The challenges faced by the Malaysian shipyard industry had led to the failure of local shipyards in catering to the demand of ship owners. The shipyard industry had recorded the least contribution (1.0%) to the world shipbuilding order book and had caused inconsistencies in the Malaysian shipbuilding ship repair (SBSR) industry’s demand and supply market. The objectives of this study had been to identify the factors that had contributed to the challenges faced by the shipyard industry in Malaysia, and to rank them according to their priorities. The factors of these challenges had been identified by using the cause-and-effect analysis method and were further illustrated in the form of an Ishikawa diagram. Subsequently, an analytic hierarchy process (AHP) method was applied to determine the weightage of the priorities. The results had shown that ‘Market’ (41.66%) had been the most challenging aspect faced by the shipyard industry in Malaysia from all the five factors studied. As such, this research would help shipyard organisations to effectively prioritise these challenging factors as a way of sustaining their businesses and affecting the economic contribution from the shipyard industry.