Before You Buy Another Chip Stock on Bursa, Read This…
Case Notes 45: In this article, I examine how the Bursa semiconductor sector has performed over the past decade and provide an overview of several key players. I aim to uncover the real story behind the boom - and occasional bust - experienced by these companies.
Malaysia’s semiconductor sector has been on a tear — or has it? Headlines tout booming demand from EVs, automation, and AI, but a closer look reveals a different story.
Over the past decade, many Bursa-listed chip companies grew revenues and expanded their global reach. Yet returns on capital quietly eroded, margins came under pressure, and investors faced more volatility than they bargained for.
In this article, I dig beneath the surface. This is not just another bullish narrative. It is a data-driven examination of how the sector performed, which companies thrived, which stumbled, and why.
From dominant OSAT players to precision automation specialists and next-gen LED innovators, I explore the winners, the laggards, and the strategic pivots that could define their next decade.
Before you jump on the semiconductor bandwagon, read on. The true story may surprise you, and it could save your portfolio from an expensive lesson.
Should you go and invest in the companies covered here? Read my Disclaimer!
Contents
- Introduction
- Sector Trends and Base Rates
- Semiconductor Assembly, Test, and OSAT
- Equipment and Automation
- Semiconductor Components and Optoelectronics
- Conclusion
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Introduction
The semiconductor sector on Bursa Malaysia has undergone profound changes over the past decade. This reflected not only rapid technological advances but also shifts in global supply chains and end-market demand. As Malaysia strengthens its role within the regional electronics ecosystem, investors increasingly look to this sector for exposure to long-term growth themes such as automation, electric vehicles, and digitalization.
Yet while the topline story is one of expansion, the deeper picture is more nuanced. Revenue growth, capital investment, margins, and returns on equity have not always moved in tandem, raising important questions about sustainability and capital efficiency.
This article takes a structured approach to exploring these dynamics, providing investors with a balanced perspective on where opportunities and risks might lie.
How is this article structured
We break the analysis into two main parts:
1. Sector trends and base rates
We begin by examining the financial and operational evolution of the Bursa semiconductor sector over the past decade. This includes trends in revenue, profitability, returns, capital structure, and margins. They provide a critical backdrop - or base rate - against which individual company performances can be assessed.
2. Company-level analysis:
We then drill down to commentary on 10 selected companies that exemplify the diverse challenges and opportunities within the sector. These companies were chosen from a broader pool of 13 Bursa-listed semiconductor players to ensure a representative mix across key sub-sectors and financial profiles.
I grouped them under three main categories - Semiconductor Assembly, Test & OSAT, Equipment & Automation, and Semiconductor Components & Optoelectronics. Within each sector, I explore how the representative companies are navigating growth, capital demands, profitability pressures, and strategic pivots.
By combining a long-run sector perspective with focused company snapshots, I aim to help value-oriented investors better gauge the intersection of growth potential, capital discipline, and business quality within Malaysia’s semiconductor landscape.
Sector Trends and Base Rates
Over the past decade, the semiconductor sector on Bursa Malaysia has undergone meaningful shifts, mirroring global technological progress and changing market needs.
As a critical pillar of the worldwide electronics supply chain, semiconductor companies listed on the Bursa Main Market have delivered diverse performances. These were shaped by megatrends such as automation, artificial intelligence, and the accelerating adoption of electric vehicles.
Broadly, the Bursa-listed semiconductor players can be grouped into four categories based on their primary business activities:
- Semiconductor Assembly, Test, and OSAT (Outsourced Semiconductor Assembly and Test).
- These companies focus on packaging and testing semiconductor devices, ensuring quality and performance before final integration.
- There are 4 companies here - Inari Amertron, KESM Industries, Malaysian Pacific Industries, and Unisem (M).
- Equipment and Automation (Semiconductor Manufacturing Tools).
- This segment includes firms that design and supply high-precision equipment and automation solutions essential to semiconductor fabrication and inspection processes.
- There are 4 main companies here - Greatech Technology, Elsoft Research, Frontken Corporation, and ViTrox Corporation.
