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FMM is conducting the 27th FMM Business Conditions Survey on performance in the first half of 2025 (1H2025) and outlook for second half of 2025 (2H2025). |
As with the last 26 surveys since 2012, we are tracking the FMM Business Conditions Index (FMM BCI), which measures members’ feedback on their current and expected levels of business activity, local and export sales, production volume, capacity utilisation, capital investment, employment and cost of production.
Topical issues for this survey will focus on assessing manufacturers’ views on the following:
- Expectations on Company Revenue and Profit Growth in 2H2025
- Business Confidence Level in 2H2025
- Challenges to Business Operations and Growth in 2H2025
- Biggest Opportunities in 2H2025
- Impact of Ongoing US Tariffs
- Impact of SST Scope Expansion
- New Electricity Tariff Structure Under the Regulatory Period 4 (RP4)
- Artificial Intelligence (AI) Technology – Level of Awareness, Adoption and Application Within the Manufacturing Industry
FMM aims to obtain over 1,000 responses for this survey. We seek members’ continued support and participation to ensure that the BCI is a REPRESENTATIVE and ACCURATE index of manufacturing business conditions and feedback on the current state of business and the economy and current challenges faced are reflective of the industry.
The survey will be conducted completely online. The questionnaire takes about ten to fifteen minutes to complete and can be accessed by scanning the QR code above OR online via this link: https://tinyurl.com/FMMBCS1H2025Survey.
This survey continues to be an important tool to collect members’ feedback on the current and expected levels of business activities as well as on topical issues impacting the manufacturing sector. For instance, the last survey revealed the following:
- In 2H2024: that Malaysian manufacturing sector in 2H2024 demonstrated steady momentum, with business conditions, sales and production strengthening amid high costs. Sustained capital investment and steady employment levels underscore a strategic, long-term confidence, as manufacturers navigate an evolving economic landscape with a balanced approach to growth and risk management.
- Outlook for 1H2025: Looking ahead to 1H2025, manufacturers are expected to prioritise efficiency over aggressive growth, focusing on stability amid global economic uncertainties. While employment remains stable and investment sentiment is steady, rising costs and external risks may temper business expansion. The sector is moving toward gradual recovery, but caution remains a defining factor in strategic planning.
- Outlook for revenue growth remains cautiously optimistic while profit growth is more balanced with a mix of optimism and caution. 56% respondents expect revenue growth, with most anticipating increases of 1%-10%. 47% respondents expect profit growth, with most predicting increases of 1%-10%.
- Versus 2024, there is a decline in pessimism in 2025 marking a subtle recovery in confidence. There continues to be a measured approach that favours efficiency and gradual adaptation over rapid transformation.
- Top 5 challenges to business operations and growth in 2025: rising input costs, increasing competition, weak demand, attracting new customers and ringgit depreciation. New challenges in 2025 include increased regulatory burden, access to domestic skilled labour, higher tax obligations and sustainability compliance.
- Top 6 opportunities for business operations and growth in 2025: expansion of product portfolio, exporting to new countries, leveraging digital technologies, cloud and AI, opportunities in new international markets, narrowing product portfolios and value-chain opportunities associated with ESG targets.
- 91% of respondents expect the increase in minimum wage and mandatory wage costs to impact their operational expenses, with 48% expecting moderate increase (5%-10%)
- Green Manufacturing Adoption:
- A majority of respondents (51%) reported being only moderately prepared for green manufacturing adoption, with just 16% well or fully prepared. While 68% have partially integrated sustainability into their operations, only 32% have set specific targets and 26% aim to adopt green practices within 1–2 years. Common initiatives include waste reduction and recycling (71%), though 52% allocate less than 5% of their capital expenditure to green efforts. Key motivators include cost savings, corporate sustainability goals, and regulatory compliance, but high implementation costs remain the main barrier. Energy usage and greening the supply chain are seen as the most challenging areas, with financial incentives or grants cited as the most critical support needed.
- Respondents reported sourcing materials from a mix of domestic (35%), regional (36%), and global (54%) suppliers to manage risk and maintain supply chain stability. The most pressing challenge is increased logistics costs, followed by delivery delays and material shortages, with 26% attributing disruptions to global supply chain issues. Geopolitical tensions have mainly led to higher costs due to trade policies and sanctions, as well as disrupted logistics. In response, businesses are focusing on supplier diversification, risk mitigation, and digital transformation to enhance supply chain resilience. Many also called for greater government support through regional trade agreements to reduce barriers.
- Implementation of Factory Automation / Smart Manufacturing / Industry 4.0 (Ind 4.0)
- About 44% of companies have implemented factory automation, smart manufacturing, or Industry 4.0 technologies, with system integration being the most common (63%). The main driver is to boost operational efficiency and productivity. However, awareness of financing options remains low, with 53% unaware and only 19% of those informed having applied. Additionally, 31% of respondents use AI software or productivity tools in their operations. While 68% have access to 5G and 62% actively use it, adoption is hindered by poor signal strength (30%) and connectivity or indoor coverage issues (49%).
The closing date of the survey is August 1, 2025.
Thank you for taking your valuable time off to complete the questionnaire.
Click here to download Circular GI/14/2025.
Enquiries: Puan Hema Thiruchelvam / Puan Nurhafizah Ngatiran / Puan Kamsiah A Rahim, Business Environment Division at Tel: 03-6286 7200 or e-mail: [email protected].
Tan Sri Dato’ Soh Thian Lai
President
FMM Advocates Transparency, Integrity, Accountability and No Corruption