Yinson GreenTech (YGT), through its marinEV brand, has completed the construction of its all-electric crew transfer vessel, the Hydroglyder.

The vessel is to provide the crew transfer services within the Singapore harbour craft segment that is fully built and integrated in Malaysia.

Present to witness the completion of the Hydroglyder prototype at the Ctruk Boats shipyard were Transport Minister Loke Siew Fook, Yinson Holdings Bhd (Yinson) group CEO Lim Chern Yuan and YGT CEO Eirik Barclay. Malacca state government representatives and strategic partners including OCBC Malaysia, represented by wholesale banking head Jeffrey Teoh were also present.

The Hydroglyder is equipped with advanced hydrofoil system, which provides better energy efficiency as compared to traditional electric vessels of the similar size. The onboard batteries provide power to propel the vessel while the flight control system maintains the stability of the craft during foiling. This is expected to reduce operational cost by up to 90%.

Loke said, “I am proud that Malaysia was selected for the Hydroglyder prototype’s assembly and construction, demonstrating the country’s ability to deliver world-class, technologically advanced engineering projects. This aligns well with the National Transport Policy that aims to enhance Malaysia’s economic competitiveness by developing a skilled workforce, fostering a conducive business environment, and facilitating trade and investment.”

Meanwhile Lim said that the Hydroglyder prototype will be a game changer and is a prime example of their commitment to transform the maritime industry.

Barclay said, “The Hydroglyder prototype is a major milestone in our quest to reduce the maritime industry’s carbon footprint, reduce local particulate air pollution and prepare for the launch of a fleet of technology enhanced, zero-emission vessels. Collaboration with like-minded partners has been crucial to the successful completion of this prototype. Special mention to Ctruk Boats, whose expertise in composite material technology allowed us the full flexibility to modify the vessel’s design as needed during the construction process. We also hope that the project has contributed to the nurturing of local talent and industrial capabilities.”

The vessel will debut in Singapore to start its sea trials and aims to contribute to the achievement of the country’s decarbonisation goals. The Hydroglyder will be the first vessel of its kind within the Singapore harbour craft market, providing a more efficient and environmentally-friendly alternative to current crew transfer vessels.

Recently, the Hydroglyder won the ‘Most Promising Maritime Technology Award’ at the recent Singapore Norway Innovation Conference) in recognition of the vessel’s cutting-edge technology.

Source: The Sun Daily

Yinson shows off Hydroglyder prototype

The Investment, Trade and Industry Ministry (Miti) has implemented a two-year moratorium, beginning August 15, 2023, to allow for reassessments to address the challenges faced by the local iron and steel industry and update the industry’s direction in line with the New Industrial Master Plan (NIMP) 2030.

Deputy minister Liew Chin Tong said the temporary suspension covered all inquiries, assessments of current applications, new applications, license transfers, expansions, regularisation and diversification for manufacturing licence as well as the issuance of certificates for exemption from manufacturing licence (ICA10) under the Industrial Co-ordination Act 1975 (Act 156) for manufacturing activities in the iron and steel industry, including non-ferrous recycling activities.

“However, if there are manufacturing licence applications that support the NIMP 2030 agenda, applications can be considered for exemption from the moratorium.

“This includes projects for the production of complex iron and steel products with high added value and equipped with low-carbon/carbon reduction technologies such as carbon capture, utilisation and storage (CCUS) that support the missions and aspirations of NIMP 2030,” he said when winding up the committee-level debate on the Supply Bill 2024 for his ministry at the Dewan Rakyat today.

He said any new manufacturing licence applications would also be evaluated based on 12 parameters set under NIMP 2030.

Nevertheless, he said further details on the assessment criteria are still being ironed out by the government at the moment.

Meanwhile, Liew said the capacity of iron and steel in Southeast Asia is expected to increase and the Malaysian Government needed to discuss with China and other countries in the region to address the significant excess capacity faced by the regional steel industry.

“Last year, the total capacity of iron and steel in China was one billion tonnes but only 900 million tonnes were used because China faces excess capacity of iron and steel and there are also conditions where the construction sector in China experiences a downturn.

“In Southeast Asia, the capacity of iron and steel in 2021 was 75 million tonnes but in 2026, the total capacity of steel and iron is expected to increase twofold to 150 million tonnes,” he said.

