Malaysia's electronics export sector is facing a slowdown amid the lingering threat of a trade war between the US and China.— Reuters pic

KUALA LUMPUR, Jan 11 — Malaysia’s over-reliance on the Chinese market is now affecting its local electronics export sector, Financial Times (FT) reported today.

Calling it a “lesson in over-reliance,” FT’s report stated that the sector is facing a slowdown amid the lingering threat of a trade war between the US and China, affecting all important shipment to the republic.

FT went on to say that China and Hong Kong make up the largest export market for Malaysian electronics companies in the past five years, with value of shipments increasing by 15.5 per cent in 2017 to a staggering US$20.2 billion (RM82 billion).

“[The year] 2019 will see multiple headwinds from the trade war, slower economic growth and reduced capital expenditure from major IT companies,” FT quoted Firdaus Abdullah, the chief executive of Silterra Malaysia, one of Malaysia’s largest semiconductor manufacturers.

FT said that China’s economy is also expected to face a slow growth this year, even if the republic and the US agree to a ceasefire.

Malaysia and China’s fragile bilateral ties, owing to the cancellation of several of the republic-backed mega infrastructure projects here, are also seen as another key point.

“A recent UBS survey of Chinese manufacturers found growing interest in moving production capacity to south-east and north Asia in the coming six to twelve months.

“However, UBS said Malaysia fared worse relative to Thailand compared with a survey conducted in August 2018, suggesting this could be the result of cooling bilateral ties,” FT reported.

It also said that Malaysia has now turned its attention to the European Union (EU) to boost its investments, a plan that has reportedly been on hold since 2012.

“One example is Dyson, which runs a manufacturing supply chain between Singapore and contract manufacturers in Malaysia, with research divisions in both countries.

“Dyson has chosen Singapore as a base for building electric cars, which could mean more investment for Malaysia.

“However, these are all further into the future for Malaysia’s electronics sector. The near-near-term reality may be considerably more bumpy,” said the FT report.