Automation is the Future

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The global automation boom is upon us, and Penang is ready – almost. 

More than 1.4 million new industrial robots will be in factories around the world by 2019. By 2020 this market is projected to exceed US$350mil.1 The industry is coming of age, and Penang is well positioned to capitalise on it.

Penang’s E&E industry remains the bedrock of the state’s economy, contributing to 36.7% of Malaysia’s exports as of January this year. It will remain absolutely crucial in the years to come amid an expected explosion in the growth of the global automation market.

Or at least, it should be. ViTrox Corporation CEO Chu Jenn Weng notes that local SMEs still have some way to go before they can be taken seriously as global players. For starters, quality: “The quality of parts is very hard to control. We spend a lot just on quality control of the parts we receive, then we need to notify (our suppliers), and that costs us a lot of time and money.”

Chief Minister Lim Guan Eng (far left) with Chu Jenn Wong at the announcement of the Penang Automation Cluster in February.

Unlike MNCs, which typically have strict standards, most SMEs in the fabrication industry do not have ISOs. The control really depends on the boss,” Chu says.

The problems go beyond that: companies are scattered across the island and the mainland – some in small shop lots, some even in kampungs – which makes delivery an issue. SMEs face insufficient resources as well as a lack of skilled workers, proper management and poor collaboration. They are also lagging in terms of technology. “There are parts that need very high precision, and we are not able to source them locally. We have to go elsewhere, like Japan, Taiwan and Singapore. These are some of the common problems.”

The state government sought to address the issues. With the development of the 150-acre SME Village in Batu Kawan underway (scheduled to be completed by 2019), Datuk Seri Lee Kah Choon, director of investPenang, the state’s investment promotion agency, suggested that Chu work something out with the SMEs.

Soon, the Penang Automation Cluster (PAC) was formed.

A Hub for Automation

PAC is RM63mil collaboration between Chu’s ViTrox, Chuah Choon Bin of Pentamaster Technology and Goh Kheng Sneah of Walta Engineering, and is billed as the country’s first world-class SME precision metal fabrication and automation cluster. It aims to be a one-stop metal parts supply chain hub via collaboration between local large companies (LLCs) and SMEs.

The automation cluster will be based on five acres of land in the SME Village during the project’s first phase, which is scheduled for completion by the first half of 2019. Through the cluster, a healthier, high-value chain ecosystem can be developed to help SMEs maintain high production standards while encouraging deep collaboration between all players. Technology industries that would benefit include semiconductors, electronics, aerospace and medical devices.

Phase One of the Penang Automation Cluster will consist of SME factories that are linked together by a highly segmented process, where each factory will specialise in a particular area such as fabrication, tooling, finishing and quality control. “These SMEs will come together with different capabilities,” says Chu, “and when combined, they can come up with much better output. Some will do laser cutting, some will do machining, some will do the finishing, but they will not be competing with one another.”

All the required facilities will be located in the same space, instead of scattered around the state as they are now, ensuring a more efficient delivery system under more controlled conditions.

Some 500 jobs are also expected to be created due to the cluster, with employees given the chance to take part in the German Dual Vocational Training (GDVT) programme conducted by the Penang Skills Development Centre, into which the state government has already invested RM6mil. “This is part of the requirement and I think it is a good idea because GDVT is proven training, and the Germans are very advanced in SME development,” says Chu.

It is still early in the process, and the 18 SMEs that would take part in the cluster have yet to be announced. “We have identified some but we cannot disclose which right now,” says Chu. Invited SMEs would have to invest in skilled workers (hence the GDVT programme) and new machinery, and the cluster will help these companies in their investment by petitioning to the federal government for grants. The grants, according to Chu, will likely be matching grants where the SME and the government will invest 50- 50 in modernising their equipment.

Perhaps more importantly, the cluster is a local project through and through. The point, after all, is to develop local companies to become globally competitive. “We do not plan to invite (multinational corporations) at the moment (unless) the cluster has exceeded capacity. Priority should be given to locals.”

Synergy, Not Rivalry

This isn’t the first time the state government has tried to get local automation companies to work together. Years ago, a similar attempt was made, but it failed before anything could happen. “Many of the SMEs were competing against one another for projects, so it didn’t work out and it just died off. We learned a lesson. It is important that we get companies who can be frank to one another and who will not compete for business. Only then can we work out on a common goal.” Chu and Pentamaster’s Chuah are on the board of directors of SJK(C) Kwang Hwa in Sungai Nibong and know each other very well, and he considers Walta’s Goh a good friend as well.

“The key thing is that we must have a common objective and we must be a friendly party. We can come together and start something small, rather than getting 10 or 20 companies together. There would be too many voices and everyone would have their own agenda, so things would not have worked out. So we start with three.” ViTrox and Pentamaster each hold 35% of the equity while Walta holds 30%. The state government meanwhile has provided the cluster with a discounted land price of RM16 per square feet for a total land investment of RM3.5mil, with a leasehold of 30 years.

Container terminal at Butterworth.

Chu says the cluster aims to lease out at least 60% of its total capacity within the first year of operations, and 90% by the second, while providing at least RM50mil in annual sales by 2020.

Catching Up with Technology

The automation boom is coming, and Chu worries that Malaysia is lagging behind the rest of the world. “We only have 33 automated robots for every 10,000 manufacturing workers. Singapore has 398 robots per 10,000. There are plenty of opportunities for Malaysia to grow, and automation is definitely the way to go. The local automation companies have been in the industry since 1970. We should take advantage of our skills and expertise in providing automated equipment to the world. In the next two to three years, I think there will be a strong demand for automated equipment or robotics across many different industries.”

On one hand, all these repetitive low-end jobs will be replaced by robots and automated equipment. On the other hand, more jobs will be created to build robots, to analyse data, to go into the services industry, and so on. That’s how we move on into a high-income economy.

The flip side of automation, of course, is that robots are basically taking jobs away from humans. The more we automate, the more people will lose their jobs. Chu however sees that as necessary for the country to grow. “We can eliminate or reduce our dependence on foreign workers. We can invest back into automation and train our people in areas like programming and data analysis so that locals can move up the value chain.

“Yes, on one hand, all these repetitive low- end jobs will be replaced by robots and automated equipment. On the other hand, more jobs will be created to build robots, to analyse data, to go into the services industry, and so on. That’s how we move on into a high-income economy.”

Sources:

1 https://ifr.org/



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