Management Discussion and Analysis
ACCELERATING TRANSFORMATION, SHAPING THE FUTURE
OPERATING ENVIRONMENT: STRATEGISING STRENGTHS THROUGH EMERGING AVENUE
The extended financial period ended 30 June 2025 (“FPE 2025”) unfolded against a backdrop of significant shifts in the global semiconductor and technology industries. Evolving consumer demand patterns and ongoing inventory recalibrations across the electronics supply chain reshaped the market landscape. The consumer product segment, particularly mobile devices, is undergoing structural changes, with future growth expected to be driven by new technology applications. Macroeconomic dynamics, coupled with global trade realignments and foreign exchange volatility, further defined the environment.
Against this backdrop, Globetronics’ (“Globetronics” or “the Group”) established manufacturing footprint in Penang created opportunities, especially as multinational companies diversified their production bases in response to US-China trade developments. This environment provided the impetus for Globetronics to accelerate its diversification journey, positioning the Group more competitively in emerging technology domains and higher value-added market segments.
At the national level, Malaysia’s National Semiconductor Strategy (NSS) and New Industrial Master Plan 2030 (NIMP 2030) offer a supportive framework through targeted incentives, funding for R&D, and talent development. These initiatives reinforce Penang’s position as the country’s ‘Silicon Island,’ enabling Globetronics to benefit from the clustering effect of multinational companies expanding their supply chains.
GROUP FINANCIAL REVIEW: STRENGTHENING INVESTMENTS TOWARDS LONG-TERM CAPABILITIES
The revenue for the eighteen-month FPE 2025 stood at RM161.0 million as compared to RM180.1 million in financial year ended 31 December 2022 and RM131.5 million in financial year ended 31 December 2023, reflecting early signs of recovery from the previous cycle. The foreign exchange loss of RM5.0 million was primarily attributable to United States Dollar/Ringgit Malaysia volatility. Meanwhile, capital expenditure of RM27.8 million were directed towards advanced packaging and backend IC capabilities, aligning with emerging demand in automotive, and advanced data communication applications. Despite dividend payments of RM13.5 million, the Group preserved a strong cash position of RM114.8 million, underscoring its financial resilience. Net cash generated from operating activities amounted to RM6.8 million. Separately, cash outflows of RM27.8 million for capital expenditure underscored the Group’s commitment to strengthening its technological readiness. These investments were carefully prioritised towards equipment and capabilities that support new opportunities in advanced packaging, backend Integrated Circuit (“IC”) services and product diversification.
SENSOR DIVISION: RESHAPING THE SENSOR BUSINESS, STRENGTHENING COMPETITIVENESS
The consumer market segment remained subdued throughout the period, with light sensors in mobile applications maintaining a stable but modest demand base. The Group continued to work closely with customers to migrate to next-generation flagship components, achieving seamless execution in both the start-up and mass production phases without significant issues. However, the proliferation of second-source strategies by end customers in the True Wireless Stereo market intensified price competition, rendering gesture sensors increasingly commoditised. These developments exerted pressure on both volumes and margins within the division. Nonetheless, the Division’s track record of seamless execution in migrating customers to next-generation flagship components further reinforced Globetronics’ reputation as a reliable manufacturing partner. In parallel, Industry 4.0 initiatives such as automated ‘lights-off’ manufacturing, real time digital dashboards and productivity gains in Units Per Hour (“UPH”) continued to deliver measurable benefits, including improved yields, leaner manning ratios and shorter operational cycles.