- Semiconductor Components and Optoelectronics:
- The companies in this group are engaged in designing and manufacturing semiconductor components such as LEDs, sensors, and other specialized devices.
- The companies here are D&O Green Technologies, Globetronics Technology, and JHM Consolidation.
- Miscellaneous:
- A small cluster of companies serves niche roles within the semiconductor value chain. I focused on 2.
- Key ASIC Berhad, which specializes in ASIC design for IoT and related applications.
- Turiya Berhad, which provides plating services to semiconductor manufacturers
This classification sets the stage for a closer look at the sector’s financial and operational trends over the past decade, which will be explored in the charts and commentary that follow.
Sector details
Company size dispersion is significant, with the 2024 total assets ranging from RM 34 million to RM 3.6 billion. The 2024 revenue ranged from RM 23 million to RM 2.1 billion. Refer to Chart 1. This wide range explains the diverse performance profiles within the sector.
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| Chart 1: Total Assets and Total Revenue |
From 2015 to 2024, the sector median revenue grew at 8.6 % CAGR. But as shown in the left part of Chart 2, the bulk of the growth came post-2020.
While there was consistent median revenue growth, the profit picture was more volatile, with a spike in 2021 for the median profit. Thereafter, profit declines. Refer to the right part of Chart 2. Nevertheless, there was an overall median PAT growth of 8.2 % CAGR over the past decade.
The profit surge in Malaysia's semiconductor sector during 2021 and 2022 was the result of heightened global demand, strategic geopolitical shifts favoring Malaysia, robust export performance, advantageous currency movements, and supportive government policies.
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| Chart 2: Sector Revenue and PAT |
Despite growth profits, the sector returns declined over the past decade. Chart 3 shows the declining trends for the ROE and ROA.
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| Chart 3: Sector Returns |
The declining returns with increasing profits were because of the growth in total assets and total equity, as shown in Chart 4. Many Bursa semiconductor stocks between 2015–2024 became larger, better capitalized, and more diversified — but this came at the cost of short-term capital efficiency as measured by ROE.
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| Chart 4: Sector Total Equity and Total Assets |
Given the different trajectories between profits and capital, you should not be surprised to find declining sector capital efficiency as illustrated in Chart 5.
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| Chart 5: Sector Capital Efficiency |
At the operational level, the sector faced a challenging situation over the past decade. There was no gross profit margin expansion while the Selling, General and Administration (SGA) margin increased (deteriorated). Refer to Chart 6.
These suggest that the profit growth was driven more by revenue growth than by improvements in operating or capital efficiencies.
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| Chart 6: Sector Margins |
The main positive news about the sector was the improvement in the financial position. As shown in Chart 7, the median Debt Equity ratio declined from 2015 to 2024. There was also a corresponding decline in the sector leverage (Total Assets/Total Equity).
This better financial standing will ensure that the sector can have some breathing space to address the operating challenges.
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| Chart 7: Sector Debt Equity Ratio and Leverage (Total Assets/Total Equity) |
Overall, the picture that emerged is that this is a sector that can generate topline growth. But it was much harder to deliver profitable, capital-efficient growth. This is probably because:
- Capital demands are relentless.
- Pricing power is limited.
- Talent is a bottleneck.
- There is customer concentration risk.
Semiconductor Assembly, Test, and OSAT
This sub-sector comprises companies specializing in the critical back-end processes of the semiconductor value chain. This covers packaging, assembly, and rigorous testing of semiconductor devices before they reach end markets.
The firms here play an essential role in ensuring product reliability and performance, especially as devices become more complex and quality standards tighten.
In Malaysia, OSAT players have benefited from the country’s established electronics ecosystem and strategic position within global supply chains. However, they also face rising capital demands, customer concentration risks, and the ongoing challenge of balancing scale with profitability.
The following profiles of Inari Amertron, KESM Industries, Malaysian Pacific Industries, and Unisem illustrate how companies in this segment are navigating growth opportunities alongside operational and financial headwinds.
Inari’s Growth Story: Strong Profits, Weak ROE
Over the past six years, Inari Amertron Berhad has achieved a 4 % CAGR in revenue while PAT grew at a double rate of 8% CAGR.
