MSIA SME Conference 2024 innovation: pathway to growth

The inaugural MSIA SME Conference 2024, held on March 5th, Malaysian SMEs in the semiconductor industry convened to discuss growth and innovation.

Backdrop

The tapestry of 5 decades of semiconductor industry in Malaysia holds significant importance. The industry today contributes approximately 4.9% (approx. MYR 21.Bil) of the 23.4% manufacturing industry’s segment of Malaysia’s 2023 GDP.

Recognizably, Malaysia has established itself as the 6th largest exporter of semiconductors and integrated circuits (ICs) in the world, accounting for 6.3% of the world’s total exports. The country's semiconductor trade with the United States has also been substantial, representing 23% of US semiconductor trade in 2022. Further, Malaysia commands 13% of the world’s assembly, packing, and testing (APT) services, showcasing its prowess in the back-end semiconductor industry.

Befittingly, Malaysia employs more than 618,000 people employed in the sector, with an increase of approximately 7% year-on-year, and has been a leader focusing on chip assembly, packaging, and testing, elevating Malaysia as a major player in the global market.

Renewed focus

With now a focus on innovation and R&D, Malaysia aspires to see more front-end activities such as integrated circuit design, wafer fabrication, IoT, advanced packaging, and equipment manufacturing, positioning itself as an innovation-driven E&E hub. These factors collectively underscore the significant landscape and potential of the semiconductor industry in Malaysia.

Discussion

My presentation on Panel 2 delves into the challenges faced by the E&E industry in Malaysia. Here are some highlights:

1. Rising Operating Costs: Increasing costs of raw materials, labor, and energy can put pressure on profit margins.
2. Global Competition: Stiff competition from other countries with lower production costs, such as Vietnam, Philippines, and China. The ongoing US-China trade and technology conflict presents uncertainty in global demand for products.
3. Innovation and R&D: Industries need to invest more in research and development activities to move up the value chain and the challenge to develop innovative products and solutions.
4. Graduates: Malaysia’s engineer-to-population ratio stood at 1:170 in late 2022, below the aspirational target of 1:100. (https://eastasiaforum.org/2023/12/22/malaysias-semiconductor-industry-demands-a-more-strategic-outlook/)
5. Pay Gap: Over a third of engineering graduates had a starting salary of less than RM2000 per month as of 2021, while 90% of engineering graduates earned less than RM3000 per month. (Survey by Board of Engineers 2022; https://www.freemalaysiatoday.com/category/nation/2023/10/16/pay-engineers-a-higher-starting-salary-says-minister/)
6. Reinvestment & Matching Incentives: Challenge lies in demonstrating (of both MNCs and SMEs) that reinvestment involve higher value-added products and processes deserving of new incentives. Striking a balance is crucial.

Opportunities for SMEs

The opportunities for value-added investments in the E&E sector in Malaysia are:

1. Encouraging SMEs players to invest in higher value-added products and automation. Automation would not entirely replace jobs, it will enhance talent.
2. Strengthening and growing the technology and research and development (R&D) base of Large Local Companies (LLCs).
3. Supporting small and medium-sized enterprises (SMEs) in the sector through smart partnerships, even cross-border collaborations.
4. Addressing environmental risks related to GHG emissions and product life cycles and minimizing emissions to mitigate potential impact from future carbon taxes.
5. Further understanding ESGs & SDGs regulations and framework; and
6. Venturing into "Green Business" has become a factor for MNCs and SMEs

What has NCIA done?

NCIA has undertaken various initiatives for talent development in the Northern Corridor Economic Region (NCER). These initiatives include:

1. Talent Ecosystem Development through collaboration with Academia/Industries & Agencies, supported by NCER’s Talent Programmes – NTIC’s 3 core programmes of ATMP, COE and T&I https://www.ncer.com.my/strategic-projects-programmes/technology-advancement/ncer-technology-innovation-centre-ntic/
2. Customized upskilling/reskilling certification programmes for talent development, led by industry and endorsed by academia to meet industry needs.
3. Fast-track programmes were introduced during the COVID-19 period to address graduates' unemployment and sustain workers esp. SMEs from retrenchment in NCER. Todate, that programme has been extended as NCER Talent Enhancement Programme or NTEP@NCER. https://www.ncer.com.my/invest-in-ncer/ecosystem-support-and-incentives/ncer-talent-enhancement-programme/
4. Incentives extended for areas of high-value manufacturing, "Green Businesses" such as renewables, green energy, EVs, and/or components of finish goods of 3R products.

My gratitude extends to the visionary captains and the dedicated workforce of Malaysia's semiconductor industry SMEs. Their unwavering dedication, perseverance, and resilience are the driving force behind the nation's economic growth. These qualities are the bedrock on which Malaysia's semiconductor industry needs.

Equally my sincere appreciation to Dato' Sri Wong Siew Hai, (MSIA President, https://www.tatlerasia.com/people/wong-siew-hai) a true bulwark of the industry. His leadership has been instrumental in positioning Malaysia and the SMEs as a global semiconductor powerhouse. Not forgetting as well my fellow penalist Datuk Ts. Dr. Mohd Nor Azman Hassan (MOSTI) Azizi Mustafa (MIDF) Noor Suziyanti Saad (MIDA) and ever graceful moderator J Philip Vincent (GSH Precision)