Leveraging on the electrical and electronics industry

In the era of the Digital Age, one cannot underestimate the importance of the E&E sector. The sector provides the opportunity for innovations of the Digital Age, and has always been changing the way we work, learn, live and play.

UNLOCKING greater productivity within Malaysia’s industrial sectors is one of the national strategies to drive continuous economic growth and expansion.

In line with this, the Malaysia Productivity Blueprint launched in May 2017 has identified nine priority subsectors with high potential growth. In particular, the electrical and electronics (E&E) industry, where the International Trade and Industry Ministry has been at the forefront of generating private public partnerships to drive productivity enhancement initiatives within the sector.

In an effort to boost the E&E sector’s contribution to the national economy, the Electrical & Electronics Productivity Nexus (EEPN) was formed in 2017. As chairman of the EEPN, I helmed the PPP, which involves a cross-section of industry players, government ministries and agencies to provide support for four key strategic pillars, which are crucial to drive the growth and expansion in the E&E industry.

The key strategic pillars are: enhancing value-added, nurturing talent development, acceleration the adoption of Industry 4.0 and strengthening local small and medium enterprises (SMEs) development.

To recap, the local E&E sector started back in the 1970s, when Tun Dr Lim Chong Eu introduced the Free Trade Zone (FTZ) in Penang. The first eight manufacturing companies was set up on the island in 1972 by multinational companies (MNCs) given attractive incentives by the FTZ. Since then, the thriving sector has also spread nationwide.

In the era of the Digital Age, one cannot underestimate the importance of the E&E sector. The sector provides the opportunity for innovations of the Digital Age, and has always been changing the way we work, learn, live and play.

According to the 2018 Malaysian American Electronics Industry (MAEI) Survey Report, the E&E sector has enabled Malaysia to successfully positioned itself into the global supply chain of electronic manufacturing services, outsourced semiconductor assembly and testing as well as in research, design and development.

Representing 36.7% of Malaysia’s total exports in 2017, the industry is expected to flourish even further and by 2020, is expected to generate a gross national income impact of RM53.4bil and create 157,000 jobs. It has also attracted the highest foreign investments at RM8.2bil or 84.5% in 2017.

Of the 31 American companies in the E&E industry tracked by the report, it was revealed that collectively, these companies currently employ over 80,000 people, a 16% increase from 2014. Nineteen of the 31 companies are also fully localised, where 99% of employees are Malaysians. These companies employ over 16,500 skilled engineers; 2,000 of these jobs require a Master’s degree or higher, and 5,700 are dedicated to research, design and development.

In 2017 alone, these American companies spent over RM3.8bil on research and development (R&D) , with four of these companies having located their global R&D centres in Malaysia.

Megatrends driving new growth

Several megatrends which are driving new growth in the E&E sector also presents valuable opportunities for Malaysia. The advent of Industry 4.0 has heralded the use of artificial intelligence, machine learning and the Internet of Things (IoT) in our daily lives. In fact, the digital lifestyle and digital economy which defines the New Millennium has resulted in the explosive growth of e-commerce, e-mobility and e-healthcare.

To a degree, the local E&E industry has been able to leverage on these megatrends which offers greater demand for state-of-the-art hardware, along with diversification into the area of design and development (D&D), shared services covering human resource, finance and information technology as well as supply chain management for regional and global logistics hubs.

Bearing this in mind, EEPN has set a vision for the local E&E sector to be a global state-of-the-art hub for advanced technology and high value-added activities. However, it has to be borne in mind that many other countries also present Malaysia with with stiff competition in this area.

Therefore, the EEPN aims to address the greater urgency for the local E&E sector to move further up the value chain and be globally competitive. To achieve this, Malaysia must try to attract more MNCs and large local companies to set up D&D centres in the country as well as to assist local SMEs to grow in this area.

There is also a general perceptionthat the E&E industry is labour intensive, but many fail to realise that it is also highly automated, with the manufacturing sector relying on state-of-the-art technology.

Therefore, in moving up the value chain, Malaysia needs to take into account the rise in automation of manufacturing processes, which requires greater software skills among workers.

Despite having pervasive skills in many areas of manufacturing, supply chain management and business development, the local E&E sector need to further develop its capabilities in areas such as R&D and business development. This need cuts across all industrial segments in Malaysia which utilises E&E components, such as automation, industrial electronics, semiconductors, electronics manufacturing services, storage, light emitting diode, solar and IoT.

Ultimately, in order to make the most of opportunities within the sector, Malaysia needs to be globally competitive. The current scenario sees the local sector contending with greater competition, especially with neighbouring countries such as Vietnam, China and Thailand, which are also leveraging on the E&E sector to stimulate economic growth.

While the road ahead has its fair share of challenges, the key challenges persist especially in the form of talent with a lack of highly skilled engineers in the E&E sector.

The EEPN has also identified the need to further develop the ecosystem, and encourage the growth of local SMEs, which can take on the engineering challenges associated with D&D within the E&E sector.

Datuk Seri Wong Siew Hai is the chairman of EEPN. He is also the chairman of the Malaysian American Electronics Industry and honorary governor of American Malaysian Chamber of Commerce.

> This is the first of a two-part series on the local E&E industry and and its strategic growth plans.

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