KUALA LUMPUR (April 4): US President Donald Trump’s introduction of a 24% reciprocal tariff on imports from Malaysia has thrown a spanner in the works for tech companies. However, industry players remain confident that local small and medium enterprises (SMEs) and start-ups will weather the storm — though not without experiencing funding and supply chain disruptions.

Malaysia’s strong ties within Asia and the region are expected to form the backbone of the tech sector’s resilience. Players are optimistic that this will encourage market diversification and bolster long-term funding and investment.

“The trade bloc will be reshaped by countries affected by the reciprocal tariff. East Asia has already banded together in an otherwise unlikely alliance — namely, cooperation between Japan, China and South Korea.

“Asean and Malaysia should consider a similar approach, particularly as Malaysia currently holds the Asean chair. Tech companies will need to lead this initiative,” said Ridzwan Nordin, co-founder of Kotak Sakti and a member of the National Artificial Intelligence Consortium (NAIC).

Ben Lim, founder and chief executive officer of Nexea — a venture capital, angel investor network and start-up accelerator — says he is not overly concerned about the local tech sector, given the Malaysian government’s generally business-friendly stance. However, he notes that beyond strengthening ties within Asean, supply chain diversification will become increasingly vital.

“Singapore and China are larger trading partners for Malaysia compared to the US, so as Asean chair, our focus should be on building a more stable regional trading bloc.”

Malaysia has experienced notable growth as a tech hub in Southeast Asia, said Victor Chua, founder and managing partner of Vynn Capital. He foresees an influx of investments from North Asia.

“To a certain extent, this new tariff environment could encourage further integration across Asia, making Malaysia an even more attractive destination for foreign direct investments (FDIs) from the region.”

Firms looking to invest in new technology or upgrade existing infrastructure may delay such decisions due to rising prices, said Ridzwan. This could lead to a reduction and delay in demand for local tech services.

“Since the global technology supply chain is interconnected, it will take time for tariffs to filter through to final pricing. This uncertainty will dampen investment sentiment,” he said.

Malaysia should aim to move up the value chain by offering more advanced, specialised products, placing greater emphasis on innovation rather than manufacturing. However, early-stage ventures and local companies may experience a temporary slowdown due to broader economic uncertainties.

While value-based investors may still deploy capital, given the resilience and growth potential of Malaysian firms, global investors could become more cautious.

Nonetheless, most funding remains local or regional.

“For medium to large companies exporting to the US, investors may think twice before committing. The impact could range from investment delays to cancellations, especially if growth and profitability are significantly affected,” said Nexea’s Lim.

“As entrepreneurs and business leaders, we should see this challenge as an opportunity to diversify our markets. It’s a reminder to avoid putting all our eggs in one basket.”

Warren Leow, CEO of Pixlr Group and a NAIC member, noted that most local start-ups do not export to the US. However, a broader economic slowdown due to trade reductions could impact growth.

“If growth slows, raising funds will become harder from a storytelling perspective.”

Digital and software-based tech services — including software-as-a-service (SaaS), artificial intelligence (AI), and IT outsourcing — will largely remain unaffected, as the tariffs primarily target physical goods.

Still, broader trade uncertainties and regulatory shifts may bring indirect consequences, said Tan Aik Keong, CEO of Agmo Holdings Bhd and a NAIC member.

Leow added that if the US government pushes US-based tech companies, such as cloud, software and marketing firms, to ignore local withholding or sales taxes, local vendors may have to absorb those costs and pass them on to consumers.

Not all sectors are subject to the new tax regime, such as semiconductors, but the industry remains vulnerable. Chua points out that Malaysia accounts for around 20% of US semiconductor imports. Any tariff increase would be undesirable.

Lim noted that Malaysian tech exports, especially electronics, play a vital role in global supply chains and are exposed to external shocks.

“If the US enforces the tariffs strictly, even software firms could be affected. The policy could squeeze companies into razor-thin profit margins or losses, particularly if their competitors are from lower-tariff countries. That said, the situation is still evolving, as the US Trade Representative has yet to release full details.”

The competitiveness of Malaysian tech products in the US market could decline due to higher costs, potentially reducing export volumes.

“Supply chain disruptions could emerge as many Malaysian firms are key suppliers to global tech giants. Rising costs might prompt US companies to seek alternatives, impacting Malaysian market share and profits.”

Lim agreed, noting that additional financing may be necessary to weather the impact. One likely solution is relocating certain operations abroad or expanding into new markets.

Chua cautioned that relocation costs may outweigh tariff-related losses.

“Given the strong fundamentals of Malaysia’s tech ecosystem, we are well-placed to weather this. Especially since our tech sector has always had a more regional focus,” he said.