DESTINATION CLOUD 9

Malaysia 2017 | AEROSPACE | REVIEW

Great strides have been taken to nurture Malaysia's aerospace industry, such that major international names today look to its quality workforce, while local firms are active across the supply chain.

Malaysia's aerospace industry has been identified as a strategic sector for economic growth. Consequently, a comprehensive national drive has evolved, one that corrals key ministries and a plethora of sector-specific bodies to give the industry voice, train an elite aerospace workforce, and meet the goals of the Malaysian Aerospace Industry Blueprint 2030, launched in 2015. The national aerospace plan first saw light in 1997, with the Malaysian Aerospace Council (MAC) launched four years later. The original plan entailed the transformation of Malaysia into a regional aerospace hub. In its wake, the government turned Kuala Lumpur's erstwhile Subang International Airport into the Malaysia International Aerospace Centre (MIAC), which has since become Malaysia's key maintenance, repair, and overhaul (MRO) center.

The latest aerospace blueprint for the long-term development of the aerospace industry targets the country becoming the premier aerospace nation in Southeast Asia, as well as an established star in the global firmament by 2030. To date, significant and diverse investments have materialized in areas of activity ranging from MRO—34 firms operating today—a growing parts assembly, and manufacturing components. Wan Suraya Wan Mohd Radzi, the Senior Director at the Sectoral Policy Division of the Ministry of International Trade and Industry (MITI), told TBY how, “The new blueprint (has) set a target of total industry revenue of MYR55.2 billion and employment for 32,000 by 2030." The ambitions are huge, and, whereby, “In MRO, we want to capture 5% of the global market share, while for manufacturing; we want to be the number-one producer of parts and components in Southeast Asia. We want to be 70% self-reliant in system engineering, and for engineering services, we want to capture 3.5% of the global market share." “Lastly," he concluded, “we want to be the number-one supplier of skilled aerospace engineers in Southeast Asia."

In 2015, the Malaysian Aerospace Council was brought under the auspices of MITI, while also under its purview, the National Aerospace Industry Coordinating Office (NAICO), launched originally tasked with investment promotion and policymaking, is set to become an independent agency. Shamsul Kamar Abu Samah, the Head of NAICO, defined its seminal role as becoming an independent “agency that will lead industrial development, investment, and supply chain development in Malaysia in achieving our aim of becoming the number-one aerospace country in Southeast Asia by 2030." The project rests on the six pillars of “aerospace manufacturing, MRO, system integrations, engineering and design, training and education, and research and technology, with support for defense industries as an additional area of attention."

Also emphasizing the sheer coordination of sectoral activities was Managing Director of Malaysia Airports Holdings Berhad (MAHB) Datuk Badlisham Bin Ghazali. He noted in an interview that over the past 10 years Malaysia's aeronautical industry had expanded “from 13 to 200 companies, including multinationals like Airbus and Rolls-Royce (where) these industry giants seek space, a supportive ecosystem, and the right partners—and these are all part of our offering." Regarding his organization, he noted “in cargo and logistics we work with the Ministry of Transport, our aerospace program ties in with MITI's Blueprint, and in leisure we work in close consultation with the Ministry of Tourism."

Highly Skilled Workers

The industry is, of course, only as good as the engineers and technicians that populate it. Much effort, then, has gone into preparing a workforce capable of winning and retaining business over the longer term. Indeed, according to Malaysian Foresight Institute data, Malaysia today boasts close to 70 educational facilities catering to the aerospace industry, 11 of which are approved by the Department of Civil Aviation. Meanwhile, 11 licensed flight schools provide pilot training. The 2030 blueprint envisages an estimated 50,751 technicians and 16,746 pilots graduating from these institutions by 2030, and this is in addition to the fact that Malaysia is already the largest regional provider of aerospace workforce.

Performing at High Altitude

Malaysia's performance to date has been hugely impressive, and the nation is keen to tap further into the global market, where over the next 20 years aircraft production is calculated to scale 38,050 units at a value of USD5.6 trillion, not including regional jets. Incentives have been extended to sustain investor confidence, and thereby expedite and diversify sector growth. These have included the extension of land leases to 99 years, rendering projects, long term in nature in this business, more financially viable. “Our aerospace industry belt extends from the current Sepang Airport—located closer to Kuala Lumpur—to KLIA, and down south toward Malacca, where Tier-3 manufacturers are setting up shop," Datuk Badlisham concluded.

The local aerospace industry's total turnover printed at MYR6.8 billion in 2015, in stark contrast to just MYR600 million as recently as 2009. The aerospace manufacturing sector as of 1Q2016 employed 8,800 workers and is aimed to deliver MYR21.2 billion total industry turnover by 2030. By no means an embryonic market, Malaysia is already a known force in composite design and manufacturing as well as aircraft component design and production and avionics and systems design and production. It is the single source of specific composites parts for Airbus and Boeing. Of note, around 50% of the composite wing parts for the Airbus A320 and Boeing B737 are sourced from Malaysia. Today, eight aircraft assemblers are in operation, while 28 companies make aircraft parts and components, including ground support equipment, and over 50 firms are engaged in MRO business.