This stronger PAT growth, however, did not stem from improved cost leverage or margin expansion. As noted in the 2024 annual report, “the Group’s administrative expenses rose in line with revenue,” indicating no significant improvement in fixed cost efficiency.
Despite growing profits, Inari’s ROE fell from 18% in FY2019 to just 10% in FY2024. This decline reflects an outsized expansion in capital relative to earnings. For instance, between FY2019 and FY2024, total assets and shareholders’ equity rose at a CAGR of 18 % to 19%, well above the 4% revenue CAGR.
The company’s growth trajectory is also marked by a high concentration of revenue from a single customer. As disclosed, “approximately 90% of the Group’s revenue is derived from one major customer.”
This underscores a key investment risk, especially in a sector where technological shifts and client decisions can swiftly alter demand.
Taken together, Inari exhibits the financial strength typical of companies in the Gem quadrant of the Fundamental Mapper. However, its declining ROE and high customer concentration suggest elevated investment risk, even in the presence of profit growth.
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| Chart 8: Inari Fundamental Mapper 2 Jun 2025 |
KESM: Strategic Shift and Signs of Recovery
KESM Industries Berhad is principally engaged in burn-in and testing services for the semiconductor industry. It is recognized as the world's largest independent burn-in and test service provider, primarily serving global semiconductor manufacturers.
However, KESM’s revenue declined 20 % from 2019 to 2024. According to the company, the revenue decline was not due to market loss or obsolescence, but rather a strategic pivot into higher-value segments (EV and AI), hindered by macroeconomic disruptions and long product development cycles.
But the turnaround signs in 2024 suggest that the business may be at an inflection point.
- Revenue rose 6 % in 2024 compared to that in 2023. This marks the first year-on-year growth since 2021.
- After a net loss in 2023, KESM recorded a modest net profit of RM0.2 million in 2024.
- KESM noted improvements in the automotive semiconductor demand, especially for EV applications.
- The company is seeing rising orders for advanced power management chips used in AI systems, a new but rapidly growing vertical.
In short, 2024 marked a bottoming out and a pivot toward recovery. While the profit was still minimal, the operational and strategic indicators point to early-stage momentum that could accelerate if EV and AI testing volumes continue to grow.
The Price of Progress: MPI’s Growth vs Return Compression
Malaysian Pacific Industries (MPI) today is a globally competitive, innovation-driven OSAT provider with a growing focus on power electronics and next-generation technologies.
Over the past six years, MPI has evolved from a traditional OSAT-focused manufacturer into a sustainability-integrated, digitally enabled partner aligned with global megatrends such as EVs, renewable energy, and advanced power semiconductors.
This transformation has been underpinned by strategic ESG leadership, strong global customer orientation, enhanced R&D capabilities, and a resilient, skilled workforce.
In line with this strategic shift, revenue and PAT grew at a CAGR of approximately 6% over the period. However, revenue growth did not translate into proportionately higher PAT due to declining gross profit margins and rising SGA expenses.
At the same time, capital employed grew faster than PAT, resulting in a decline in ROE. While this declining ROE trend is common across the sector, MPI continues to outperform peers on a relative basis.
That said, the market appears to have priced in concerns about MPI’s declining returns. So, while MPI stands out on a peer-relative basis, from an investment risk perspective, it falls into the Gem quadrant of the Fundamental Mapper - reflecting strong business fundamentals but a market valuation that is cautious about future profitability.
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| Chart 9: MPI Fundamental Mapper 2 Jun 2025 |
Unisem: Positioned for a Rebound?
Over the past six years, Unisem (M) Berhad has evolved from a cost-focused OSAT player into a technology-driven, sustainability-aligned enterprise.
This transformation involved embedding ESG principles and digitalisation into its operations, expanding its role to a collaborative innovation partner, and investing in modern, environmentally sustainable facilities.
Despite this strategic shift, there was no sustained uptrend in profits from continuing operations. While profit after tax in 2022 was approximately three times higher than in 2019, by 2024 it had declined to a level below that of 2019.
