On paper, Malaysia’s trade figures read like a victory lap. Technology-related exports jumped about 55 per cent year-on-year in September, and the monthly trade surplus hit its second record high of MYR 34 billion (US$8.38 billion).
When looking closer, though, the boom appears to be largely borrowed.
In a new note, CGS International argued that the surge has been powered mainly by a global appetite for memory-related products, not by Malaysia winning a bigger share of the market. The gains have also yet to show up where they matter most to ordinary Malaysians: in wages, jobs and fresh investment.
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That distinction is not academic. A country that rides a demand wave gets carried back down when the wave breaks. A country that gains competitiveness keeps its position after the tide goes out.
A boom built on memory
The growth has been narrow. It is concentrated in electrical and electronics (E&E) products, particularly memory, solid-state devices and integrated circuit (IC) parts, all of which have benefited from demand tied to AI and the data centre build-out reshaping the region’s chip supply chain.
Electrical machinery accounted for roughly 40 to 50 per cent of Malaysia’s export growth so far this year. The US was the single largest contributor to the increase in shipments, adding about 10 to 15 per cent to export growth.
The trade map tells its own story. Malaysia’s widening surplus with the US is offset by deficits with China and Taiwan. In plain terms, components flow in from East Asia, are assembled, tested and packaged in Malaysia, and then shipped out to American customers. CGS International describes this as Malaysia acting as a conduit within the global technology supply chain. Conduits are useful. They are rarely where the money pools.
The scoreboard that hasn’t moved
To test whether Malaysia is genuinely outperforming, CGS International used Revealed Comparative Advantage (RCA), a measure that compares how much a product weighs in a country’s exports against its weight in global trade. If Malaysia were winning, its RCA index would climb.
It has not. Malaysia already holds a competitive position in IC parts and solid-state devices, but the latest data shows no significant improvement in its RCA score despite the sharp rise in exports. The research house’s reading: Malaysia is benefiting from a bigger pie, not grabbing a larger slice.
The memory numbers make the point neatly. Malaysia’s memory exports rose 243 per cent year-on-year to date. The World Semiconductor Trade Statistics (WSTS) forecasts global memory sales growth of 249 per cent. Malaysia, in other words, is swimming slightly slower than the current.
The gains have also come from volume rather than pricing power. Memory shipment volumes in mid-2026 reached about three times their 2023 levels. That matters because volume growth depends on factory capacity, while soaring memory prices tend to reward front-end producers, the companies that design chips and fabricate wafers. Malaysia’s strength lies in the back end: assembly, testing and packaging, where margins are thinner.
There is one encouraging signal. OECD Trade in Value Added data suggests Malaysia is capturing a larger share of domestic value added, meaning more of the economic value from each export is staying in the country.
Where are the pay cheques?
The broader economy has yet to feel the boom.
Employee compensation in the E&E sector has stayed broadly flat since 2022-2023, according to CGS International. Employment in the industry did not grow significantly in the first eight months of 2026.
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Investment is the starker gap. Quarterly approvals in the sector have hovered between RM5 billion and RM10 billion (roughly US$1.2 billion to US$2.5 billion), far below the RM40 billion to RM80 billion (about US$9.9 billion to US$19.7 billion) peaks of the 2021-2023 investment boom.
The research house offers a caveat: wages, hiring and investment typically lag exports, so the benefits may still arrive. There is some evidence for that. Manufacturing capacity utilisation rose to 87.7 per cent in June 2026, its highest since 2015. Factories running that hot usually have two choices: expand or turn away orders.
Still, “it’s coming” is an argument that needs the cycle to cooperate. And the cycle may not wait.
The cycle is already cooling
CGS International expects E&E export momentum to moderate. WSTS forecasts global semiconductor sales growth to slow from about 90 per cent in 2026 to 27 per cent in 2027.
Malaysia’s exports are likely to follow. Because it sits at the back end of the supply chain, it may also feel the slowdown later than others, a delayed hangover after a party it mostly catered.
Climbing the value chain, again
The policy challenge, the research house said, is to sustain growth beyond this demand cycle by moving up the value chain, particularly into advanced packaging and semiconductor services. It views the National Semiconductor Strategy as a more pragmatic plan, with realistic targets for developing the industry and capturing more value.
Malaysia is not alone in this ambition. Thailand is targeting a US$80 billion semiconductor push to move beyond assembly, and neighbours from Singapore to the Philippines are chasing the same higher-value work. At home, startups such as GreatAsic, which is betting on indigenous chip design, and FusionAP hint at what an upgraded industry might look like, though they remain small against the scale of the task.
The constraints are real. The US is weighing tariffs under Section 232, a trade law that lets Washington impose duties on national security grounds, with the second phase of the measures still pending. Malaysia also faces shortages of skilled workers, electricity and other resources, pressures sharpened by the data centres crowding into Johor and competing for the same power grid.
These, CGS International warned, could limit Malaysia’s ability to fully capitalise on the semiconductor upcycle and attract further investment.
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The record surpluses are worth celebrating. But a boom that lifts exports without lifting wages, jobs or competitiveness is less a transformation than a good season. Malaysia’s task is to make sure the next downturn finds it higher up the ladder than this upturn found it.
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