Malaysia is among the world’s most dynamic emerging economies and is confirming its rise as a more industrially integrated player in a fragmented global economy. Beyond its traditional image as a tourism country, Malaysia is now actively repositioning itself as a high-tech manufacturing hub. The country is also simultaneously seeking deeper integration into global, and increasingly European, industrial value chains. To better understand this shift, we met with Mr. Sébastien Chan from the Malaysian External Trade Development Corporation (MATRADE) in their Paris bureau.
Malaysia is entering 2026 with solid macroeconomic momentum. According to World Bank estimates as reported by Malaysian media, growth is projected at around 4.4%. According to GlobalData, the country is also one of the fastest-growing e-commerce markets in Southeast Asia, with a forecast of approximately €35 billion in 2026. And in 2025, the country recorded a historic trade performance, with total trade surpassing €612 billion for the first time. This resilience is largely driven by a rapid upgrading of its manufacturing base, particularly in electronics and high-value industrial segments.
This structural shift is reinforcing Malaysia’s ambition to position itself as an advanced manufacturing hub and a technology-oriented export base. The country is also increasingly positioning itself as a reliable industrial partner, closely aligned with Europe’s strategic priorities of diversification, resilience, and secure sourcing in this unstable context.
A Resilient Export Powerhouse Entering a New Phase
In 2025, according to the country’s Ministry of Investment, Trade and Industry (MITI), Malaysia exports reached approximately €321 billion (+6.5%). Imports stood at around €291 billion (+6.2%), generating a trade surplus of about €30.4 billion.
Manufactured goods dominate the export profile, reaching approximately €278 billion (86.4% of total exports). Within this category, electrical and electronic products remain the backbone of the economy. They are valued at around €142 billion (44.3% of total exports) with strong growth of 18.3%.
According to Mr. Chan,
“This expansion is closely linked to global demand for semiconductors and integrated circuits, which alone account for roughly €78 billion, reflecting the acceleration of digitalisation, artificial intelligence applications, and advanced semiconductor technologies.”
Malaysia is indeed the world’s 6th largest exporter of electronics and semiconductors. The country is responsible for 7% of global semiconductor trade flows and 13% of global back-end operations. And it is also a leading beneficiary of the “China Plus One” strategy. (This strategy was adopted by multinational companies to diversify their supply chains beyond China to reduce geopolitical and operational risk. It involves expanding production across alternative manufacturing hubs in Asia including Malaysia, Vietnam, Indonesia…)
Other significant export categories include machinery and parts (€15.7 billion), optical and scientific equipment (€13.1 billion). Agriculture remains an important pillar, particularly through palm oil exports and palm oil-based manufactured goods (€8.1 billion).
Geographically, Malaysia maintains a diversified export base. Key destinations include Singapore (€50 billion), the United States (€46.6 billion), China (€37.8 billion), Hong Kong (€19.2 billion), and Taiwan (€17.6 billion).
Europe: A Strategic Market Gaining Importance
Historically, Malaysia’s trade strategy has been anchored in Asia, particularly China and ASEAN markets. However, Europe is now becoming increasingly important in its external diversification strategy.
In 2025, MITI reports that trade with the European Union reached approximately €45.6 billion. Exports to the EU stood at around €25.8 billion, growing by 11.5%. For Mr. Chan,
“Trade with the EU grew for the second consecutive year in 2025. Exports to several EU markets reached all-time highs.”
This is the case with the Netherlands (€8.6 billion), Germany (€6.6 billion), followed by Italy, Belgium, France, and Spain.
Exports to Europe are primarily driven by electrical and electronic goods, palm oil-based manufactured products, and iron and steel products.
But Malaysia’s strategy goes beyond simply increasing exports to Europe. It is built around a dual industrial logic: upgrading domestic exporters toward higher value-added activities while deepening integration into European industrial value chains.
And for this, Malaysian officials emphasize a more structural argument: stability. The country consistently highlights its political continuity, predictable business environment, and ability to maintain steady growth even during global shocks such as the COVID-19 crisis. For European partners in particular, in the current geopolitically unstable environment, this reliability is becoming a key differentiator, Mr. Chan believes:
“We build strong partnerships with everyone and maintain a deliberately neutral position. We are friends with China, the United States, and Europe at the same time. We are a diverse, non-confrontational and open business partner. Malaysia is also politically stable, with no major disruptions or natural disasters, which gives investors confidence.”
