Not made in Sarawak

THE abrupt shutdown of Sanmina-SCI Corporation (Malaysia) Sdn Bhd’s plant in Sarawak was not the first high-tech company that left the state.

In 2009, US-based hard disk manufacturer Western Digital (WD) pulled out of Sarawak after a few years of operation, laying off all its 1,500 employees.

When the announcement came, the Sarawak Government went into overdrive, attempting to salvage the situation without much repercussions.

Hitachi was then brought into the fold. It took over the facility and jobs were saved. But it is also worth noting here that, by then, Hitachi had become the plant’s third owner. Prior to the two, the facility at the Samajaya Free Industrial Estate was actually built and operated by Komag Inc.

Also years before the WD-Hitachi episode, there was a debacle surrounding 1st Silicon Sarawak, which now has become X-Fab Semiconductor Foundries.

“It’s quite depressing (to see) all these big high-tech companies leaving Sarawak,” Dewan Rakyat Deputy Speaker Datuk Wan Junaidi Tuanku Jaafar told me over the weekend.

“I’ve said this for a long time — no country is ready for high-tech industries until after it has a large pool of scientists, researchers, engineers, technicians and let’s not forget, management expertise to back everything up,” he added.

To put it simply, Sarawak lacks the ingredients needed to sustain high-tech industries. Some have suggested that Sanmina-SCI should move more of its operations to China to save labour cost. Malaysia’s soon-to-be-implemented minimum wage policy was — quite unfairly — blamed for this.

Well, I think that this is not the case, since the company will still continue the operations of its Penang plant.

Here, I will voluntarily offer three reasons which I think, caused Sanmina-SCI’s abrupt departure.

Firstly, Sanmina-SCI left because manufacturing in Sarawak is expensive due to transportation cost. We Sarawakians understand these costs like the back of our hands. The cost involved in shipping materials to and from other bigger ports in Peninsular Malaysia and Singapore outweighs the benefits that we can offer like cheap land and power tariff. Sanmina-SCI is continuing its operations in Penang because of its proximity to the seaports in the peninsula and Singapore.

Secondly, Sanmina-SCI is moving more of its operations to China to save time. In an interview conducted before his death, Apple founder Steve Jobs explained that labour accounted for very little in manufacturing costs. He pointed out that since the company first shipped its iPods, minimum wage in China had gone up by multiple folds, but prices of iPods, iPhones and iPads had actually declined.

The real reason many companies like Apple do not manufacture their products anywhere else but China is precisely because they can get everything there.

China is a one-stop centre, which allows something money cannot buy — time.

No longer does it rely on cheap labour, which was perhaps its greatest competitive edge over others a decade ago.

The late Jobs explained that initially, Apple estimated it would take nine months and almost 9,000 engineers to oversee the making of the first iPhone. When he went to his Chinese manufacturers, they made that happen in 15 days.

This is precisely why Junaidi’s assessment on the reason behind the departure of many high-tech industries from Sarawak had been spot on. Our biggest stumbling block is that we cannot compete on time, and time is money, as they say.

This leads to my third reason for the shutdown of Sanmina-SCI, which has something to do with our education system.

It seems that we have spent decades chasing after quantity instead of quality.

When countries like Taiwan, Singapore and South Korea surpass us in terms of standards in science and mathematics, we come up with all sorts of excuses to comfort ourselves.

Singapore is doing better? That’s because it is a small country.

South Korea? Because their monoculture makes it easier for the country to progress.

China? Because it is a large country with millions of population.

Talk about shifting goal posts!

Coming back to Sanmina-SCI, just look at all the headlines so far. It seems everyone is only blaming the company for having taken advantage of our workers and leaving them with so little retrenchment benefits.

This, to me, is a very valid point. My heart goes out to the retrenched workers, some of whom are actually planning to go to China for employment. The skills that they have acquired are such a niche that they face difficulties securing jobs with matching salaries in Malaysia.

But the truth is that, we were never quite ready to indulge in the high-tech industry. And this goes beyond Samajaya.

The closure of Sanmina-SCI is really another sign that we are still not ready.

Junaidi said to me that the problems went beyond the lack of specialists we have in Malaysia. The question, he said, was finding ways to create a better environment that could lead to a better intellectual development among Malaysians?

If we — including our policymakers — continue to overlook the real damage we are inflicting upon ourselves, then we will never be fully prepared to face this fast-moving globalisation.

Sanmina-SCI’s shutdown at Samajaya is a red flag for us to seriously take heed of.