Eyes Set on Industry 4.0

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Penang’s manufacturing landscape is ready to take on the next big thing.

Major changes are coming. The Fourth Industrial Revolution, the integration of physical and digital technologies, is underway. Within the manufacturing industry, it’s called Industry 4.0 – the use of cyber-physical systems through the likes of automation, robotics and the Internet of Things for producing goods. Daniel Bernbeck, director of the Malaysian-German Chamber of Commerce and Industry, considers it to “embody everything in society, changing everything from the type of jobs we have to the lifestyle decisions we make.”

Penang is aptly positioned to embark on Industry 4.0. Ironically, this stems from the state’s manufacturing industry being a latecomer to technology: the manufacturing landscape here is such that it is built on multinational companies that offshored low-end, labour-intensive assembly and production functions to the region. This means that the industry, which includes the network of local firms and suppliers, was not technology intensive – or rather, it did not need to keep abreast with the latest technologies.

This is in comparison to developed countries that were at the forefront of the manufacturing industry, requiring them to both adopt and develop new technologies.

Penang’s slower pace of doing this is what makes it easier now to transition into Industry 4.0 – the technology inertia among Penang manufacturers is lower and easier to overcome.

Medium-sized firms transition into Industry 4.0 much more quickly compared to larger firms; they are “more flexible – it’s a bit easier to move things,” says Dato’ Hans Brenner, CEO of KLS Martin, the global leading supplier of medical technology solutions which has a manufacturing plant in Penang.

In this aspect, Penang is again suitably positioned to take on Industry 4.0. The self-reinforcing effects of agglomeration have created a robust manufacturing industry in Penang. In this environment, new domestic firms have sprouted and have commonly become a testament to successful technology transfer by multinational companies, forward-thinking industrial policies and the steady growth of capital in a once-young economy. These effects however have not yet been successful enough to develop domestic firms into large multinational corporations that have a global presence. The end result of these two opposing effects is a cluster of medium-sized firms that are poised for transition.

Daniel Bernbeck.


Additionally, the manufacturing industry in Penang has come to a point where technological adoption is no longer a novelty but a necessity. Growing competition around the region and the pressure to meet global demand are fuelling the need for Industry 4.0. Increased productivity, greater efficiency and lower prices are required to maintain Penang’s competitive position in the global arena.

But being a latecomer to technology and having a cluster of only mid-sized companies have its problems – the biggest of which is the shortage of appropriate skills. To make matters worse, this shortage is present in every layer of the skill hierarchy, from skilled machinists and experienced engineers, all the way to industry thought leaders and highly qualified development researchers.

A comprehensive report by the Penang Institute1 shows that there exists a mismatch between the supply and demand for skills in the industry. Malaysians also seem to demonstrate a lack of interest in science and engineering programmes, while tertiary education institutions in Malaysia overemphasise theoretical knowledge, with little on the application of knowledge.

The issue of quality dominates entry-level positions, whereas the issue of quantity dominates mid-level and senior-level positions. Contributing to this are the phenomena of brain drain and high labour mobility; Brenner describes the latter as “when a new company joins the industry, a whole line of engineers from the last entrant moves to the new one, and this continues for every new industry entrant. This proves to be a challenge because it creates the illusion that there is enough skilled talent in the labour pool.”

Much has been put in place to address this shortage in skills. For one thing, the Penang Skills Development Centre (PSDC), a private sector-led initiative, has been successful at pioneering a skills-training model that combines academic training and industry relevance, or what Bernbeck terms as “demand-driven education”. It was not long before both the state and federal government began to support and partner with PSDC through monetary endowments, specifically to tailor training programmes as well as acting as an authoritative voice in human resource policy-making.

One notable initiative by the Penang state government in this regard is the German Dual Vocational Training programme, in partnership with the Malaysian-German Chamber of Commerce and Industry and PSDC. Fully funded by the state, students not only receive highly relevant technical training, but also an allowance throughout the period of the programme. The first batch of graduates will be robed this month.

More than that, the state is also earnestly identifying other avenues in which they can facilitate the transition towards Industry 4.0. Among them are the re-evaluating of the development of industrial parks to be Industry 4.0-friendly, the enhancing of the standards of liveability to support efforts in attracting and retaining talents, and the encouraging of innovation through startups.

With a ready supply of firms under the right conditions to transition, a vibrant manufacturing ecosystem that consists of both domestic and foreign firms, and a state institution that is willing to adapt and change, the future of Industry 4.0 in Penang looks bright.

The manufacturing industry in Penang has come to a point where technological adoption is no longer a novelty but a necessity. Growing competition around the region and the pressure to meet global demand are fuelling the need for Industry 4.0.

1https://penanginstitute.org/programmes/social-studies-and-statisticsprogramme_trashed/penang-skilledworkforce-study.

Timothy Choy is an economic analyst at Penang Institute. He reminisces the good old days when McD sold popcorn.



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