For example, WEEROC, a French fabless semiconductor firm specializing in chips for satellites, drones and Airbus aircraft signed a letter of intent to invest €4 million and open operations in Puchong, Selangor.
The message to the Europeans is clear, summarizes Mr. Chan:
“Malaysia is no longer just a low-cost manufacturing base. It is a mature, high-capability technology partner that belongs in your supply chain, not as a backup, but as a strategic node.”
A State-Led Industrial Upgrade: From “Made in Malaysia” to “Made by Malaysia”
Malaysia’s current industrial policy is anchored in a coordinated set of national plans: the 13th Malaysia Plan (13MP), the New Industrial Master Plan 2030 (NIMP 2030), and the National Semiconductor Strategy (NSS).
The 13th Malaysia Plan (13MP)
The 13MP sets the country’s overall economic and trade direction, with a focus on upgrading export quality. It aims to strengthen Malaysia’s SME base by pushing firms toward higher-value markets, improved productivity, and greater international competitiveness. A key target is to reach approximately €400 billion in exports by 2030.
The New Industrial Master Plan 2030 (NIMP 2030)
The NIMP 2030 provides the industrial transformation framework. Its objective is to raise manufacturing value-added and economic complexity by developing strategic sectors. These include electronics, electric vehicles, aerospace, pharmaceuticals, and advanced materials. The point is to accelerate Malaysia’s shift toward more technology-intensive and innovation-led industries.
The National Semiconductor Strategy (NSS)
Launched in 2024, the NSS is the most targeted of the three plans. It aims to position Malaysia higher in the global semiconductor value chain. Historically, Malaysia has been a global leader in back-end semiconductor activities. (These represented roughly 13% of global assembly and packaging). The strategy now focuses on moving into front-end activities, including IC design and wafer fabrication. The objective is also to attract around €100 billion in investments by 2030.
For Mr. Chan,
“[We are] moving from simply selling “made in Malaysia” products to positioning “designed, engineered and serviced in Malaysia” technology offerings in priority global markets.”
The National Agency
To achieve this, the country can rely on MATRADE. Malaysia’s trade promotion agency is similar to JETRO in Japan or Business France in France. With its network of 48 overseas offices worldwide, including nine in Europe (notably the recently expanded Paris office, where we met), MATRADE drives efforts on the ground.
In Europe, the agency operates on three levels: accelerating exports to Europe, facilitating market access and compliance, and acting as a connector between Malaysian industrial champions and European buyers and value chains.
The agency also promotes Malaysian companies at major European trade fairs (Paris Air Show, Farnborough Airshow in the UK, InnoTrans in Berlin), to position them as credible partners within European industrial ecosystems.
National Champions: The Industrial Spearhead of Malaysia’s Global Ambitions
But who are Malaysia’s national champions? From a European perspective, while a global player like Petronas is well known in oil and gas, Malaysia’s advanced manufacturing and technology champions remain far less visible. Yet these companies are not emerging players. Several Malaysian firms are already deeply embedded in global supply chains linked to Europe. This is the case across automotive, industrial, medical and consumer electronics sectors.
A New Generation of Tech and Semiconductor Leaders
Companies such as Inari Amertron, Pentamaster, ViTrox and Globetronics have indeed established themselves as key players in semiconductors, test equipment and advanced electronics.
Pentamaster is among the most prominent players. The company supplies advanced automation and test systems for electronics, automotive and semiconductor industries. It is complemented by ViTrox, provider of machine vision, automated optical inspection and X-ray systems used in semiconductor and electronics production lines worldwide.
They operate alongside major global chip manufacturers present in the country.
Firms such as Carsem, Unisem and SilTerra play critical roles in assembly, testing and wafer fabrication within international semiconductor supply chains.
In parallel, companies like K-One Technology, Hartalega and Top Glove illustrate Malaysia’s ability to scale mid-tier industrial players into global exporters. They are present on European markets such as the UK, France, Germany and Scandinavia.
Smart Manufacturing: Building an Industry 4.0 Export Ecosystem
Another, often overlooked, pillar of Malaysia’s industrial transformation lies in smart manufacturing and automation. Indeed, a growing number of Malaysian companies are exporting Industry 4.0 solutions (robotics, factory automation, digital manufacturing systems) to international markets, including Pentamaster and ViTrox.
