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UNISEM, INARI, MPI, ELSOFT: Semiconductor Sector Report: AI Demand Fuels Growth Amidst Trade Uncertainties
Semiconductor Sector: Growth Still Fuelled by Robust AI Demand
May 2025 Global Semiconductor Sales +3.5% MoM & +27.0% YoY
In May 2025, the global semiconductor continued its positive momentum by recording another strong sales growth. According to the Semiconductor Industry Association, global semiconductor sales for the month reached USD59.0bn (+3.5% MoM, +27.0% YoY), marking the 19th consecutive month of YoY sales growth, supported by sustained demand for AI and high-performance computing applications. The YoY improvement was broad-based across all regions, led by the Americas (+45.2%), followed by Asia Pacific/All Other (+30.5%), China (+20.5%), Japan (+4.5%), and Europe (+4.1%).
Figure 1: Global Chip Sales (US$ bn)
Figure 2: Global Chip Sales Cycles (YoY Growth)
Higher MoM Sales
By geography, the 3.5% MoM increase in sales for May 2025 was also supported by growth across all regions, led by Asia Pacific/All Other (+6.0%), China (+5.4%), Europe (+4.0%), the Americas (+0.5%), and Japan (+0.2%).
Figure 3: Growth in Sales by Region (% YoY)
Figure 4: Breakdown of Sales by Region (%)
Global Manufacturing Capacity Sees Healthy Expansion
According to SEMI, global front-end semiconductor suppliers are ramping up expansion efforts to meet the soaring demand driven by generative AI applications. The semiconductor manufacturing industry is expected to sustain healthy growth momentum, with capacity projected to increase at a CAGR of 7% from the end of 2024 through 2028, reaching a record high of 11.1mn wafers per month.
Figure 5: Global Manufacturing Capacity
YoY Capacity Growth for ≤7nm vs. >7nm Nodes (2024-2028)
The primary driver of capacity growth is the continued expansion of advanced process nodes, particularly 7nm and below, which are critical for the producing high-performance chips required for AI applications.
Potential AI Chip Curbs for Malaysia and Thailand
According to media reports, the administration of U.S. President Donald Trump plans to restrict shipments of AI chips to Malaysia and Thailand as part of efforts to curb suspected semiconductor smuggling into China. At this stage, the proposed rule remains in draft form and is still subject to change. Overall, this move is not entirely unexpected, as Trump has previously expressed his intention to implement his own version of an AI diffusion policy. For Malaysia’s technology sector, we do not expect a significant immediate impact, given the local semiconductor industry’s currently limited direct exposure to AI chips. However, we are more concerned about the potential long-term implications, as such restrictions could hinder the country’s ambition to move up the value chain. Limited access to cutting-edge AI chips may delay local AI development, ultimately slowing technological advancement.
Maintain Neutral
Although the World Semiconductor Trade Statistics forecasts continued growth in global semiconductor sales for 2025, we maintain a cautious outlook due to the prevailing uncertainties related to U.S. trade policy. Should the U.S. implement sector-specific tariffs on semiconductors, it could materially impact end-market demand and corporate earnings. On the other hand, we believe the Malaysian government will remain steadfast in executing the National Semiconductor Strategy, with the goal of elevating the country’s position within the global semiconductor value chain. Overall, we maintain our NEUTRAL stance on the semiconductor sector. We downgrade UNISEM (TP: RM2.15) from Hold to Sell due to limited potential upside following the recent price rally. Meanwhile, we maintain Hold recommendations on INARI (TP: RM2.11), MPI (TP: RM21.63), and ELSOFT (TP: RM0.36).
Key downside risks include:
i) U.S. policy risks that may weigh on economic growth and disrupt supply chains, ii) weaker-than-expected sales, iii) a weakening of the US dollar against the Ringgit, and iv) a sudden spike in commodity prices.
Table 1: Peers Comparison
| Company | Call | ESG | Price (RM) | TP (RM) | Mkt. Cap. (RM mn) | PE (x) | EPS Growth (%) | PBV (x) | Div. Yield (%) | ROE (%) | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CY25F | CY26F | CY25F | CY26F | CY25F | CY26F | CY25F | CY26F | CY25F | CY26F | ||||||
| Inari Amertron | HOLD | ★★★★ | 1.93 | 2.11 | 7,217.8 | 26.8 | 24.1 | -11.8 | 10.9 | 2.5 | 2.5 | 3.6 | 3.9 | 8.4 | 9.2 |
| Unisem | SELL | ★★★★ | 2.28 | 2.15 | 3,677.9 | 44.2 | 30.0 | 54.4 | 47.4 | 1.6 | 1.6 | 3.5 | 3.5 | 3.7 | 5.3 |
| MPI | HOLD | ★★★★ | 21.42 | 21.63 | 4,495.7 | 28.1 | 26.6 | 20.3 | 5.5 | 2.0 | 1.9 | 1.6 | 1.9 | 6.0 | 6.0 |
| Elsoft | HOLD | ★★★ | 0.33 | 0.36 | 229.1 | 29.4 | 20.9 | 160.5 | 41.1 | 2.2 | 2.3 | 6.1 | 6.1 | 7.3 | 10.8 |
| Weighted average | 30.7 | 26.6 | 5.0 | 15.6 | 1.9 | 1.9 | 3.0 | 3.3 | 6.3 | 7.1 | |||||
Source: Companies, TA Securities
Sector Recommendation Guideline
OVERWEIGHT: The total return of the sector, as per our coverage universe, exceeds 12%.
NEUTRAL: The total return of the sector, as per our coverage universe, is within the range of 7% to 12%.
UNDERWEIGHT: The total return of the sector, as per our coverage universe, is lower than 7%.
Stock Recommendation Guideline
BUY: Total return of the stock exceeds 12%.
HOLD: Total return of the stock is within the range of 7% to 12%.
SELL: Total return of the stock is lower than 7%.
Not Rated: The company is not under coverage. The report is for information only.
Total Return of the stock includes expected share price appreciation, adjustment for ESG rating and gross dividend. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting.
Total Return of the sector is market capitalisation weighted average of total return of the stocks in the sector.
ESG Scoring & Guideline
- ★★★★★ (≥80%): Displayed market leading capabilities in integrating ESG factors in all aspects of operations, management and future directions. +5% premium to target price
- ★★★★ (60-79%): Above adequate integration of ESG factors into most aspects of operations, management and future directions. +3% premium to target price
- ★★★ (40-59%): Adequate integration of ESG factors into operations, management and future directions. No changes to target price
- ★★ (20-39%): Have some integration of ESG factors in operations and management but are insufficient. -3% discount to target price
- ★ (<20%): Minimal or no integration of ESG factors in operations and management. -5% discount to target price
Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy and/or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein.
As of Thursday, July 10, 2025, the analyst, Chan Mun Chun, who prepared this report, has interest in the following securities covered in this report: (a) nil
Kaladher Govindan – Head of Research
