PHOTONICS SECTOR COULD EXPAND MALAYSIA’S OSAT MARKET TO US$4.6 BLN BY 2030

KUALA LUMPUR, March 10 (Bernama) -- Malaysia’s outsourced semiconductor assembly and test (OSAT) industry could see new opportunities from the growing photonics sector, with the market projected to expand to about US$4.6 billion by 2030 as demand for optical networking infrastructure rises.

In a research note today, Kenanga Investment Bank Bhd (Kenanga IB) said the increasing use of photonics in data communications, particularly in artificial intelligence (AI) data centre networking, is gradually shifting more value towards high-precision assembly, reliability qualification and testing.

“For Malaysia, photonics is becoming more ‘OSAT-like’, with value increasingly tied to high-precision assembly, reliability qualification, and test throughput, rather than component performance alone,” the investment bank said.

Kenanga IB noted that if the optical module ecosystem continues outsourcing assembly and testing activities in stages, Malaysian OSAT players could take part in capacity expansion, especially where customers prioritise strong quality systems, yield discipline, traceability and reliability screening.

“The key factors to monitor are whether photonics packaging flows become repeatable enough to outsource at scale and whether module owners are willing to qualify Southeast Asian partners for higher-complexity steps such as fibre attach or alignment, advanced packaging and optical testing.

“Assuming a 10 per cent OSAT share of the datacom market forecast by LightCounting, the opportunity is projected to grow from US$1.7 billion in 2025 to US$4.6 billion by 2030, representing a compound annual growth rate (CAGR) of 22 per cent,” it said. 

LightCounting is a market research and consulting company that specialises in the optical communications and photonics industry.

Additionally, Kenanga IB also said automation players are well positioned to benefit from manufacturing challenges in the photonics industry that are increasingly suitable for automation.

“For automation, players are directionally leveraged to the industry’s pain points that are increasingly automation-able.

“This includes micro-alignment, vision or automated optical inspection (AOI), and handling or logistics around burn-in and test integration, supporting a constructive medium-term setup for integrators that can deliver end-to-end cells such as motion, vision, handling, testing and traceability,” it said. 

--BERNAMA