On Miti’s approach for local companies to enter the export market more systematically, Liew said the ministry through the Malaysia External Trade Development Corporation (Matrade) took the development of exporting companies seriously, especially micro, small and medium enterprises (MSME) to venture into the export market.

He said the approach’s objective is to increase exports to markets under free trade agreements (FTA) such as the Regional Comprehensive Economic Partnership (RCEP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

“The government will hold discussions with other countries that we don’t have FTA with, including the Europe and United Arab Emirates (UAE),” he said.

He said the government-to-government (G2G) approach is crucial in the development of the semiconductor industry, which is seen as a strategic industry.

“Last week, the Prime Minister of the Netherlands visited Vietnam and Malaysia with 25 business entrepreneurs involved in the semiconductor and technology industry.

“As a result of the meeting on Nov 1, 2023, a G2G dialogue on the semiconductor sector between Malaysia and the Netherlands will be established.”

Source: Bernama

Ministry implements 2-year moratorium to update steel industry direction

The industrialised building system (IBS) has become a buzzword lately, thanks to the clarion call to find an alternative to foreign labour, the shortage of which was exacerbated by the pandemic.

Before the virus struck, construction and property development solutions provider MGB Bhd, a subsidiary of LBS Bina Group Bhd, had decided to take the path less trodden to use IBS in its construction process. That decision turned out to be a blessing.

“Less than a year after the commencement of our operations in the Nilai (Negeri Sembilan) factory, we were hit by the Covid-19 lockdown, which hampered our production and operations. Fortunately, we were one of the first construction companies to be granted approval to operate, by MITI (Ministry of Investment, Trade and Industry), during the Movement Control Order (MCO) due to our substantially smaller number of workers compared to other traditional construction companies,” executive vice-chairman Tan Sri Lim Hock San, who is also executive chairman of LBS Bina, tells City & Country.

MGB was established in 2006 and listed on Bursa Malaysia in 2016. In May 2018, the company deployed its first mobile IBS plant, which cost RM20 million and has an annual production capacity of 3,000 units, to Alam Perdana, Selangor.

The following year, with an investment of RM40 million, it established a standalone IBS factory in Nilai to produce precast concrete products such as wall panels, solid slabs, staircases, beams and columns. The factory, which has a built-up area of 119,017 sq ft, was developed via a joint venture between MGB and SANY Construction Industry Development (M) Sdn Bhd, a subsidiary of China-based SANY Group Co Ltd.

“We found SANY, which specialises in precast systems. We collaborated with them; initially, the share was 51% and 49% between MGB and SANY. They put in the machinery and technology. Over the years, they have fulfilled their requirements, and we now own 81% but they still share their technology with us. That is what we started in 2018,” says Hock San.

More than just using technology, MGB also looks at providing its customers with a holistic IBS solution. “In MGB, we have our latest technology proposition called Value-Driven Technolo­gy, or VaDTech, which delivers high-quality and cost-competitive end-to-end solutions to bring value to both businesses (B2B) and customers (B2C),” says executive director and CEO Datuk Richard Lim Lit Chek.

For B2B, VaDTech provides end-to-end construction, investment and financing solutions; for customers, the proprietary technology is able to provide affordable housing solutions, from planning, coordination, product design, manufacturing, financing and construction to after-sales service.

When it comes to B2C, MGB is the developer of affordable housing projects, which are sold to the public.

Factory benefits

On a visit, City & Country found that the Nilai factory had a high ceiling with half-covered sides, allowing ample ventilation while providing protection from the wind, rain and sun. The interior felt warm but it was surprisingly bearable. There were not that many workers.

Richard explains that at full capacity, 70 workers are needed to run the three factory lines, adding that the factory can churn out 6,000 home units — be it landed or apartment — a year.

“We have completed and handed over 6,000 units [so far]. We have overcome all technical hurdles and are very confident now, where towards the end of this year, we are looking to complete 4,000 units for a total of 10,000 units,” he explains.

Hock San highlights that MGB does not only produce IBS products for LBS Bina’s projects but also seeks other jobs.

MGB has tied up with Permodalan Negeri Selangor Bhd (PNSB), a subsidiary of the Selangor government under Menteri Besar Selangor (Incorporated) (MBI), to develop the Rumah Idaman MBI series. The six affordable housing projects — Idaman BSP in Jenjarom; Idaman Melur in Dengkil; Idaman Cahaya 1, 2 and 3 in Shah Alam; Idaman Sari in Puchong; Idaman Perdana at Alam Perdana, Puncak Alam; and Idaman Kita at Dengkil — will comprise a total of 7,120 apartments. The series has an estimated gross development value of RM2 billion, according to Hock San.