Firms such as Exclusive Master develop custom automation systems for regulated industries like pharmaceuticals and food.
System integrators also play a key role. Elliance System and Sophic Automation deliver turnkey automation projects and smart-factory solutions. Mawea Industries integrates CAD/CAM, PLM and MES technologies into full-scale digital factory environments.
Aerospace: A Lesser-Known but Strategic Pillar
Malaysia’s aerospace sector remains less visible internationally but is rapidly gaining traction, particularly in Europe. Among the most notable Malaysian players are CTRM Aero Composites, a key supplier of composite aerostructures. SME Aerospace is specialized in precision metal components. And UMW Aerospace produces critical engine components.
The maintenance, repair and overhaul (MRO) segment is represented by firms such as AIROD and Asia AeroTechnic. Strand Aerospace Malaysia focuses on engineering, design and structural analysis.
These companies operate alongside global leaders such as Airbus Group Malaysia, Safran, Spirit AeroSystems and GE Engine Services.
The Halal Industry: A Strategic Global Growth Engine
This industrial overview of Malaysia would not be complete without mentioning one of its most distinctive economic assets: the halal industry.
From a European perspective, halal is mainly associated with food and finance. However, in the Malaysian vision, it represents a far broader industrial ecosystem. It covers pharmaceuticals, cosmetics, logistics, industrial equipment and integrated supply chains.
The global halal economy is expected to reach USD 5 trillion by 2030 according to Research&Markets. This is one of the fastest-growing consumer and industrial segments worldwide. And Malaysia wants to position itself not only as a producer, but as a global standard-setter.
A central platform for this ecosystem is the MIHAS (Malaysia International Halal Showcase), scheduled for 23–26 September 2026 in Kuala Lumpur. The event serves as a global marketplace connecting Malaysian companies with international buyers, including from Europe, and reinforces Malaysia’s ambition to remain the reference hub for halal certification and trade. (Malaysia’s halal certification system is indeed widely recognized internationally and accepted by all Muslim nations).
Key export destinations in the halal economy include Singapore, China, Indonesia, Japan, and the United States. But Mr. Chan believes halal compliance could represent an opportunity for European companies. Malaysia could provide training, certification guidance, and technical support for foreign companies seeking halal compliance:
“This includes detailed industrial requirements such as cleaning processes for production equipment and supply chain traceability, which have become increasingly relevant for European firms targeting Muslim consumers globally.”
Challenges for Malaysian MSMEs Entering Global Markets
Despite this strong institutional framework, Malaysian MSMEs face several structural challenges when expanding internationally. The first is regulatory compliance and sustainability expectations Mr Chan notes:
“Meeting European technical standards, certification requirements, and regulatory frameworks remains costly and complex, especially for smaller firms. European buyers also increasingly demand ESG compliance, carbon reporting, and sustainable sourcing. These are areas where many Malaysian SMEs are still building capacity.”
Brand recognition is another constraint. Many companies remain price-competitive rather than brand-driven, which limits their ability to differentiate in mature markets.
Financing remains a persistent challenge, particularly for export working capital, large orders, and trade risk insurance. In addition, talent shortages, especially in language skills, logistics, and international business development, constrain expansion.
Besides, understanding European buyer behaviour, distribution channels, and competitive landscapes remains a major hurdle for firms unfamiliar with the region.
“For Malaysia, trading with Europe takes time. We’ve still got a lot of work to do”.
A free trade agreement between Malaysia and the European Union has been signed but is not yet implemented. It could be completed by around 2027.
Southeast Asia: The Next Global Manufacturing Hub
Malaysia is not the only country seeking to move up the value chain by exporting higher value-added products and targeting Europe more strategically. Across Southeast Asia, several economies are positioning themselves as credible alternatives to China as Western companies accelerate the diversification of their supply chains.
ABI Research, in its whitepaper “Beyond China: Southeast Asia’s Potential for Friendshoring Western Enterprises’ Supply Chains,” highlights how the region is rapidly transforming into a global manufacturing hub. To support this shift, countries are rolling out structured industrial strategies similar to Malaysia’s NIMP 2030. Vietnam, for exampe, is advancing its Digital Transformation Strategy. Indonesia is deploying its “Making Indonesia 4.0” roadmap. This was notably showcased when the country was partner of Hannover Messe in 2023 as we reported at the time.
