WITH the advent of 5G technology, investors may consider adding potential beneficiaries to their portfolios.
5G is the 5th generation global wireless standard after 1G, 2G, 3G, and 4G, which brings more capacity, faster speeds, and lower latency than previous generations of cellular network technologies.
5G enables us to connect virtually everything together including machines, objects, and devices, and will undoubtedly enhance the consumer’s experience to another new level.
For instance, 5G will enable the consumer to experience boundless Extended Reality (XR), seamless Internet of Things (IoT) capabilities, new enterprise applications, local interactive content, instant cloud access and so on.
Businesses also will be benefitted from the adoption of 5G, as the high speed and reliable network of 5G technology are expected to boost the productivity and efficiency of businesses.
5G is expected to roll out widely across Malaysia from the end of 2021.
As the 5G supercycle arrives, the Malaysian technology sector has emerged as a hotspot for investors seeking to gain exposure to the up-and-coming technology.
1. Inari Amertron Bhd (Sector: Technology)
Inari Amertron Berhad is an Outsourced Semiconductor Assembly and Test (OSAT) service provider for Radio Frequency (RF), Fiber-optics transceivers, Optoelectronics, sensors, and custom IC technologies.
Among the business segments of Inari, the radio frequency division contributed the most to the company’s revenue, about 45 per cent of total revenue.
With the rollout of 5G’s deployment, higher demand on RF components would likely continue to generate robust earnings to Inari. In the 10th AGM of Inari Berhad, the company revealed that they are expecting the RF segments would contribute up to 50 per cent of the total revenue in FY 2021.
In addition, Inari stated in their latest quarterly report that they would continue to ramp up their production capacity in order to cater to the strong demand from the continued growth of 5G devices.
2. Unisem (M) Bhd (Sector: Technology)
Unisem (M) Bhd provides semiconductor assembly and test services in Malaysia.
Unisem’s assembly and test services include wafer bumping, wafer probing, wafer grinding, a range of lead frame and substrate integrated circuits packaging, wafer-level CSP (chip scale packaging), flip chip and radio frequency, analogue, digital and mixed-signal testing services.
With the growing commercialisation of the 5G technology, most of Unisem’s operations are running at full capacity in order to cater for the greater chip demand for power management, radiofrequency automotive, and consumer electronics.
Looking ahead, the growing demand for radiofrequency (RF) and power management components going into 5G network base station solutions and 5G mobile devices would still be the major catalyst driven the performance of the company.
The group has also stated that it will continue to focus on building its strength in radio frequency (RF), analogue and micro-electro-mechanical systems (MEMs) in order to fulfil the higher demand of 5G.
3. Malaysian Pacific Industries Bhd (Sector: Technology)
Malaysian Pacific Industries Bhd is engaged in manufacturing, assembling, testing and selling integrated circuits, semiconductor devices, electronic components, and lead frames.
With greater demand for higher bandwidth and operating frequency under the revolution of 5G, the demand for power semiconductors is expected to surge at a promising rate and thus benefitting MPI in both the short and long run.
Other than that, MPI also foresees the demand for lead frames will continue its growth trend in the segment that related to the 5G market power management chip.
Catering for the growing demand, MPI has equipped themselves by acquiring an additional 121,000 sqft of production floor space in Ipoh as well as scouting for a new site to set up another factory by end of the year 2022.
4. MI Technovation Bhd (Sector: Technology)
MI Technovation Bhd is involved in the design, development, manufacture, and sale of wafer level chip scale packaging sorting machines with inspection and testing capabilities for the semiconductor industry.
Its semiconductor equipment business unit contributed up to 93.59 and 96.68 per cent in 4Q20 and FYE20 respectively. The largest revenue source of this business unit comes from the assembly and packaging product group.
Again, the global deployment and adoption of 5G are expected to continue to be the driving force for the semiconductor market, and thus benefit those OSAT company whose revenue mainly generated from offering third-party IC-packaging and test services.
5. JF Technology Bhd (Sector: Technology)
JF Technology Bhd (JF Tech) engages in the manufacturing, packaging, marketing, trading, and distribution of electronic products and components. Its products include rigid style contact technology, high-current cantilever style, and manual actuator solutions.
In addition, the firm engages in the design, development, custom manufacture, and sale of integrated circuit test sockets, interconnect, and test solutions and equipment for the semiconductor and electronics assembly markets.
As a leading innovator and manufacturer of high-performance test contacting solutions for globally integrated circuit makers, JF Tech continues to place utmost emphasis on their production lines in order to fit and capitalise on the existing 5G trend.
In FY2020, JF Tech was granted with additional 11 patents related to the invention of a high-frequency IC test contacting solution used mainly in 5G/RF/mmWave applications, making the company stand out among the industry players.