Richard says IBS is the way of the future. “If you look at this world, everything has been industrialised [made in a factory], except houses. Many years ago, Tan Sri [Lim Hock San] was showing us the vision of a high volume of units we could put to market because our focus is on the affordable segment, which has volume. So, the challenge was given: How are we going to deliver a high volume of homes and at a competitive price?

“So, looking at industrialisation or adopting precast, volume is the No 1 factor. You must have volume. We were blessed by the mother company because there is a constant supply of projects with great volume,” he says.

Richard adds that once economies of scale are reached, they will impact costs. “If you only have one project, it will be expensive [to build] by 10% to 15%; but if you have many projects, when you reach economies of scale, the cost comes down.

“The main challenge in the beginning was, how are we going to set up this factory? We could have invested a lot more money to make the factory look good, have it fully automated. But that would give us a lower ROI (return on investment). So, what we have now is the optimum way to meet the whole demand for affordable housing; we have a semi-automated system,” he says.

“The second challenge is the approach, understanding that it (the process) has to be standardised and repetitive, and this gave guidance to the whole design team. The design approach is already set in place with a meticulous management system from A to Z, which has some savings till the end of the line.”

If required, he adds, the factory can become fully automated.

The recent installation of a wire mesh machine, which produces the internal wire frame for wet concrete to secure to, also helps in precast production and lowering production costs.

Deputy CEO Isaac Lim Kim Hoe, a member of the design team, explains that the machine has helped reduce costs as the company no longer needs to purchase wire mesh from external suppliers.

He also explains that SANY worked closely with MGB to iron out the technical details. This is a great help as several stakeholders, such as subcontractors, were sceptical of the precast process.

According to data collected two years ago from MGB’s projects, there was a reduction of 33% in construction time, 31% in labour costs and 49% in onsite labour costs.

“This year, we have achieved even higher efficiency, recording an increase of 10% to 15% on top of those figures achieved two years ago,” says Isaac.

Richard adds that a typical terraced house will take 24 to 36 months to complete. With IBS, the time is reduced to between 14 and 15 months.

On whether prefab buildings are “boring” aesthetically, Richard says: “More fanciful designs can be done but it is a matter of cost. Anything can be done; it is whether it is worth doing it.”

Isaac says: “We are blessed to have a mother company, LBS Bina, which gives us a free hand in the design. We need to design the units a little bit square and not have odd shapes.”

As for quality, Richard highlights that the group’s product has zero water issues such as leaks. Also, the walls are flat and uniform, eliminating the need for plastering.

He adds that the use of machines in a factory reduces mistakes and stringent quality control ensures that products that leave the factory are of good quality. Product defects are far less compared with conventional building methods.

Moreover, the worksite is cleaner and there are fewer workers. “When bankers or visitors visit, they usually have two questions. First, where are the workers? It is a huge construction site and they don’t see any workers because it is a smaller workforce. Second, how come there is no rubbish? It is very, very clean. There are less hazardous areas,” says Hock San.

ESG in construction

As property development and construction activities produce high carbon emissions, MGB has put in place ESG initiatives to manage not only how it makes its product but also how to take care of its employees.

“We are committed to heavily reducing material wastage and energy usage. We use less raw materials than traditional construction methods,” says Richard, adding that solar panels are installed to take advantage of Malaysia’s sunny days.

“Our social commitments remain strong as well. We always ensure the safety and welfare of our workers, partly by complying with occupational safety and hazard standards.” He points out that efforts have been made to create a conducive work environment and a diverse workforce that encompasses a broad range of elements such as gender, race and ethnicity.

Thus far, there have been no major incidents at the factories. Richard says: “We’ve also kept up with our governance aspects. The factory’s operations are held to a high level of integrity, which includes stringent guidelines on procurement, code of conduct, business ethics, as well as a strong internal control and risk management framework.

“This is supported by our group’s policies such as the Whistleblowing Policy, as well as Anti Bribery and Anti-corruption Policy. So far, we have had zero incidences of impropriety reported through both internal and external channels, which demonstrates the high standard of integrity in our employees and the strong mechanisms put in place to guarantee that our business operations remain clear of any irregularities.”

