# Malaysia's Manufacturing Sector: Bigger Every Year, Stuck at the Same Share of GDP

> Manufacturing is Malaysia's second largest sector at roughly 23% of GDP — the same share it has held for fifteen years, and nearly eight percentage points below its 1999 peak. What the plateau does and does not tell you about the shift from assembly work to higher value-added production.

- Category: economy
- Language: en
- Status: published
- Updated: 2026-07-24
- Canonical: https://negaraku.md/en/economy/manufacturing

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## At a glance

| Metric | Value | Period | Source |
| --- | --- | --- | --- |
| Share of GDP | ~23.0% | 2025 | DOSM |
| Sector growth | 4.5% | 2025 | DOSM |
| Whole-economy growth | 5.2% | 2025 | DOSM |
| Jobs (registered private establishments) | 2.54 million (27.5%) | Q4 2025 | DOSM |
| Share of all vacancies | 58.4% (115,800) | Q4 2025 | DOSM |
| Labour productivity | RM59.0 per hour worked | 2025 | DOSM |
| Approved investment | RM131.3 billion (30.8% of total) | 2025 | MIDA |
| Peak GDP share | just under 31% | 1999 | World Bank |

## A quarter-century-old ceiling

Malaysia's factories have never produced more output than they do now. Manufacturing
expanded 4.5% in 2025, faster than the 4.2% recorded in 2024, inside an economy
worth RM2.03 trillion at current prices.

And yet the sector's share of GDP is almost exactly where it was in 2010.

That is the puzzle worth explaining, because most coverage of Malaysian
manufacturing picks one half of it. Boosters cite record chip investment and
call it a transformation. Critics cite the flat GDP share and call it stagnation.
Both are reading the same number and neither is reading it carefully.

## What the share actually did

World Bank national accounts data for Malaysia show manufacturing value added as
a percentage of GDP moving like this:

| Year | Manufacturing value added (% of GDP) |
| --- | --- |
| 1995 | 26.4% |
| 1999 | 30.9% (series peak) |
| 2004 | 30.4% |
| 2010 | 23.4% |
| 2015 | 22.3% |
| 2020 | 22.2% |
| 2024 | 22.5% |

The fall happened between roughly 2005 and 2010. Since then the line is
essentially horizontal — the range across fifteen years is a little over one
percentage point.

DOSM's own 2025 figures put the sector in the same place. Services contributed
59.5% of GDP in 2025, and DOSM reports that services and manufacturing together
contributed 82.5% — which leaves manufacturing at about 23.0%.

So this is a plateau, not a decline. Manufacturing output is growing; it is
simply growing at close to the same rate as everything else.

## Why a flat share is arithmetic, not necessarily failure

Three mechanisms produce a flat share, and they mean very different things.

**Services grew faster.** Services expanded 5.4% in 2025 against manufacturing's
4.5%. When the larger sector grows faster, the smaller sector's share falls even
while its output rises. Every economy that gets richer sees this; the label for
it is structural change, not deindustrialisation.

**Value added is captured elsewhere in the chain.** Malaysia's position is
concentrated in the back end of electronics — assembly, testing and packaging —
where the margin per unit is thinner than in design or wafer fabrication. High
export volumes therefore convert into less domestic value added than the
headline trade numbers suggest. This is covered in detail in
[electronics and semiconductors](/en/economy/electronics-semiconductors) and
[external trade](/en/economy/external-trade).

**Composition changed inside the sector.** This is the part the GDP share cannot
show you at all.

## The evidence that the mix is shifting

If manufacturing were simply stuck doing the same low-margin assembly work at
larger scale, productivity would be flat. It is not.

| Productivity measure | Manufacturing | Services | All sectors |
| --- | --- | --- | --- |
| Value added per hour worked, 2025 | RM59.0 | RM42.0 | RM44.5 |
| Growth, 2025 | +4.6% | +3.3% | +3.7% |
| Value added per employed person, 2025 | RM139,454 | — | RM102,672 |

Manufacturing generates about 40% more value per hour than services and about a
third more than the national average. That is not the profile of a pure
assembly economy.

Sub-sector growth in 2025 points the same way. Electronic components,
communication equipment and consumer electronics grew 9.9% for the year, and in
the fourth quarter alone electrical, electronic and optical products surged
12.7%. Food processing grew 9.1%, and vegetable and animal oils and fats 9.9% —
the commodity-linked side of manufacturing that connects to the
[palm oil sector](/en/economy/palm-oil-sector).

Investment approvals tell a similar story. MIDA approved RM131.3 billion of
manufacturing investment in 2025 — 30.8% of Malaysia's record RM426.7 billion
total — across 1,354 projects expected to create 109,950 jobs. The largest
industries by approved value were E&E (RM28.5 billion), chemicals and chemical
products (RM24.9 billion), transport equipment (RM14.9 billion), basic metal
products (RM11.1 billion) and machinery and equipment (RM11.0 billion). MIDA's
Managerial, Technical and Supervisory index — the skilled share of promised
positions — rose to 42.8%.

Note also the ownership split: RM100.6 billion (76.6%) of that manufacturing
investment was foreign, RM30.7 billion (23.4%) domestic. Upgrading is happening
largely on foreign balance sheets.

## Jobs: the number people misquote

DOSM's Quarterly Employment Survey counted **2.54 million manufacturing jobs** in
Q4 2025, or 27.5% of all jobs it tracks, with 2.42 million of them filled.
Manufacturing also accounted for **58.4% of every unfilled vacancy in the
survey** — 115,800 positions.