Operationally, there was little improvement in profit margins over the six years, although the SGA margin remained stable. As a result, ROE declined at 12 % per year compounded over the period.
According to the company, this performance stems primarily from cyclical demand weakness, underutilised capacity, and cost escalations. These challenges have masked the operational improvements and technology investments the company has made.
However, its capacity investments, customer alignment, and cost control suggest it is well-positioned to rebound once demand normalizes.
To track Unisem’s recovery, investors should watch for rising semiconductor demand and improved plant utilisation. Margin and ROE improvement would signal better cost absorption and capital efficiency. New customer wins and progress on technology and ESG goals would further support a sustainable rebound.
Equipment and Automation
This sub-sector consists of companies that design, manufacture, or service high-precision tools, automation systems, and advanced process equipment used throughout semiconductor fabrication and testing. These businesses form the backbone of technological progress in the semiconductor industry, enabling higher yields, finer geometries, and improved production efficiency.
In Malaysia, firms in this segment have leveraged global shifts toward smart manufacturing, Industry 4.0, and the rapid growth in EV and renewable technologies to expand their market reach. However, their success often hinges on timely capital investment and customer project cycles. The ability to move up the value chain into more sophisticated, higher-margin solutions is critical.
The following analyses of Frontken, Greatech, and Elsoft highlight how players in this space are scaling operations, managing profitability, and positioning themselves to capture the next wave of semiconductor demand.
Frontken: Squeaky Clean Profits, but ROE Needs a Polish
Frontken Corporation Berhad is a leading service provider specializing in advanced precision cleaning, surface treatment, and maintenance of high-value components for the semiconductor and oil & gas industries.
Over the past six years, it has been riding a pretty sweet growth wave - revenue grew at a solid 11% CAGR, thanks to booming demand in semiconductors, smart capacity expansions, and a nice little comeback from its oil & gas business.
Profits shot up even faster, with PAT growing at 15% CAGR. That is the magic of doing more high-value work, keeping costs in check, and squeezing more out of each dollar, particularly in its powerhouse hubs of Taiwan and Singapore.
But here is the twist. Despite raking in more profits, ROE barely budged, moving from 20.0% in 2019 to just 20.7% in 2024. Why?
Well, Frontken has been playing it safe - retaining lots of earnings, issuing new shares from warrant conversions in 2024, and keeping its balance sheet squeaky clean. All great for stability, but not exactly ROE fuel.
Still, on the Fundamental Mapper, Frontken shines bright, sitting proudly to the right with its strong business performance. But… maybe just a little too bright for the market’s liking. With its stock price possibly outpacing its fundamentals, it has landed in the Gem quadrant—sparkling with quality, but perhaps already fully admired.
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| Chart 10: Frontken Fundamental Mapper 2 Jun 2025 |
Greatec: From Rocket to Rollercoaster
Greatech Technology Berhad has spent the past six years scaling up impressively - transforming into a global automation powerhouse serving industries like solar, semiconductors, EVs, and life sciences. Revenue grew 3.5 times, and profit after tax tripled.
This was not luck. It was the result of bold moves: entering new markets, diversifying its customer base, and investing heavily in capacity, talent, and acquisitions.
But while the business grew bigger, shareholder returns told a different story. Return on equity was cut in half, not because of new shares, but because retained profits swelled the equity base while profit growth lagged behind revenue. Heavy upfront investment in new factories, people, and subsidiaries also weighed down margins in the short term.
Now, Greatech finds itself at an inflection point - straddling the edge between the Quicksand and Gem quadrants in the Fundamental Mapper. To overcome this predicament – growing revenue with declining ROE - the strategy must shift from expansion to execution. That means making better use of the infrastructure already in place, focusing on higher-margin, repeatable projects, and tightening cost control.
The challenge ahead is clear - turn scale into efficiency, and growth into stronger returns. If Greatech can do that, it won’t just be a leader in automation – it will be a high-performing business delivering real value to shareholders.