Projects and plans

The Rumah Idaman MBI series has seen the launch of the following so far — Idaman BSP (launch date: March 7, 2022; 1,312 units), Idaman Melur (Dec 5, 2022; 1,448 units), Idaman Cahaya 1 (March 23, 2023; 568 units), Idaman Cahaya 2 (April 1, 2023; 872 units) and Idaman Sari (May 10, 2023; 513 units). Three others — Idaman Perdana, Idaman Cahaya 3 and Idaman Kita — are being planned.

The launched projects feature two towers of between 22 and 24 storeys. There are only two unit sizes available — 1,000 and 1,022 sq ft — with the former offering three bedrooms and two bathrooms and the latter, three bedrooms and three bathrooms. Selling prices are RM250,000 and RM288,800 respectively.

Besides local projects, MGB is moving to produce precast concrete products in Saudi Arabia. In July, it announced that its subsidiary, MGB International for Industry, had entered into a joint venture with SANY Alameriah Industrial, a branch of SANY Alameriah For Construction Co Ltd, which in turn is a JV company incorporated in Saudi Arabia between SANY and Alameriah, a top developer in the kingdom involved in construction, property development, infrastructure, design and build, and manufacturing of precast concrete products. The factory is located in Al Lith Road, Jeddah 3rd Industrial City, in Jeddah.

Back home, more plans are afoot at the Nilai factory. “We are looking to expand our capacity to meet demand as it comes. We are also continuing to experiment with new developments in the IBS ecosystem and incorporating our VaDTech into our production line to deliver to our customers and end-users value, quality and consistency in our properties,” says Isaac.

What is the outlook for the use of IBS in property development as a whole?

“It is a matter of time before the market will eventually realise and fully grasp the benefits of IBS. As labour costs continue to rise and the supply of skilled labour becomes scarce, the use of IBS will substantially reduce our exposure in relation to manpower, ensuring that our construction can carry on in a manpower shortage or where traditional construction methods are not cost effective,” says Richard.

“The advantages of IBS cannot be overstated and as the demand for IBS-built properties increases, we will be ready to meet that demand and give our IBS precast products the recognition they warrant — one that we have been building on since we started this (Nilai) factory,” says Hock San.

Source: The Edge Malaysia

MGB establishes its IBS goals

UWC Bhd (UWC) is poised to benefit from the next semiconductor upcycle, rising FDIs into Malaysia amid US-China tensions and the move into front-end semiconductors, according to Phillip Research.

At the same time, the integrated engineering service provider is also expected to benefit from the mass expansion of manufacturing capacity by certain US-based front-end customers and the push for localization bodes well with its long-term prospects.

In an initiation report on the company, Phillip Research has tagged the company a ‘Buy’ with a 52-week target price of RM4.31. The counter closed at RM3.64 yesterday, valuing the company at RM4.01 billion.

Philip Research, a unit of Singapore-based subsidiary Phillip Capital Sdn Bhd, said it expected UWC’s front-end business to grow with management guiding for an initial RM40 million to 50 million contribution (15% of FY24E revenue) from one US-based customer, while working to qualify with another US and European-based front-end equipment customers.

“The front-end market being 6-7x larger over back-end equipment presents a huge growth opportunity. We expect UWC’s initial front-end contribution to gradually ramp up, achieving 25% of total revenue in FY26E,” it said.

World Semiconductor Trade Statistics (WSTS) and industry association SEMI were projecting a 12% yoy rebound in 2024, according to the report, mainly driven by the recovery in the memory segment, which was forecast to rise 40% yoy to reach US$120 billion.

While the memory segment takes the lead, nearly all other segments including discrete, sensors, analog, logic, and micro were poised for recovery. The US and Asia Pacific were amongst the regions which were expected to see the strongest growth.

“The gradual relocation of more semiconductor equipment companies into Malaysia offers increase outsourcing opportunities for UWC,” it said.

UWC’s total factory floor space is expected to increase by 57%, from  675,000 to 1 million square-feet, by the end of 2024 to accommodate the expected rise in future orders.

Coupled with the recent acquisitions aimed to further growth and add customer value, the research house has projected a 3-year profit CAGR of 40.7% across FY23-26E driven by the sector recovery, and improving margins from moving into front-end semiconductors.