6. Maxis Bhd (Sector: Communication services)
Maxis Bhd is a telecommunications provider. Its primary services include mobile, wireless, fixed, and enterprise services, with the majority of revenue generated from mobile and wireless.
Since the 5G services have been largely deployed by other countries in the year 2019, Maxis has been working on optimising its resources to get ready for seamless transition towards 5G.
This includes rolling out the next-generation IP network that supports high inter-district or state transmission capacity, expanding its fibre footprint nationwide, and testing a variety of 5G devices to ensure they perform well when 5G becomes available.
Besides, Maxis Bhd has also agreed to collaborate with another two telco giants in the industry, which is Celcom Axiata Berhad and Digi Telecommunications Sdn Bhd to jointly develop and share fibre infrastructure for a 5G future.
With the 5G’s deployment at the year-end of 2021, it would likely see higher demand for fibre, and thus it benefits the local-telco providers such as Maxis.
7. Telekom Malaysia Bhd (Sector: Communication services)
Telekom Malaysia Bhd is a triple-play telecommunications company. It generates revenue from the provision of fixed-line voice services, data, and broadband and multimedia services to businesses and individual households and consumers.
With the launch of the MyDigital project by the end of the year 2021, TM Berhad managed to ride on the opportunity and well-positioned itself to play a significant role in MyDigital – focusing on digital connectivity (fibre, 5G, international connectivity), digital infrastructure (Cloud, Data Centre and Cybersecurity) as well as digital skillsets and talents (via Multimedia University and TM Digital Academy).
The company was also appointed as the sole Malaysian Cloud Service Provider (CSP) under MyDigital, at par with the other global players.
Under the MyDigital plan, TM Bhd is expected to benefit from leasing their fibre transmission network to the Special Purpose Vehicle (SPV) for the 5G rollout over 10 years of duration.
In addition, TM also plays a leading role in the government’s Jendela plan (2021 – 2025), which aim to improve broadband coverage and services quality across Malaysia, thus benefitting TM itself with higher sales.
8. Digi.com Bhd (Sector: Communication services)
Digi.com is a telco company that primarily involved in the provision of mobile and wireless Internet services, and it also owns fibre and mobile-related infrastructure.
To lay the foundation of 5G, Digi has been working closely with the regulators, innovators and industry partners to roll out 5G Demonstration Projects, such as to equip Langkawi Island as the first place in Malaysia with advanced 5G’s technology.
In Digi Bhd’s 24th AGM, the board of directors stated they play an important role in 5G’s deployment by leveraging its existing passive infrastructure (eg: towers and fibre) to DNB for its 5G’s rollout.
9. Axiata Group Bhd (Sector: Communication services)
Axiata Group Bhd is a telecommunications company. It primarily provides mobile and infrastructure services and operates in six main geographic areas which are Malaysia, Indonesia, Bangladesh, Sri Lanka, Nepal, and Cambodia. In Malaysia, the government initiative of MyDigital is expected will benefit to most of the telco companies that providing related infrastructure and support services.
For Axiata Bhd, the implementation of 5G technology will benefit the group via its 63 per cent owned infrastructure unit – Edotco Sdn Bhd. During the press conference of reporting on the group’s FY2020 performance, the President of Axiata also mentioned that Edotco Sdn Bhd will be able to offer its services as an independent tower business to the SPV in the 5G’s plan.
Likewise, the merger proposed between Axiata and Telenor is not only expected to consolidate its key position in Malaysia but also expand its business exposure to more geographical areas.
10. Pentamaster Corp Bhd (Sector: Industrials)
Pentamaster Corp Bhd has three business segments, which including Automated Test Equipment (ATE) segment, Factory Automation Solutions segment (FAS) and Smart Control Solution system segment. Among which, ATE segment is the largest contributor approximately 67.9 per cent to the Group’s revenue in FYE 2020, followed by the FAS business segment.
With the proliferation of 5G rollout and newer sensors being developed and embedded in the smartphone and devices market, ATE will continue to be the major segment that the group focuses on.
Besides, another major business segment – FAS is also being supported by the adoption of industry 4.0, which paving the path for stronger performance in the future.
11. Frontken Corp Bhd (Sector: Industrials)
Frontken Corp Bhd provides surface and mechanical engineering solutions, serving a wide range of heavy industries such as Oil and Gas, Power Generation, Semiconductors, and the Marine industry.
It also provides various specialized engineering services, such as thermal spray coating, cold build-up coating, plating and conversion coating, specialized welding, precision cleaning, abrasive blasting, machining and grinding. In addition, the company provides surface treatment and precision cleaning for the thin film transistor liquid crystal display and semiconductor industries.
Along with the gradual rollout of the 5G network not only in Malaysia but worldwide, Frontken Bhd which is being the largest part treatment and cleaning service provider in Malaysia is likely to be benefitted from the need for more maintenance services for machinery given the greater demand for semiconductors and chips under the advent of 5G technology.