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| Chart 11: Greatec Fundamental Mapper 2 Jun 2025 |
Burned Out? Why Elsoft’s Test Equipment Business Needs a Reboot
Once upon a time, Elsoft Research Berhad was riding high, churning out test and burn-in systems like nobody's business. These clever contraptions found eager customers in the booming world of smartphones and shiny gadgets. Life was good.
But then came 2019. Demand for LED flash testing started drying up as smartphone makers got a little too comfortable with “good enough,” and product designs moved on. And just when Elsoft was wondering what else could go wrong, along came COVID-19, slamming the brakes on capex and shipping schedules. Revenue took a nosedive.
In 2021 and 2022, things perked up a bit, thanks to delayed orders finally getting delivered and customers emerging from lockdown hibernation. But this was a short-lived rebound. The core smart device segment never came back, and Elsoft’s newer bets - like automotive and medical test equipment - were still warming up on the sidelines.
Today, Elsoft sits in what we would call the “Quicksand quadrant” in the Fundamental Mapper. It is not sinking dramatically, but it is stuck. The company is making all the right noises - more R&D, new markets, a pivot to EVs and medical devices - but real growth is still a work in progress. Until those bets pay off, Elsoft’s story is less “comeback kid” and more “patient in rehab.”
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| Chart 12: Elsof Fundamental Mapper 2 Jun 2025 |
Semiconductor Components and Optoelectronics
This sub-sector includes companies engaged in the design, manufacture, and assembly of specialized semiconductor components such as LEDs, sensors, and precision modules. These products are essential for a wide range of end markets where performance, miniaturization, and energy efficiency drive competitive advantage.
Malaysian firms in this segment have carved out niches by integrating upstream design capabilities with downstream manufacturing. They have positioned themselves to serve demanding global customers. Yet they also face industry pressures from rapid technology cycles, evolving product standards, and the need to continually invest in innovation to stay ahead.
The following reviews of D&O Green Technologies, Globetronics, and JHM Consolidation illustrate how these companies are adapting to shifting market dynamics, managing cost structures, and striving to balance growth with sustainable profitability.
Growth Without Profit? Mapping D&O's Strategic Reset
D&O Green Technologies is a vertically integrated automotive LED solution provider, evolving into a one-stop platform for smart automotive lighting systems. A key innovation is its seddLED - the world’s first smart digital automotive LED that integrates both LED and IC within a single package.
Over the past six years, D&O achieved a 13% CAGR in revenue, yet PAT grew at only 2% CAGR. This discrepancy is largely due to a significant decline in gross profit margin, which dropped from 28% in 2019 to 20 % in 2024, although partially offset by improved SGA efficiency.
The margin erosion stemmed from several factors - less favourable product mix, rising input costs, higher depreciation and overhead, industry pricing pressure, and foreign exchange volatility.
These structural and external challenges weighed on profitability, despite strong topline performance. It is no surprise, then, that ROE in 2024 is roughly half of what it was in 2019.
However, the outlook is not entirely bleak. While gross margins remain below historical levels, D&O’s strategic pivot toward higher-margin products, deeper vertical integration, and sustained investment in automation are showing early signs of a turnaround.
A sustained recovery will hinge on scaling production volumes, cost stabilization, and market acceptance of its advanced offerings. Given this context, it is clear why D&O falls into the Turnaround quadrant in the Fundamental Mapper.
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| Chart 13: D&O Fundamental Mapper 2 Jun 2025 |
Globetronics Turnaround Hinges on Product Renewal
Globetronics’ revenue has halved over the past six years, with PAT falling from RM46 million in 2019 to RM11 million in 2024.
While gross margins held up, the shrinking topline meant fixed costs weighed more heavily on profits. The company attributes the decline to lower customer volume loadings, its exit from the quartz timing business, and COVID-related disruptions.
But the deeper issue is this: new products have not scaled fast enough to replace legacy lines. In a tech-driven industry, that is a serious concern. Globetronics’ disclosures cite softening demand and reduced volume from key customers, but offer little mention of successful new product rollouts or major customer wins.
This absence is telling. Over several years, the company has explained revenue weakness through external factors, yet there has been no concrete sign of innovation-led growth. In a sector where new product milestones are typically highlighted, this silence suggests execution gaps in product development and commercialization.
