GLOBETRONICS Technology Bhd is on the lookout for electronic medical manufacturing companies to either merge or acquire to broaden its revenue base.
Group chief executive officer Heng Huck Lee says the group is now in talks with two potential partners in the Asean region to acquire a major stake in their electronic medical device manufacturing companies.
The electronic medical device manufacturing sector is a recession-proof business, which generates sustainable margins, according to Heng.
“We will be exploring to provide original equipment manufacturing (OEM) services and developing our own medical device brandname.
“The group will be able to leverage on its electronic manufacturing expertise to expand in the electronic medical device business. It is also in line with the group’s recent business direction to develop sensors for bio and health wearable smart devices for US customers,” he tells StarBizWeek.
The sensors, according to Heng, enable the device to check the pulse rate, body temperature, blood sugar indication and sweating profile, and also provide real-time data to doctors.
“We are in the production start-up stage and the sensors will be delivered starting from July.
Heng cites the Millennium Research Group (MRG), the global authority on medical technology market intelligence, which forecasts that the global medical device outsourcing market will grow to over US$12bil (RM38.5bil) by 2018.
“The report says medical device brand owners in many countries are facing increasing budgetary pressures due to factors such as the ongoing debt crisis in Europe and the implementation of the medical device excise tax in the United States.
“As a result, we can expect a surge in the demand for medical device outsourcing and contract manufacturers, as brand owners aim to cut down on production costs, particularly for high-volume and low-margin devices,” Heng says.
According to Technavio, the UK-based research and advisory company, the global medical device manufacturing services outsourcing market is projected to grow at a compound annual growth rate of nearly 12% over the 2013-2018 period.
“The industry is highly fragmented with thousands of companies competing for a share of the market. Some of the key factors contributing to market growth are the advancement in healthcare technologies and a growing medical devices market, both domestically and abroad,” the report notes.
On the group’s other business segments, Heng says the group would add a new light-emitting diode (LED) production line soon, which would start producing in September for one of the top four LED lighting manufacturer in the world.
“The product is a new LED module used for general indoor lighting,” he says.
For Globetronics’ crystal timing devices business, the group has just added a new production line to make the products for a Japanese customer serving the worldwide market.
“We now have a total of eight production lines making eight types of crystal timing devices, with a monthly output of about 150 million units,” he says.
The group has allocated between RM55mil and RM60mil this year for these new business activities.
“We expect the second quarter 2014 to improve over the performance of the first quarter 2014 and the previous year’s corresponding period,” he adds.
For the first quarter ended March 31, 2014, Globetronics posted a net profit of RM14.1mil on revenue of RM83.42mil.
“The new range of crystal timing devices, LED lighting products, and sensor products should enable the group to achieve another record breaking year for the revenue and the bottom line.
“These three segments generate about 90% of the group’s revenue,” Heng says.
He adds that the group will explore more opportunities to invest in developing and manufacturing cutting-edge sensors for mobile and wearable smart products.
Meanwhile, Globetronics founder and executive chairman Michael Ng Kweng Chong notes that with today’s phenomenal technological advances, it will be a folly and a total waste of time for anyone to try predict and prepare for the future 50 years from now.
“The best that anyone of us can try to do is to strive like crazy to stay current and relevant for the next five years, not 50 years ahead.
“This is what we have been doing. Every year the group looks ahead to strategise and plan for the next five years’ business roadmap.
“Looking into the next five years, we believe the growth areas for our group should be along our core competencies into products and components that support smart phones, medical electronics automotive tablets, wireless networks, wearable wireless products and in short Internet of things.
“Our group has stayed current and relevant with these technological advances and have been an active and innovative solution provider to our world renowned customers who supply or produce products for tomorrow’s market needs ahead of their competition,” he says.
According to Gartner Inc, the Connecticut-based research house, with the global economy showing signs of a gradual recovery, worldwide IT spending is on pace to total US$3.8 trillion in 2014, a 3.2% increase from 2013 spending.
“Globally, businesses are shaking off their malaise and returning to spending on IT to support the growth of their business.
“Consumers will be purchasing many new devices in 2014. However, there is a greater substitution toward lower cost and more basic devices than we have seen in prior years,” Richard Gordon, managing vice president at Gartner noted.
The devices market (including PCs, ultramobiles, mobile phones and tablets) is forecast to return to growth in 2014, with worldwide spending of US$689bil , a 4.4% increase from 2013 smart devices and smart mobile electronic products.
Heng says that the group has secured orders for its sensors from European Union and US customers for the second half of 2014.
“We expect these new-generation sensors to help the group achieve another record-breaking year for its revenue and bottom line,” Heng says.
An example of a wearable smart device is the smart glasses, which allow the user to surf the net and perform most of the mobile phone functions, Heng says, adding that the group is now in the product development stage of designing sensors for bio and health wearable smart devices for its US customers.