Even those bullish about AI and tech acknowledge heightened uncertainty over what Washington might have in store for semiconductors, which, along with pharmaceuticals and critical minerals, are currently the subject of an ongoing national security investigation under the Trade Expansion Act.

Tuvey noted that a key risk is the US slapping punitive tariffs on semiconductors, which are currently exempt from the country-based levies imposed on other imports.

Malaysia Semiconductor Industry Association president Wong Siew Hai believes that much rests on the Trade Expansion Act probe, which also covers manufacturing equipment and derivative products. However, he is hopeful that clear strategic interests will prevail.

“This (US-Malaysia) model of business, with the high-end fabrication in the US and assembly and testing in Malaysia, is a win-win for both sides. Since the reciprocal trade agreement was signed, we do not expect any changes going into 2026,” he said. The trade deal locks in a 19 % tariff for Malaysian goods, aside from the exempted items imported into the US.

According to the World Semiconductor Trade Statistics organisation, 2026 is expected to see global sales reach close to US$1 trillion, up by over 26 % from 2025’s estimated tally.

Malaysia, where total trade is on track to hit RM3 trillion (US$739 billion) for the first time, has seen its trade surplus for January-November 2025 rise by 10.7 % to RM132.56 billion.

Tengku Zafrul Aziz, who was trade minister until Dec 2, told The Straits Times that while November saw a 15.8 % surge in imports, it was largely in capital and intermediate goods, signalling “ongoing industrial investment and supply-chain deepening, a positive sign for future productivity and export capacity”.

“To sustain this momentum, Malaysia should continue diversifying its export markets beyond traditional partners, deepen regional economic integration via ASEAN and new FTAs (free trade agreements), and strengthen supply-chain flexibility to mitigate tariff risk,” added Zafrul, who now chairs the Malaysian Investment Development Authority.

One such effort was Malaysia inking a memorandum of understanding with five other ASEAN peers in July to “treat each other as partners to collaborate and integrate our supply chains, said Wong.

Singapore has also ridden the tech wave, with non-oil domestic exports rising by 11.6 % year on year in November, marking the second consecutive month of double-digit growth.

Chua Hak Bin, regional co-head of macro research at Maybank, said Singapore’s role in the AI supply chain will continue to deepen in 2026 with the opening of Micron’s new SGD8.9 billion (US$6.9 billion) advanced packaging facility and UMC’s SGD6.5 billion wafer plant.

“Singapore is also attracting investments in AI research and development facilities and as a global test bed for new technologies,” he said.

But diversification has also been part of the storyline, according to HSBC’s ASEAN economist Yun Liu, with transport engineering, for example, continuing to grow its exports at a double-digit pace.

“This not only contributes to the manufacturing sector, but has also boosted related services sectors such as wholesale,” she said.

Singapore’s low 10 % baseline tariff gives it a competitive advantage against other US trading partners and will likely mean that investments will be diverted to the Republic.

Supply chain resilience

These developments to build resilient supply chains come as trade becomes an increasingly key plank of geopolitical strategy.

OCBC Bank’s head of Asia macro research, Tommy Xie, believes China’s unprecedented trillion-dollar annual trade surplus will be difficult to sustain, and the export pressure exerted by Beijing will likely cause more trade frictions with countries beyond the US.

Already, Mexico has slapped tariffs of up to 50 % on more than 1,400 products from Asian countries, a move widely believed to be aimed at curbing Chinese imports.

China and Europe have also been trading anti-dumping duties on various goods since last summer, such as electric vehicles and pork. French President Emmanuel Macron has threatened further measures should Beijing fail to reduce its trade surplus with the EU, which exceeded US$350 billion in 2024.

The broad sentiment among observers is also that China cannot continue to rely on exports for future growth.

“The economic support from external demand will decline. It can’t be as high as it was this year or last year. This is why domestic demand has become so important. But whether the latter can be held up is uncertain,” said Xie.

There is also lingering concern about the overconcentration risk on tech.

Chen Mei-chu, head of Taiwan’s National Development Council’s Department of Economic Development, said the island’s economy is uneven, with the tech industry serving as the backbone while non-tech, “old economy” industries underperform.

For instance, the value of Taiwan’s machinery exports, which face stiff competition from manufacturing powerhouses such as China, where costs are lower, dropped to US$24.1 billion in 2024, the lowest in four years.

In his national day address in October, Taiwanese President Lai Ching-te said the government will be investing tens of billions of dollars more each year to help small and medium enterprises move towards digital transformation and net-zero emissions.

In November, Thomas Wu, chairman of the Taipei-based Chinese National Association of Industry and Commerce, called on the government to do more to address the imbalance between the high-tech and traditional sectors.

“Taiwan’s AI hardware suppliers have delivered strong earnings results and underpinned robust exports, but the nation cannot lean on the AI boom indefinitely,” he said.

Shannon Teoh

Yip Wai Yee

Kok Yufeng

Ovais Subhani

The Straits Times

Asia News Network