This is the heart of Globetronics’ challenge. In tech, if new doesn’t grow, old revenue goes. A sustained turnaround will depend on the company regaining its ability to bring new, scalable products to market.
Its position in the Turnaround quadrant in the Fundamental Mapper reflects this fundamental issue.
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| Chart 14: Gtronic Fundamental Mapper 2 Jun 2025 |
JHM’s Inflection Point: Signs of a Turnaround Ahead?
JHM Consolidation Berhad is a one-stop engineering and manufacturing solutions provider serving the automotive, industrial, semiconductor, and telecommunications sectors.
It supports the semiconductor sector at the upstream level by supplying precision mechanical parts for semiconductor equipment. It also produced hermetic enclosures and connectors used in semiconductor modules, and assembled electrical and optical modules for semiconductor and industrial applications.
Over the past six years, JHM’s revenue has declined at a compounded rate of approximately 2% annually. This decline was driven by reduced orders from key automotive customers, the lingering effects of the COVID-19 pandemic, supply chain disruptions, delayed project launches, and rising input and labor costs.
As such, from a profitable position in 2019, JHM slipped into losses in 2024. The decline was exacerbated by a narrowing gross profit margin and higher SGA expenses. These structural pressures challenged operating leverage, despite capacity expansion initiatives.
However, 2024 may mark the bottom. The Q1 2025 results indicate revenue improvement and a narrower loss. Additionally, JHM reportedly secured a contract to supply automotive parts to the U.S. and is exploring EV battery pack assembly initiatives that could support a turnaround and eventually improve its position in the Fundamental Mapper.
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| Chart 15: JHM Fundamental Mapper 2 Jun 2025 |
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Conclusion
The Bursa semiconductor sector stands at an intriguing crossroads. Over the past decade, these companies have proven their ability to drive meaningful topline growth, capitalizing on megatrends like automation, electrification, and digitalization.
Yet beneath this growth lies a more complicated picture. Returns on equity have generally declined, pressured by relentless capital requirements, limited pricing power, and the structural challenges of operating in a highly competitive, rapidly evolving global industry.
Our company analyses underscore this dynamic. While some firms have demonstrated robust profit expansion and operational discipline, others are grappling with margin erosion, underutilized capacity. Some are facing the challenges of the long lead times needed for strategic pivots to bear fruit. Across the board, capital efficiency remains a critical watchpoint.
For value-oriented investors, this suggests both opportunity and caution. The sector’s long-term relevance is clear, supported by global shifts toward smart technologies and sustainable industries.
However, identifying winners will require careful attention to balance sheets, customer diversification, execution on technology roadmaps, and above all, the ability to translate scale into sustainable returns.
As these businesses navigate the next cycle, investors would do well to focus on signs of improving ROE, margin resilience, and strategic moves that deepen competitive moats - factors that ultimately separate durable compounders from capital-intensive laggards.
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Disclaimer & DisclosureI am not an investment adviser, security analyst, or stockbroker. The contents are meant for educational purposes and should not be taken as any recommendation to purchase or dispose of shares in the featured companies. Investments or strategies mentioned on this website may not be suitable for you and you should have your own independent decision regarding them.
The opinions expressed here are based on information I consider reliable but I do not warrant its completeness or accuracy and should not be relied on as such.
I may have equity interests in some of the companies featured.
This blog is reader-supported. When you buy through links in the post, the blog will earn a small commission. The payment comes from the retailer and not from you.
Disclaimer & Disclosure
I am not an investment adviser, security analyst, or stockbroker. The contents are meant for educational purposes and should not be taken as any recommendation to purchase or dispose of shares in the featured companies. Investments or strategies mentioned on this website may not be suitable for you and you should have your own independent decision regarding them.
The opinions expressed here are based on information I consider reliable but I do not warrant its completeness or accuracy and should not be relied on as such.
I may have equity interests in some of the companies featured.
This blog is reader-supported. When you buy through links in the post, the blog will earn a small commission. The payment comes from the retailer and not from you.
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