Zarauza remains highly conscious of semiconductor cycles and says MPI deliberately avoids overbuilding capacity, even during periods of strong demand. The reason is simple: semiconductor cycles are inherently volatile.

“Everything that goes very fast up can also go very fast down,” he cautions. “We always have profitable growth. We do not expand for the sake of chasing headline growth.”

When asked whether MPI is taking advantage of the tight global capacity conditions to raise prices aggressively, Zarauza dismisses the idea. “The pay up is only short term. What will I do in two years when the premium is gone?”

Instead, MPI focuses on deepening customer relationships by broadening the range of products it supplies during negotiations.

“When one product goes down, I still have other products to shield the effects. I need to be responsible for 9,000 livelihoods that depend on MPI,” says Zarauza, referring to the company’s workforce.

The company is also careful to not become overly dependent on any single product category or customer. Its revenue mix currently comprises 50% industrial applications (of which 13% is tied to AI servers) 37% automotive, 9% 5G and Internet of Things (IoT), and 3% personal computers and laptops.

As for entering frontier product categories, Zarauza says there are no shortcuts. “You need to work hard on introducing new products. What is important when you decide something is that you need to have a vision as a CEO — what you think will be the future.

“What MPI is doing today is the result of planning made seven years ago. It is not just because you have money, you can immediately come into this game. There are a lot of processes involved with customers.”

The ongoing technology war between the US and China is also reshaping the semiconductor supply chain.

Zarauza notes there is a shortage of OSAT capacity globally, given the sheer amount of front-end semiconductor activity currently taking place. “There is no OSAT in Europe, so the orders need to come over to the neutral part of the world — Southeast Asia,” he adds.

The strategic acquisition of Carsem Bangkok provides another geographical option for MPI’s customers seeking supply chain diversification. Furthermore, the facility benefits from its proximity to universities and technical schools, as well as mass rapid transit connectivity that supports worker recruitment.

Zarauza says the group managed to turn around the previously loss-making Thailand operation within six weeks. As for MPI’s China factories, he says they are increasingly onboarding Western customers, with the proportion expected to rise to 65% from about 30%.

Security concerns among multinational clients are also shaping customer behaviour. “We are very neutral. In China, I’m the only one there who is not Chinese,” says the Spaniard. “All the other OSAT players like ASE and Amkor have been sold to Chinese companies.

“Now the Europeans and Americans say, ‘If we go to China, it is better to go with Carsem even though it is more expensive than the Chinese companies’, because they are worried about the intellectual property (IP) and trade war issues. That puts us in a very nice position.”

When asked about the potential impact of strategic supply disruptions — such as helium gas shortages, which could create a bullwhip effect across the semiconductor industry — Zarauza says the situation is still manageable. According to him, the key lies in better planning and more proactive procurement strategies, including maintaining sufficient raw material inventories ahead of potential disruptions.

This is because the industry can still source critical materials from alternative regions globally even if certain supply routes become constrained. Having said that, Zarauza acknowledges that raw material costs have risen in recent months, particularly commodities such as copper and gold.

Currently sitting on net cash of RM738 million, MPI is committing to significant capital expenditure (capex) over the next two years. The investments span multiple growth areas.

“I have the Suxiang factory opening — I need to invest for capacity. I have silicon carbide, I’m investing. I have AI servers, I’m investing. Sensor demand is strong, I’m investing. I have Bangkok for memory and I’m also investing there. But I only invest when it is profitable and when I already have the business,” says Zarauza.

Since 2020, MPI’s annual capex has consistently exceeded its reported net profit. However, the company recorded positive net cash inflow in five of the past six years, suggesting that its investments are generating returns alongside its business expansion.

The management’s conservative operating style is also reflected in the fact that MPI has paid dividends every year since its listing in 1987 despite operating in one of the world’s most cyclical industries.

When asked about MPI’s long-term revenue potential once all planned facilities are fully ramped up, Zarauza estimates that the group could eventually achieve RM3 billion in annual revenue — about 20% above the annualised RM2.5 billion revenue trajectory for the current year.

Beyond organic expansion, MPI is also open to mergers and acquisitions, particularly in areas such as advanced packaging, chip design, specialised materials, equipment as well as automation and robotics.

One structural constraint shaping MPI’s outlook is the limited scope for automation in the OSAT industry. While certain processes can be optimised, the need for frequent changeovers and product customisation means human labour remains essential.

“You still need people, especially for complex products,” says Zarauza.

That reality reinforces the importance of workforce planning and geographic diversification. Nevertheless, he believes MPI can gradually carve out higher profitability through greater product complexity and by moving beyond component-level services towards integrated module solutions.

The company has set an internal goal of eventually achieving a net profit margin of 15%. Its average net profit margin has stood at about 8.3% in the past 36 years, with only four years — 1990, 1991, 2000 and 2001 — recording a margin of more than 15%. In the previous semiconductor up cycle in 2021 and 2022, it achieved a net profit margin of 13.7% and 13.6% respectively.

For all the optimism surrounding AI, Zarauza remains grounded. The AI cycle may be powerful, but it will not last forever. What matters is not merely riding a single wave, but positioning for the sequence of waves that follows, he says. “We are in this wave, but we are also preparing for the next.”

In that sense, MPI’s story is less about chasing growth and more about managing it carefully, deliberately, and with an eye on what comes after the hype.

At about RM50, MPI’s share price may appear relatively inaccessible to some retail investors.

When asked whether the company would consider a share split to improve affordability and liquidity, Zarauza says there are currently no such plans, saying that a split would not fundamentally alter ownership structure or intrinsic value.

According to him, the value of a company ultimately depends on investors’ perception of its long-term prospects rather than its absolute share price. He notes that many high-quality global companies continue to see triple-digit share prices, while emphasising that MPI’s future growth proposition remains the more important consideration. “If we do a share split, the largest shareholder still owns 58%,” he points out.

Hong Leong Group currently owns 58.07% of MPI, while the Employees Provident Fund (EPF) holds 11.69%. Collectively, the company’s top 30 shareholders account for 84.38% of the total shareholding, with the list largely dominated by institutional investors, including Norway’s central Norges Bank, mutual funds and insurance funds.

Investors have begun pricing in the AI opportunity, driving Malaysian OSAT stocks to multi-year highs.

MPI’s share price climbed to a 52-week high of RM50 on May 26, just shy of its all-time high of RM51 on Dec 1, 2021. At its latest closing price of RM49.06, the stock had surged 57.2% year to date, giving the company a market capitalisation of RM10.3 billion and a forward price-earnings ratio (PER) of 49.4 times.

For Quek, the gains have been substantial. The 7.28 million shares he accumulated in July 2020 for about RM90 million are now worth roughly RM360 million.

However, analysts appear more cautious. The average target price of RM43.55 of eight research houses implies a downside potential of 11.2%, suggesting that much of the near-term optimism may already be reflected in the share price.

The same trend is evident across Malaysia’s major OSAT players.

Unisem (M) Bhd (KL:UNISEM) has rallied 75% year to date to a record high of RM5.30, valuing the group at RM8.55 billion and 72.8 times forward earnings. The consensus target price of RM3.68 among nine analysts implies a downside potential of 30.6%.

Meanwhile, Inari Amertron Bhd’s (KL:INARI) share price has gained 34.5% this year to RM2.38, giving the company a market capitalisation of RM8.92 billion and a forward PER of 44.8 times. Analysts’ average target price of RM2.18 points to a downside of about 7%.

The sharp rerating reflects investors’ growing conviction that AI-driven semiconductor demand is entering a multi-year expansion phase. Whether the earnings growth can ultimately justify the elevated valuations is the key question.

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