SENSOR DIVISION ACCOMPLISHMENTS AND HIGHLIGHTS: OPERATIONAL EXCELLENCE THROUGH AUTOMATION AND INDUSTRY 4.0
On the operational front, the Group advanced its efficiency and cost competitiveness programmes during the eighteen-month financial period. Key initiatives included the elimination of nonvalue-added processes through digitisation, and the transition towards “Lights Off” manufacturing, which reduced reliance on manual labour while improving output consistency. Dynamic production planning was executed through closer weekly forecast management with customers, while efforts to raise equipment productivity in UPH helped to reduce operational days and achieve significant cost savings. In addition, volume linearisation with customers enabled the Group to maximise economies of scale and strengthen profitability. The Industry 4.0 project, which reached maturity in the previous financial year, continued to deliver tangible benefits in FPE 2025. Improvements were realised in manning ratios, production yields and overall output, while the deployment of live digital dashboards provided real-time visibility, driving improved decision-making and enhancing Overall Equipment Efficiency. Collectively, these initiatives have resulted in a more resilient cost structure and stronger operational readiness to support both current and future product requirements.
LIGHT EMITTING DIODE (“LED”) AND OPTOELECTRONICS OPERATING ENVIRONMENT: STRENGTHENING MARKET POSITION THROUGH ADVANCEMENT
The LED, laser and optoelectronics businesses remained stable, underpinned by the Group’s matured product portfolio. Efforts during the financial period were centred on sustaining efficiencies and maintaining profitability from existing product lines. Product qualification for high-power light modules progressed on track, with mass production readiness expected in the coming financial year. Concurrently, capacity expansion and customer support initiatives in lead-frame based packages delivered positive results, including the successful qualification of a networking IC package for volume production.
This segment continued to serve as a stable cash-generating base for the Group, providing balance against more volatile sensor revenues. The qualification of high-power light modules and a networking IC package not only diversifies the customer portfolio but also strategically positions the Group to capture growth opportunities in data communications and high-efficiency lighting markets.
EMERGING TECHNOLOGY AND VERTICALS: REPOSITIONING PORTFOLIO TOWARDS HIGH-VALUE GROWTH
The development of new product pipelines, which had slowed in recent years due to pandemic-related constraints, regained momentum during the period under review. Intensive efforts were directed towards broadening the pipeline in automotive and communication verticals, leading to a healthier flow of discussions and customer qualifications. The global reshoring of semiconductor supply chains, spurred by geopolitical tensions, also created new opportunities for Malaysian-based players. The alignment of Globetronics’ pipeline with national initiatives such as NSS and NIMP 2030 underscores the Group’s strategic repositioning towards higher value-added verticals. Coupled with Penang’s role as a beneficiary of global semiconductor reshoring, these developments enhance the Group’s ability to capitalise on opportunities in automotive electronics, photonics and MEMS, all of which are increasingly critical to the future of AI, medical technology and electric mobility.
GROUP OUTLOOK AND PROSPECT: TRANSITIONING TOWARDS LONG-TERM COMPETITIVENESS AND VALUE
In line with the cyclical nature of the semiconductor industry, the Group experienced softer demand during the financial period under review. The slowdown was driven by excess inventory across the global supply chain, inflationary pressures, subdued consumer spending and geopolitical uncertainties. While these factors weighed on short-term performance, early signs of stabilisation in product loadings emerged towards the latter part of the period, indicating the start of a gradual recovery. The period was also one of adjustment and restructuring for the Group. The expiry of pioneer tax status in a major subsidiary, together with rising minimum wages and utilities costs, placed pressure on the Group’s cost structure. Nonetheless, the measures implemented, including automation, efficiency-focused process improvements and targeted equipment upgrades, have created a stronger and more sustainable operating base.
Looking ahead, the Group remains cautiously optimistic. FPE 2025 was a transition period marked by restructuring and upfront investments, laying a stronger operating foundation for financial year ending 2026 and beyond. While the expiry of pioneer tax incentives and rising operating costs created short-term pressure, the Group’s prudent cost discipline, strong net cash balance sheet and continued dividend payments reinforce investor confidence. With diversified product pipelines spanning automotive memory, MEMS, laser modules and photonics, Globetronics is well placed to benefit from long-term structural demand drivers in Artificial Intelligence, electric vehicles, medical technologies and global data infrastructure.