Grow the E&E golden goose up the value chain


Electrical and Electronics Productivity Nexus (EEPN) chairman Datuk Seri Wong Siew Hai says the E&E industry is a leader in back-end manufacturing (assembly, test and packaging) which contributes only 10% to the value of the finished semiconductor chip. - NORAFIFI EHSAN/The Star

TO drive the electrical and electronics products (E&E) industry in Malaysia to new heights, there must be government support for improved tax incentives for local companies and foreign investors, strategies to attract and develop talent, policies to boost local capabilities in designing integrated circuits (IC) and industrial software, as well as campaigns to encourage buying locally produced components and machinery.

Electrical and Electronics Productivity Nexus (EEPN) chairman Datuk Seri Wong Siew Hai says the E&E industry is a leader in back-end manufacturing (assembly, test and packaging) which contributes only 10% to the value of the finished semiconductor chip.

According to a study by the Belfer Centre for Science and International Affairs, Harvard Kennedy School in July 2020, the remaining 90% are contributed in equal portions by front-end manufacturing (wafer fabrication), and design and development.

“This does not mean we are not doing well, because back-end manufacturing also involves high technology. However, we should also develop our capabilities into high value areas where we are lacking such as design and development, ” says Wong.

EEPN is an industry-driven and government supported initiative that was formed in 2017 under the Ministry of International Trade and Industry’s Malaysia Productivity Corporation (MPC), to boost the E&E industry’s contribution to the national economy.

The E&E industry is among the nine priority subsectors within the Malaysia Productivity Blueprint (MPB), launched in May 2017 as part of the 11th Malaysia Plan, that were identified as having high growth potential for the country.

Wong, who has spent three decades in the E&E industry, and was formerly Intel’s vice-president of technology and manufacturing group, says the sector’s importance to the Malaysian economy since 1972 cannot be overstated.

He points out that statistics showed that in 2019, the industry accounted for 6.3% of the country’s gross domestic product (GDP) and employed 560,000 people.

According to Malaysian Investment Development Authority (MIDA), the E&E industry is the single largest contributor to the manufacturing sector, and was the country’s largest export earner in 2019, with exports totalling RM372.67bil or 44.7% of all manufacturing goods exported.

In 2019, the E&E industry also recorded the highest approved investments, at RM25.65bil or 31% of the total RM82.71bil.

These approved investments in 157 E&E projects are expected to create 22,936 jobs.

The 2018/2019 Economic Impact Survey report by MAEI noted that Malaysia is the seventh largest E&E exporter in the world, with more than 100,000 jobs being created in this sector.

Malaysia’s top five export destinations in 2019 were Singapore, Hong Kong, United States, China and Japan, with Singapore accounting for the lion’s share of 16.2% of all E&E exports, amounting to RM60.42bil.

Wong explains that the country’s E&E industry is known for its manufacturing strengths in semiconductor assembly test and packaging, storage, electronics manufacturing services (EMS), medical devices, light-emitting diodes (LEDs), solar systems, and industrial electronics as well as global business services (GBS) and automation systems.

“Malaysia is strong in automation and it has grown in capabilities. We need to make it known to the world, ” he says.

He also says Malaysian companies are also involved in IC design, embedded system design and development, industrial software, artificial intelligence (AI) and 5G, wafer fabrication, integration of robotic systems and testing equipment.

“But we don’t have a significant presence in these areas which deliver more innovation and higher value. As such, we can focus on growing local capabilities in these areas where we have a weak presence. We also need to grow the medical device industry here, ” he says.

Wong points out that the country’s E&E industry is not able to design vision cameras, robotic arms, surface mount technology (SMT) equipment, wafer fabrication processing equipment, bonders, direct material for semiconductors and E&E manufacturing, and machine learning algorithms.

He says to move the Malaysian E&E industry up the value chain, there has to be a holistic strategy for talent development among students.

“The majority of students nowadays are not interested in STEM (science, technology, engineering and mathematics) subjects. And yet, we want to become a nation of innovation in science and technology, ” he says.

Wong says in the past three years, EEPN had organised hackathons for university students and plugfests for engineers.

