Tariff shadows loom over electronics manufacturing services stocks

WHILE semiconductor stocks on Bursa Malaysia have remained largely unscathed by tariff concerns, the electronics manufacturing services (EMS) segment seems to be taking a hit.

Analysts are flagging that near-term results may weaken due to tariff uncertainties and order deferrals.

VS Industry Bhd, one of the stalwart EMS stocks on Bursa Malaysia, which at its peak in September 2021 commanded a market capitalisation of more than RM6bil, has seen its share price slump significantly since then.

This week, its share price dropped further, and alarmingly, there were share disposals by key management.

Similarly, competitor SKP Resources Bhd is down 24% year-to-date.

Also in that period, PIE Industrial Bhd is down by 53%, Wavefront Bhd (formerly ATA IMS Bhd) down 19%, and JHM Consolidation Bhd down 37%.

VS Industry has told the media that it acknowledges the operating environment is challenging due to uncertainties from tariff measures and rising cost pressures.

All of these could impact earnings, the company says.

It adds that the company is in dialogue with key customers and believes it will take some time for greater clarity on order flows to emerge following the tariff implications.

Hong Leong Investment Bank Research flagged similar concerns in a recent report, noting that EMS players are showing early signs of weakness amid tariff uncertainty.

The research house added that they are beginning to see “misses and weak numbers” in EMS companies, as “customer caution amid tariff uncertainty weighed on order flows”.

There is some cautious optimism.

Some reckon that global demand for EMS services will rise, driven by sustained consumer consumption and new product launches.

Several analysts have maintained their “buy” calls on EMS stocks, expecting earnings growth supported by new semiconductor technologies and artificial intelligence-related infrastructure investments.

However, risks remain from tariff uncertainties, inflationary pressures, geopolitical tensions, and customer concentration.