That vacancy concentration is the single most revealing labour statistic in the
sector. It says employers cannot fill roles at the wages and conditions on offer,
which is exactly what you would expect from an industry mid-transition: the old
jobs are hard to staff and the new ones are hard to staff for different reasons.

Read the 27.5% carefully, though. See the common mistakes below.

## The middle-income trap argument, stated fairly

The trap thesis holds that a country can grow rich enough to lose its low-cost
advantage without becoming innovative enough to compete on technology, and then
sits between the two. Malaysia is the case study most often cited.

The strongest evidence for it is not the GDP share. It is the wage share.
Compensation of employees was **33.6% of GDP in 2024** (RM648.5 billion), up only
marginally from 33.5% in 2023, while gross operating surplus took 63.7%. In
high-income economies the wage share typically sits far higher. Output can rise
for years without much of it reaching households.

The government's own planning documents accept the framing. The Thirteenth
Malaysia Plan (2026-2030) targets:

- GDP growth of **4.5% to 5.5%** per year
- Manufacturing growth of **5.8%** per year — deliberately above services at 5.2%
- Gross exports growth of **5.8%** per year
- GNI per capita of **RM77,200 by 2030**, which the Plan states would surpass the high-income threshold
- Compensation of employees rising to **40% of GDP by 2030**
- Foreign workers reduced to an average of **10% of the workforce by 2030**, and up to 5% by 2035

DOSM reports GNI per capita reached RM57,200 in 2025, up from RM54,870 in 2024.
The gap to RM77,200 in five years is the whole policy problem in one line.

The instruments named in the Plan are the New Industrial Master Plan 2030, the
National Semiconductor Strategy and the National Energy Transition Roadmap. Note
what the manufacturing target implies: for manufacturing to grow at 5.8% while
the economy grows at 4.5-5.5%, its share of GDP has to start rising again. The
plateau ending is not a forecast — it is a target.

## Common mistakes

**Saying manufacturing employs 27.5% of Malaysians.** It does not. The Quarterly
Employment Survey covers registered private-sector establishments — 9.21 million
jobs in Q4 2025. It excludes the public sector, the self-employed and informal
work. Manufacturing's share of everyone in work is materially lower. Use the
Labour Force Survey for that question; see
[unemployment and the labour force](/en/economy/unemployment-labour-force).

**Treating the falling GDP share as deindustrialisation.** The fall ended around
2010. Confusing a one-off structural adjustment with an ongoing decline
misdates the problem by fifteen years.

**Using export value as a proxy for manufacturing value added.** Electronics
exports can rise far faster than the domestic value added behind them, because
much of the imported input value passes straight through. Check the value-added
series in the national accounts rather than inferring it from trade headlines.

**Quoting approved investment as realised investment.** MIDA's RM131.3 billion is
approvals. Realisation lags by years and not every approved project proceeds.

**Comparing the 23.0% share to China or Germany.** Different economies book
different activities inside "manufacturing"; contract-manufacturing hubs and
brand-owning economies are not measuring the same thing.

## What's next

Watch four series rather than the headline share. DOSM's quarterly labour
productivity release shows whether the value-per-hour gap over services keeps
widening. The annual GDP income-approach release shows whether the wage share
moves off 33-34%. MIDA's quarterly approvals show whether the domestic share of
manufacturing investment rises above a quarter. And the sub-sector detail in each
quarterly GDP release shows whether growth is broadening beyond electronics.

For the wider picture, start with the [GDP overview](/en/economy/gdp-overview),
then read [electronics and semiconductors](/en/economy/electronics-semiconductors)
for the sector that dominates both manufacturing output and
[external trade](/en/economy/external-trade).

## Sources

- Gross Domestic Product 2025 — https://www.dosm.gov.my/portal-main/release-content/gross-domestic-product-2025 (Department of Statistics Malaysia (DOSM))
- Gross Domestic Product (GDP) by State, 2025 — https://www.dosm.gov.my/portal-main/release-content/gross-domestic-product-gdp-by-state-2025 (Department of Statistics Malaysia (DOSM))
- Employment Statistics, Fourth Quarter 2025 — https://www.dosm.gov.my/portal-main/release-content/employment-statistics-fourth-quarter-2025 (Department of Statistics Malaysia (DOSM))
- Labour Productivity, Fourth Quarter 2025 — https://www.dosm.gov.my/portal-main/release-content/labour-productivity-fourth-quarter-2025 (Department of Statistics Malaysia (DOSM))
- Gross Domestic Product Income Approach 2024 — https://www.dosm.gov.my/portal-main/release-content/gross-domestic-product-income-approach-2024 (Department of Statistics Malaysia (DOSM))
- Thirteenth Malaysia Plan 2026-2030 — Executive Summary — https://rmk13.ekonomi.gov.my/wp-content/uploads/2025/09/Executive_Summary_Thirteenth_Malaysia_Plan.pdf (Ministry of Economy (Kementerian Ekonomi))
- Malaysia Breaks Investment Record with RM426.7 Billion in 2025, Up 11% Year-On-Year; Creating Over 240,000 New Jobs — https://www.mida.gov.my/media-release/malaysia-breaks-investment-record-with-rm426-7-billion-in-2025-up-11-year-on-year-creating-over-240000-new-jobs/ (Malaysian Investment Development Authority (MIDA))
- Manufacturing, value added (% of GDP) — Malaysia — https://data.worldbank.org/indicator/NV.IND.MANF.ZS?locations=MY (World Bank (national accounts data))

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