PLUG & PLAY

Malaysia 2016 | INDUSTRY & INNOVATION | FOCUS: E&E

At the forefront of Malaysia's manufacturing sector is the electrical and electronics (E&E) industry. E&E has been highlighted as one of the 12 National Key Economic Areas (NKEAs) under the government's Economic Transformation Programme (ETP) to propel Malaysia into a developed nation.

In 2014, E&E contributed $10 billion in GNI and export value exceed $57 billion. Consumer electronics (LED TVs and other audio-visual products), electronic components (circuits and semiconductors), electrical products (household appliances such as air-conditioners, refrigerators, washing machines, and vacuum cleaners), and industrial electronics (computers and other office-related IT products) make up the four subsectors under the E&E designation. Leading companies in the sector include both local players such as Silterra, Globetronics, Unisem, and Inari, as well as international giants Keysight Technologies, Intel, Advanced Micro Devices (AMD), and Freescale Semiconductor, to name but a few.

Companies first started to look toward Malaysia as an investment destination in the 1960s. Today, a large percentage of E&E companies are concentrated in the state of Penang, which has come to be known as the “Silicon Valley of the East." A well-developed local supply chain, infrastructure, and supporting ecosystem have contributed to earning Penang a reputation as a global hub for E&E. Furthermore, a pool of skilled, English-speaking workers, the result of substantial investment from the MNCs over the years, contributes to the location's attractiveness as a location for regional headquarters.

Looking ahead, the focus will continue to be on moving up the value chain, accelerating higher yields, and increasing the industry's robustness to external demand shocks. For this, the government had intensified its R&D efforts, setting up Collaborative Research in Engineering, Science & Technology (CREST) as a catalyst to accelerate innovation in the sector, and MIMOS, an agency under the Ministry of Science, Technology and Innovation (MoSTI). Other committees and bodies, such as the Malaysian American Electronics Industry (MAEI) and the Electrical and Electronics Association of Malaysia (TEEAM), have emerged to represent the interest of businesses in the sector.

The largest driver of growth in E&E continues to be the semiconductor industry, spurred by rising demand in tablets and smartphones, which is associated with a rising middle class. E&E is expected to contribute 679,000 jobs and $20.5 billion in GNI by 2020, and remain the largest contributor, in terms of output, employment, investments, and exports, of not just manufacturing but the industry sector as a whole.