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MALAYSIAN ECONOMY: An Overview
THE ELECTRICAL & ELECTRONICS INDUSTRY IN MALAYSIA: AN OVERVIEW
Lenan a/l Sundaram & Ong Sze Yin; August 2007


The start of electrical and electronics industry in Malaysia was the establishment of a Matsushita plant in 1965. The first component plant was set up by Clarion and Semiconductor established the first semiconductor testing and packaging plant in Penang in 1971. Within two-and-a-half decades, the industry employed 330,000 workers with a total output value of RM 85 billion in 1997 (roughly US$ 30 billion). The industry’s exports account for over half the country’s export revenue and about two thirds of manufactured exports (MIDA).

The electrical and electronics (E&E) industry is now the leading contributor to Malaysia’s industrial development, in terms of output, foreign exchange earnings and support activities. During the Second Industrial Master Plan (IMP2), 1996-2005, the industry registered double digit growth in exports, thus maintaining Malaysia’s position as a net exporter of E&E products. The industry accounted for an average share of 50.5 per cent (MIDA) of the total merchandise trade during the period. Malaysia’s production and exports of semiconductors ranked among the top five in the world for the period 2000-2004.

During the period of the Third Industrial Master Plan (IMP3), 2006-2020, the industry will continue to grow and contribute significantly to the industrial progress and transformation. It will leverage upon its strength in semiconductors, information and communication technology (ICT) and support industries to develop new products, based on new and emerging technologies. The trend towards extensive applications of electronics in industries and services, together with the development of multimedia ICT, will provide growth opportunities especially in the areas of miniaturization, digitalization and multimedia applications.

The trend towards outsourcing will continue, as Multinational Corporations (MNC) strives to remain competitive in their core businesses. In the medium to long term, the industry will strengthen its linkages with the automotive, medical, defence and aerospace industries. The development of new industrial and consumer electronics products, through the application of electronics and ICT, will attract considerable investments into the industry. The support industries and services are expected to expand, in tandem with these developments.

The future growth of the E&E industry in Malaysia will be influenced by the overall growth of the global market for E&E products and the advancement of technologies in the electronics product category, particularly semiconductors. Further integration of the technologies will enable companies to develop greater product functionalities and enhance performance and system management. Demand for data and information network security will encourage further collaboration among manufacturers of semiconductors, data storage and end products to design develop and manufacture products which can perform these functions.

Rapid technology development in the applications of electronics in the automotive industry will increase linkages between the two industries. The global market for automotive electronics is projected to reach US$185.3 billion in 2012 (MIDA). With its established foundation in both the electronics segment and automotive industry, Malaysia is expected to benefit from this development.

(I) Semiconductors

The next five years, the industry is projected to grow at an average annual rate of 6.5 per cent and be able to generate revenues of US$318 billion by 2010 (MIDA). This is attributed to high consumer spending and the changing preference for the most advanced electronics devices among developed countries. The growth in demand for E&E products is expected to be higher among emerging economies, especially in Asia-Pacific, in view of the expansion in electronics commerce and increase in consumer purchasing power. To date, Malaysia has been able to attract leading semiconductor companies in the assembly and packaging of microprocessors, micro controllers, memories, signal processors and logic integrated circuits. Further adoption of nanotechnology is expected to improve the performance of semiconductor devices, as well as generate new applications and product. To sustain competitiveness, more Malaysian semiconductor manufacturers are expected to adopt this new technology in their cooperation.

(II) Industrial Electronics

The next five years, the industry is projected to grow at an average annual rate of 6.5 per cent and be able to generate revenues of US$318 billion by 2010 (MIDA). This is attributed to high consumer spending and the changing preference for the most advanced electronics devices among developed countries. The growth in demand for E&E products is expected to be higher among emerging economies, especially in Asia-Pacific, in view of the expansion in electronics commerce and increase in consumer purchasing power. To date, Malaysia has been able to attract leading semiconductor companies in the assembly and packaging of microprocessors, micro controllers, memories, signal processors and logic integrated circuits. Further adoption of nanotechnology is expected to improve the performance of semiconductor devices, as well as generate new applications and product. To sustain competitiveness, more Malaysian semiconductor manufacturers are expected to adopt this new technology in their cooperation.

(III) Consumer Electronics

The production of consumer electronics products, especially audio visual products, is projected to grow, with the trend towards the digitalisation of broadcasting in the developed countries. The global market for consumer electronics is expected to register double digit growth to US$203.3 billion in 2009 (MIDA). Sales television sets, which account for more than 80 per cent of the total revenues, are expected to grow at a slower pace. While Malaysia is expected to achieve the fastest growth, in view of increased affluence and changing lifestyles (MIDA). Potential growth areas for Malaysia are in integrated home-entertainment networks digital car entertainment system, home-network devices and portable digital video players. The domestic companies, which are original equipment manufacturers (OEM) and own design manufacturers (ODM), will need to take advantage of the growing consumer market to promote their own brand products, through the existing networking with the MNCs in the country.

(IV) Electrical Products

The new applications of electronics will generate growth in the up-market segment in electrical appliances. Manufacturers have incorporated new features, utilising programmable logic controller integrated circuits into their products, such as smart rice cookers, blenders, ovens and etc. A new growth area in this product category will be solar powered energy, utilising photovoltaic technology. The market for solar powered products has registered significant growth of 30 per cent per annum during the last seven years. This growth momentum is expected to continue within the next five years. In 2005, worldwide sales of photovoltaic cells and modules totalled US$10 billion and are expected to reach US$38 billion by 2010 (MIDA). In 2005, the Government launched the Malaysian Building Integrated Photovoltaic project, aimed at intensifying the usage of solar energy as an alternative source of electricity. There are opportunities to attract investments in photovoltaic fabricated wafers, cells, modules, power management system, junction boxes, photovoltaic wires, connectors, mounting metal structures and inverters.

In conclusion, Malaysia has benefited from the MNCs in terms of technology transfer, establishment of upstream and downstream linkages, and increased employment opportunities. Overall, Malaysia E&E will be very prosperous in the futures; it may seem that Malaysia will be a major leading country in this industry.


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Har Wai Mun @ 2007