Electronics manufacturing services sector gets hit again

THE electronics manufacturing services (EMS) sector, which had already begun showing cracks a few quarters ago, seems to be taking yet another beating.

Based on the latest quarterly results, a number of well-known EMS players reported worrying numbers.

Take the case of PIE Industrial Bhd. Its net profit for the third quarter ended Sept 30, 2025 (3Q25) nearly halved to RM4.49mil from RM8.84mil a year earlier, dragged by lower revenue from EMS activities as demand for its services and products dropped.

The 19% US tariff remains a lingering source of disruption for EMS players.

One major customer of PIE recently faced a month-long hold by US Customs and Border Protection, which delayed shipments and forced the customer to temporarily reroute part of its Asean production – previously based in Malaysia, Thailand and Indonesia – to facilities in Mexico and the United States for smoother clearance into the United States market.

PIE insists that the longer-term demand narrative has not collapsed, highlighting in its financial note that while the tariff has caused potential new customers from Vietnam to pause plans to relocate production to Malaysia, the intention to shift manufacturing out from China has intensified.

The group said it is seeing many “encouraging potential new business discussions from China+1 activities”.

The problem is that opportunities arising from the US-China tensions may lack durability.

Such demand from Chinese companies can be fleeting, as customers may quickly redirect their sourcing once a cheaper alternative emerges.

Then there is Nationgate Holdings Bhd. Its revenue for 3Q25 fell by 28.6% year-on-year due to lower contributions from the data computing segment.

This division, the group’s main revenue driver, centres on assembling advanced artificial intelligence (AI)-focused computing hardware, including AI servers built with Nvidia’s graphics processing units.

As Nvidia’s sole original equipment manufacturing partner in South-East Asia for such servers, Nationgate supplies these systems to data centre operators and AI infrastructure customers.

The softer performance of its data computing segment comes amid talk of an AI bubble, with concerns that the industry’s breakneck investment in AI hardware and data centre buildouts is running ahead of the technology’s immediate commercial returns.

Clearly, the EMS sector is not out of the woods just yet.

Tariff risks, shifting supply chains and a more measured pace of AI-related spending continue to cast a shadow over near-term prospects.