KUALA LUMPUR (May 6): The artificial intelligence (AI) boom is changing the shape of global semiconductor demand, trade flows and supply chain risk, but how fast companies can deliver and how well they work together will decide which regions and players come out ahead, according to industry leaders and observers.

Speaking at Semicon Southeast Asia 2026, SEMI senior director for market intelligence Clark Tseng said Malaysia's chip sector is moving past its long-standing role as a high-volume back-end manufacturing base and being pulled into a more demanding, higher-value role in the AI era.

"The question is no longer whether the demand is there. The demand is clearly very strong, supported by AI and the supply chain diversification. The more important question is execution speed and capacity," Tseng said at the Market and Industry Outlook Forum at the conference held at Malaysia International Trade and Exhibition Centre (Mitec) here on Wednesday.

He said Penang is seeing wider demand across outsourced semiconductor assembly and test (OSAT), test equipment, inspection systems, precision components, equipment modules and semiconductor engineering services. But labour, engineering resources, factory floor space and the time it takes to qualify products with new customers are starting to slow growth.

"Malaysia's next phase is not only about attracting more investment. It is about moving from being a high-volume back-end base toward a higher-value semiconductor execution hub," Tseng said.

He also described Southeast Asia as a connected network of chip hubs rather than a single market, with each country playing a different role. Malaysia leads in assembly, testing and increasingly advanced packaging. Singapore holds the higher-value end of advanced manufacturing and AI infrastructure.

Vietnam is gaining ground in electronics manufacturing and chip design talent. Thailand and the Philippines remain key hubs for automotive, power and discrete devices.

Tseng said advanced packaging and test had become the most direct link between global AI demand and the region's chip industry. AI chips, he said, are no longer growing in performance through front-end technology alone but through system integration, more high-bandwidth memory (HBM), more chiplets, tighter connections between components and tougher testing requirements.

However, strain in the supply chain is already showing up in consumer electronics, he said.

"HBM-related DRAM, the allocation has reduced the availability for commodity DRAM. That's why you see the PC market and smartphone market unit shipment is expected to decline this year," Tseng said.

He said global spending on wafer fab equipment is entering an AI-driven phase, with double-digit growth expected this year and in 2027. SEMI projected that fab equipment spending would top US$180 billion (RM711.2 billion) by 2030 and could even reach US$200 billion as hyperscaler spending feeds through into new capacity.

BCG managing director and senior partner Aparna Bharadwaj said Southeast Asia stands to gain as global trade reroutes around a more inward-looking United States.

She said the feared collapse of global trade after last year's Liberation Day tariffs has not happened. Instead, BCG's modelling points to global trade growing at around 2.5% a year, broadly in line with global gross domestic product.

However, she said this would come with underlying trade routes shifting significantly into what BCG calls a "multinodal trade patchwork".

"Outside of US, 84% of global trade that happens beyond the US, countries continue to stay committed to multilateralism. And so we saw a scenario of a multinodal patchwork that is forming. That's the scenario that we have modelled for the next 10 years," Aparna said.

She also said US trade with the rest of the world is set to slow from 2.5% to 1.5%, with American production replacing some imports. Filling the gap is a group BCG called the "plurilateralists", which includes major powers such as the European Union's 27 member states, Japan and South Korea, as well as middle powers such as Vietnam and Chile, whose trade with one another is tipped to grow at around 3% a year.

She also pointed to China pulling away from its dependence on the US market and trading more heavily with the Global South. Bharadwaj said BCG expects China-Asean trade to grow at 5% a year and China's trade with the BRICS bloc to grow at 3.5% a year over the next decade.

"Quite a big lean in from China to trade more with the Global South. Deliberately, we need to understand these movements because the semiconductor industry is extremely globalised as well, and in fact more globalised than the average," she said.

Bharadwaj said the "America First" stance is unlikely to be just a feature of the current administration, with tariffs on China remaining a bipartisan issue. The chip industry has so far been spared the worst of the tariffs, but is firmly in the sights of regulators using investment screening and what BCG called "economic statecraft", where nations create economic policies to protect their national security interests.

She then urged industry players to build a "geopolitical muscle" rather than wait out the volatility.

"This is not going away anytime soon. You cannot wait it out. You need to build a muscle to think in terms of scenarios, build a radar to understand it and pivot according to that," she said.

SEMI chief of staff and corporate strategy Bettina Weiss said the industry's response to constant disruption cannot stop at company-level AI deployments, and called for a shift to shared "co-intelligence" across the supply chain.

"This made disruption not just incidental and occasional, but it is now structural. That means we have to find ways to bake that in to our processes and procedures and not just anticipate, but deal with the constant occurrence of disruption in our supply chain," Weiss said.

She said while some companies have built strong internal systems, coordination across the wider ecosystem remains weak, meaning warning signs and changes move too slowly through the value chain.

"One company might be very strong and robust, but that company, if it doesn't look left or right or up and down, is going to be pretty exposed and pretty lonely," Weiss said.

To put the idea into practice, SEMI has built an industry-led framework called Open Supply Chain for Agility and Resilience (OSCAR), along with a co-intelligence platform called Conductor that gives users a single view of inventory levels, early warning signals and forward-looking trends across the supply chain.

Weiss said the industry's choice now is between coordinating by design or continuing to react after the fact.