Trade in Numbers

Official figures put 2015 trade in aerospace products at MYR14.2 billion. Related exports posted a stunning YoY rise of 44.7% from MYR2.9 billion to MYR4.2 billion. Exports comprised composite parts and components (MYR4.07 billion), aerospace communication systems, and parts, avionics (MYR86.8 million), and aircraft propellers and rotors (MYR3.1 million). Meanwhile, encouragingly, for the year imports declined 33.5% from MYR15.1 billion to MYR10 billion, comprising aircraft (MYR4.06 billion), aircraft parts (MYR5.55 billion), and helicopters (MYR410 million). Nonetheless, imports still exceed exports according to MITI data. What's more, regional competition is fierce, as leader Singapore is seeing annual growth in its aerospace industry of 10%. Thailand, too, is pursuing the sector aggressively to the extent that sector estimates envisage the nation ultimately generating USD1.5 billion in annual revenues. As the ministry explained back in 1Q2016, of the approximately 7,000 A320 aircraft in operation worldwide, at least 5,000 were built with Malaysian manufactured components, again underlining the nation's prestigious standing within the global supply chain.

Project Investment

By MITI data, by 2030, the sector is earmarked generating revenue of MYR20.4 billion from MRO, MYR21.2 billion from aeronautical manufacturing, and RM13.6 billion from engineering and design services. Meanwhile, the Malaysian Investment Development Authority (MIDA) notes four projects approved in 2015 on a total investment of RM5 billion, where RM4.9 billion was sourced domestically and RM30.6 million was FDI. Examples of the latter are global giants such as Spirit AeroSystems (RM226 million), Safran Landing Systems (RM483 million) producing carbon brakes for commercial airplanes, and Aerospace Composite Malaysia and Honeywell Aerospace Services (RM280 million), which have entrusted their performance to Malaysian engineering dexterity. The net effect of this, precisely as envisaged in the National Aerospace Blueprint for 2030, is the diversification of the local supply chain where successful local players include SME Aerospace, CTRM Aero Composite, Sepang Aircraft Engineering, Airod, and Malaysian Aerospace Engineering.

In another example, according to MITI, ongoing collaboration between UMW and Rolls-Royce, launched in 2015 for the manufacture of fan cases for the Trent 1000 and Trent 7000 engines, will enhance the former's ability to be Rolls-Royce's single source tier-one supplier, again confirming Malaysia's prowess in the field. In conversation with TBY, Saji Raghavan Rolls-Royce, Country Director for Malaysia and Brunei, gave the project some context. “Our aerospace business (had) an order book of over GBP67 billion in 2015, more than 80% of our total order book (of which over 50% of orders) come from the Middle East and Asia." He expressed hopes that the “25-year agreement with UMW, which more than covers the (National Aerospace) blueprint period, will also create opportunities for more similar initiatives in Malaysia." Rolls-Royce has also seen wider involvement in the local industry, having in 2011 participated in the establishment of the Aerospace Malaysia Innovation Centre (AMIC).

A more recently initiated processing project in 2016 involved Asahi Aero Malaysia Sdn Bhd, a JV between Asahi Kinzoku Kogyo Inc. and Toyota Tsusho Corp. The firm's first Southeast Asia aircraft parts surface treatment facility, opened in October 2016, is certified by Boeing and will serve its commercial aircraft programs.

Future Insight

Aerospace, like any large-scale and high-tech industry, is ever evolving, not least in terms of its manufacturing processes. On this topic, looking forward, NAICO's Shamsul Kamar Abu Samah spoke to TBY of the recent launch of the 3M Global Aerospace Future Landscape project between Malaysia, Mexico, and Morocco. “We predict that OEMs and tier-one companies will seek regional hubs in specific markets," he ventured, whereby, “Mexico will be the hub for North America, Morocco for Europe, and Malaysia for Asia Pacific." In a highly competitive industry this does seem a possible scenario. And fortunately for Malaysia, he added, “Competition is still ongoing and open for the Asia Pacific market, and we can take the lead there (to) develop Malaysia as the hub for the Asia Pacific region." Another local organization assisting in this endeavor is Malaysia Aerospace Industry Association (MAIA), an NGO that is the voice of Malaysian aerospace companies regarding efforts to position Malaysia as Asia's aerospace hub, especially among the ASEAN markets. MAIA's task is to make sure that government policy benefits from industry insight. Rolls-Royce's Raghavan touched upon the enormous logistical requirements of the aeronautical industry that a hub would rationalize, by giving some remarkable numbers. Duly, “each engine has around 18,000 components with 35,000 parts (and) we work with over 8,000 companies in 70 countries, each of them (playing) their part in producing our products (so) we can imagine what kind of supply chain and logistics are required to make an engine."