Malaysia Manufacturing Sector To Grow In H2 Despite Dip In June
Analysts are hopeful about the future of Malaysia’s manufacturing sector in the H2 2024, despite a decrease in Purchasing Managers’ Index (PMI) to 49.9 in June, Manufacturing Asia noted.
Public Investment Bank Bhd (PublicInvest) remarked Malaysia’s PMI is expected to follow global trends, consistently exceeding the 50-level mark in the second half of 2024, as long as global uncertainties stabilise. The company added Malaysia’s manufacturing sector is set for positive growth in 2024, driven by strong projections in the global semiconductor market.
With electric and electronic (E&E) exports making up over 40% of Malaysia’s total exports, the sector is expected to benefit significantly. Despite the tension between countries and economic uncertainties, Malaysia’s exports are predicted to increase by 5.4% year-on-year in 2024. Improved economic governance and competitiveness ranking also support this positive outlook.
PublicInvest also noted the average PMI reading for the Q2 2024 reached its highest level since the third quarter of 2022, indicating a positive trajectory for economic growth throughout the quarter. However, the firm mentioned business sentiment declined for the fifth consecutive month in June, reaching its lowest point since August 2023, which could impact some optimism.
Kenanga Research shared similar sentiments, anticipating significant growth in the manufacturing sector due to strong domestic demand and foreign direct investments. The labour market is expected to improve with the implementation of the progressive wage policy, supporting recovery in the manufacturing sector. Additionally, the firm believes that the global semiconductor industry’s improvement, driven by computing needs and China’s economic recovery, will benefit Malaysia.
Thus, Kenanga Research has maintained its optimistic GDP projection of 4.5% to 5%in 2024, in line with forecasts from Bank Negara Malaysia and the Ministry of Finance. S&P Global Market Intelligence reported Malaysia’s manufacturing sector remained steady at the end of the second quarter, supported by an increase in new orders over the past two months. Whilst demand overall remained subdued, higher exports partly contributed to this growth.
In June, the seasonally adjusted S&P Global Malaysia Manufacturing PMI was 49.9, slightly less positive compared to May. However, the average reading for the Q2 2024 was the highest since the Q3 2022, suggesting a positive outlook for economic growth during that period.
Tight Competition
In the semiconductor sector, competing for pole position between Malaysia and Vietnam is intensifying. Semiconductor competition continues after Malaysia announced her mission to be Southeast Asia’s largest integrated circuit design park last April. Now, Vietnam joins the competition for the same crown, with the support from an American semiconductor titan – Marvell Technology Inc.
Marvell Technology, Inc., a titan in data infrastructure semiconductor solutions, accelerated the growth of its workforce and presence in Vietnam in the past year since the company announced plans to expand R&D, engineering and design activities in the country. Marvell committed to 50% growth of its workforce in Vietnam in three years, a target shared by the company during last year’s U.S.-Vietnam Innovation and Investment Summit attended by Marvell Chairman and CEO Matt Murphy. Today, Marvell is ahead of its plans, achieving more than 30% growth in just eight months.
Marvell has also expanded its physical footprint in Vietnam with a new location in Da Nang, adding to its offices in Ho Chi Minh City. The growth of its footprint demonstrates the company’s commitment to creating a world-class semiconductor design hub in the country.
While the commentary did not specify semiconductor per se, consumer electronics manufacturing and exports should not be used as a blanket indicator for the country’s performance into H2 2024.
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