The hackathons saw participation from 132 university students and were held at Technology Park Malaysia (Kuala Lumpur) in October 2019, as well as Johor and Sarawak in October 2020.

“We gave the university students the task of solving an industry problem, we want to give them the exposure and create the interest, ” he says.

EEPN is also driving a Structured Industry Apprenticeship Programme (SIAP) for IC design, which has seen participation from seven universities namely Universiti Sains Malaysia (USM), Universiti Malaysia Perlis (UNIMAP), Universiti Malaya (UM), Universiti Teknologi Malaysia (UTM), Universiti Teknologi MARA (UiTM), Universiti Putra Malaysia (UPM) and Universiti Tun Hussein Onn Malaysia (UTHM).

SIAP is a university curriculum enhancement and embedment programme for IC design and development, created in partnership with the Ministry of Higher Education (MOHE).

Thus far, it consists six industry-driven training modules namely introduction to design, digital front-end, digital back-end, design for testability (DFT), analog and circuit layout.

“What we wanted to do was to take the industry curriculum and put it into the universities. We are also promoting SIAP to private universities, ” says Wong.

Meanwhile, the two plugfests saw the participation of 177 engineers from 92 companies.

“In the plugfests, we wanted the engineers to solve problems under real work conditions. We gave them a simple project and they work on it with a kit, and learn programming. Then the companies realise that the learning curve is not so complex and expensive. We are discussing with HRDF (Human Resources Development Fund) to help to to fund this training, ” says Wong.

He also says the government can help via providing programmes in industrial upskilling for unemployed graduates, as well as advanced skill enhancement in IC design and embedded software development.

Wong says EEPN had held successful training and work placement programmes for 121 unemployed engineers.

“After three to six months, we placed everyone who joined the programme, ” he says.

To further attract young talent to consider design and development in the E&E industry as a career, Wong also suggests higher automatic individual relief for personal income tax as an incentive.

He also suggests allowing foreign engineering graduates, who are studying in Malaysia, to work locally.

“We can use talents from other countries. Of course, the typical view is that if we hire foreigners, we deprive Malaysians of jobs. My counter argument is, if we hire these people, we could win and support projects and thus, create more jobs, ” he says.

Wong says more tax incentives are needed for E&E companies in Malaysia to invest in research and development, and innovation.

“Reduce the red tape, and make it easier to meet the criteria for the incentives, especially during this difficult pandemic period.”

For foreign investors, there should be transparent and clear tax incentives of 10 years or more.

“Multinational corporations (MNCs) who invest in foreign countries look at the long-term horizon in their business planning.”

Also, different set of tax incentive criteria should be given to Malaysian companies who are growing and manufacturing new products and technology.

“With the tax incentives, the local companies would have extra funds to invest in design and developments and new innovations. This would allow them to compete with other companies around the world, ” says Wong.

He also said there should be incentives for MNCs and local companies to source for supplies from the domestic ecosystem.

“Electronics manufacturer Inari Amertron Bhd is a role model; it has spent hundreds of millions in supporting local companies, ” says Wong.

In recent years, EEPN has organised small and medium enterprises (SMEs) leadership training for companies with revenue from RM3mil to RM10mil.

The focus is to expose them to business and marketing strategies, pitch and win, digitalisation and develop and retain talent.

“Feedback from owners, founders and CEOs were very positive and we hope the companies will grow and be publicly listed one day, ” he says.

Meanwhile, the www.eemm.com.my portal was also set up and launched on November 30,2020, to promote Malaysian E&E companies to the world.

Wong says the portal was sponsored by 27 companies and is free for two years, to encourage more companies to sign up.

“We have about 50 companies listed on the portal, but we need more. The idea is to help overseas companies who are looking for Malaysian E&E companies to work with, ” he says.

Moving forward, Wong says the country needs to double down on areas that it is strong in, like state-of-the-art manufacturing, establish an automation hub, grow the medical device industry and GBS (global business services) further, and enhance the IC and embedded system design capability.

“To complete the ecosystem, we need to attract foreign investments in wafer fabrication, grow capabilities in semiconductor packaging design, and develop and establish a strong software industry, ” he says.

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