Manufacturing Excellence: Fruits of Penang’s Industrialisation

By Ong Wooi Leng

August 2022 FEATURE
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THE SEMICON SOUTHEAST ASIA event hosted at Setia SPICE Convention Centre from 21 to 23 June 2022 is a part of the ongoing celebration of Penang’s 50th year of manufacturing excellence in the electrical and electronics (E&E) industry. Organised by the Southeast Asia office of SEMI[1] located in Singapore, the event gathered over 200 international and local electronic companies to showcase the latest electronic equipment, machinery and innovations to investors, talents, industry practitioners and business associates.

Penang-grown manufacturers such as Qdos, a 28-year-old flexible printed circuit board (PCB) producer publicly listed under Suiwah Corporation in Bursa Malaysia as well as a 2.5-year-old integrated circuit (IC) design company, Skyechic were among a few featured in one of the talks at the event. These companies have achieved tremendous operational breakthroughs in the global semiconductor sphere and some of them have made a name for themselves in the manufacturing world. 

Tapping on MNCs opportunities

Most of the local manufacturers were bred from Penang-based multinational corporations (MNCs) and leveraged their capabilities in knowledge transfer and business opportunities.

“Even though the entry-level for MNC projects is not easy, our business strategy has to be redefined to serve the niche market that requires advanced technological solutions,” says Dato’ EK Tan, the founder and CEO of Greatech Technology, a company that provides automation solutions to support a multitude of industries including life science, semiconductor, electronic devices and solar energy.     

“Business support from MNCs, especially Avago, has helped jumpstart the journey of Inari Amertron in 2006,” says KC Lau, the Group CEO and Executive Director of Inari Amertron. “As the largest technology company listed on Bursa Malaysia, Inari has a total of 10 plants established together with business partnerships from Taiwan and Singapore.”

“We are committed to continue working with local partners from upstream to downstream of the electronics supply chain through a waterfall effect. Given that local partners offer niche technology solutions, it is also possible to found a patent together. Penang has the necessary local ecosystem to be a one-stop hub for electronics manufacturing services (EMS) that cater to the needs of system integration, materials sourcing and designs,” KC Lau continues. 

Read also: The Critical Role of Domestic Enterprises in Penang’s Industrialisation

The PCB industry is foreign-dominated. “Most of the PCB companies are based in Japan and Taiwan. To compete with well-established Japanese and Taiwanese PCB substrate makers, we strengthened our technology portfolio by investing in a higher-end semi-additive process (SAP) substrate while retaining the production of PCB substrates,” explains Jeffrey Hwang, the CEO of Qdos Interconnect.

“Penang’s strengths lie not only in assembly and test manufacturing, but also in the mass of well-trained talents who have been designing Intel microprocessors, chipsets, field-oriented control (FOC) and cutting-edge Field Programmable Gate Arrays (FPGA),” says SK Fong, the CEO of Skyechic. “Because of technology transfer from MNCs, Penang is able to position itself not only as Malaysia’s most advanced IC design providers but also in Southeast Asia.”

Skyechic comprises members with more than 15 years of advanced IC design experience and have cumulatively produced 85 U.S. patents for cutting-edge silicon-proven intellectual properties. “While some patents were founded with MNCs, MNC-nurtured talents carry with them experiences and innovation ideas to register more patents in local companies like Skyechic. These innovations are closely linked to high-performance computing and AI deep learning.”

As a digital solutions provider specialising in integrated Industrial Internet of Things (IIoT) solutions, Sophic Automation works closely with MNCs, industry associations and government agencies to leverage each other’s strengths. The CEO of Sophic Automation, DK Koh, is appreciative of Western Digital for its opportunities in digital business solutions. “Unlocking data intelligence is essential to enable effective and innovative business solutions that automate and transform manufacturing processes to improve business efficiency.”  

 “Though there are certain compliances needed by MNCs, huge opportunities are available to local SMEs through technology and knowledge transfers, especially on standard solutions in equipment, connectivity and digitalisation,” adds DK Koh.

Transforming Challenges into Opportunities

IC design is the upstream process of the semiconductor value chains. Established at the onset of the pandemic, 13 founding members who were formerly employed in MNCs had taken up the challenge in the midst of an uncertain economic climate. SK Fong highlights: “In 2020, our revenue reached tens of millions in RM amid the pandemic. The growth driver for the IC design industry is associated with data explosion, where data is estimated to grow by 47% annually from 2019 to 2035. This eruption translates into hardware explosion for data processing and analysis, which are powered by semiconductors.”

Does Penang have the potential to be a global IC design hub? “Penang started IC design in 1991 and is currently serving half of the global market size in IC design. The global tech war has opened up a unique opportunity for Malaysia to provide alternative design solutions for the market. If a global IC design specialist hub is set up in Penang, we will be able to grow more IC design makers,” SK Fong affirms.

“Speaking of the supply-chain disruption caused by the pandemic, an integrated system connecting manufacturing processes through Industry 4.0 is crucial to enable remote monitoring as part of business continuity strategies,” says KC Lau. His company, Inari Amertron, is an outsourced semiconductor assembly and test (OSAT) provider for radio frequency (RF) wafer testing and fibre optic to multinational and local electronics manufacturers.

“While lean sourcing is a time-consuming approach in procurement, it is the only way to keep the company running and competitive amid the pandemic.”

SK Fong emphasised, “A crisis is an opportunity. You must be confident in the skillsets that you have. IC design is highly complicated, which requires more than one talent with multiple functions to make different impacts for a huge market.”

Changing the Trajectory to Grow Big

“The mindset of SMEs should change towards digital adoption, which helps strengthen business portfolios and minimise the impact of the pandemic,” says DK Koh. “SMEs should also take advantage of programmes provided by government agencies such as the Ministry of International Trade and Industry’s (MITI) Industry4WRD Intervention Fund to embrace Industry 4.0 and enhance competitiveness. There is no one-size-fits-all solution to digitise and grow big. But, we have to be unique and innovative by digitally transforming parts of the processes if cost is a concern.”

“SMEs should always be forward-looking in their operations by setting initial public offerings (IPO) as the go-to goal. For SMEs who are not able to meet the minimum requirement of IPO, it is possible to team up with other SMEs with niche creativities along with a set of Blue Ocean Strategy,” imparts KC Lau.

“In the future, hopefully more homegrown heroes will sprout from the local semiconductor ecosystem,” says Dato’ EK Tan. “Apart from building parts and machinery by ourselves, we also outsource small assembly modules and parts to smaller local suppliers. This is part of the long-term effort to strengthen the E&E ecosystem.”

In today’s challenging environment, SK Fong opines, “We should not think of survival. We should think about success.” Tan thinks that we should stay hungry for growth at all times.

Given the positive business continuity trends in the semiconductor industry, KC Lau addressed parents who were present at the event to urge their children to go into STEM, where plenty of exciting job opportunities await them. 

Footnote:

[1] SEMI is a global industry association providing innovative solutions and services for manufacturing supply chains in semiconductor-related industries. 

Ong Wooi Leng

heads the Socioeconomics and Statistics Programme at Penang Institute. Her work lies in labour market analysis and socio-economic development.


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