POURING INTO PENANG

The report noted that global multinational corporations (MNCs) have been increasing their footprint in Penang, a key tech production centre in Malaysia.

“With the increasing tension between the US and China, we expect the current relocation trend to continue,” it said.

Malaysia’s FDI reached a record high of RM74.6 billion in 2022. Notably, Malaysian Investment Development Authority (MIDA) FDI approvals have achieved RM71.4 billion in the 1Q23.

“We expect UWC to benefit from the trade diversion as more global MNCs shift more of their production hub to Malaysia amid favourable government policies, attractive cost structures and business-friendly incentives,” it said.

TARGET PRICE

The target price was based on a target 35x PE multiple on FY25E EPS.

“We see the ascribed valuation as reasonable (within the peers PE range) on the back of our expectation of a broad-based industry recovery, strong earnings growth and its move into the larger and more lucrative front-end equipment market,” it said in the note dated Nov 8.

UWC specialises in the fabrication and production of metal component parts, as well as provides automated test equipment assembly as an added value service. It serves various industries including semiconductors, life sciences and medical technology.

The company excels in delivering value-added assembly services, either sub-assembling self-made parts or turning intermediate products into finished items. 

Source: The Malaysian Reserve

UWC to ride next semicon upcycle, a ‘Buy’ at Phillip Research

IT is known that the semiconductor industry operates in cycles, with upturns occurring during periods of heightened demand, causing supply shortages and driving prices higher, fostering revenue growth.

Conversely, during downcycles, the industry faces challenges as demand wanes, leading to adjustments and strategic exercises to navigate through periods of reduced activity.

Recognising the ingrained cyclical nature of the industry, the downturns present unique challenges.

Yet, these periods are met with strategic resilience as companies leverage innovation and efficiency.

Currently, in the semiconductor industry, there is ongoing excitement as it navigates a downcycle, hinting at the anticipation of a robust bounce back.

Amidst this backdrop, analysts acknowledge a visible recovery within the semiconductor industry.

However, even as the industry shows signs of rebound, a sense of caution prevails among experts.

Despite positive indicators, analysts are maintaining a neutral stance on the sector, awaiting better indications.

The consensus points to a more optimistic perspective, with a better upside expected only in the latter half of 2024 (2H24).

Kenanga Research analyst Samuel Tan says while there are indications that certain companies are consolidating, the recovery is not as convincing as the market would prefer.

Lack of demand

He, who specialises in technology stocks, says that one key factor hindering the recovery is the lack of demand from end customers compared to the pre-pandemic period.

Tan, who has a “neutral” stance on the sector, notes that despite a slight recovery, the industry is still in the process of bottoming out the downcycle, and he believes it is nearing its conclusion.

“Ground reports suggest the anticipation of a major upswing, particularly towards 2H24,” he tells Starbizweek.

Another analyst, Kenneth Leong of Apex Securities Research, asserts that the semiconductor industry is in a more favourable position compared to a year ago, citing a steady increase in global semiconductor sales for the seventh consecutive month, reaching Us$44.9bil in September.

While anticipating improved 2H23 results for the technology sector compared to 1H23, Leong remains cautious due to the sector’s relatively high valuation and the ambiguity surrounding the timing of a full recovery.

Leong maintains a “neutral” stance on the technology sector, emphasising continuous monitoring of global central banks’ interest rate decisions and awaiting further signs of a meaningful recovery within the sector.

For the third quarter of 2023 (3Q23), global sales saw a 6.3% quarter-on-quarter increase, totalling Us$134.7bil.

“We see signs of inventory replenishment which boosted sales of semiconductors in recent months as the semiconductor inventory glut eases,” he notes.

Commenting on this matter, Malaysia Semiconductor Industry Association president Datuk Seri Wong Siew Hai says that inventory levels are decreasing and hence, he is anticipating a return to normal business operations.

“A clearer picture is expected to emerge in the first quarter, with the hope that conditions will improve by the second quarter,” he tells Starbizweek.

He also notes that many companies are currently focused on austerity measures, cost reduction, and minimising unnecessary expenses due to relatively low demand.

He says that due to an austerity drive, companies are intensifying efforts in cost-saving and automation and hence, progress to elevate them to the next level remains stagnant.

Talent war

Anticipating challenges ahead, Wong sees the potential resurgence of a talent war, as between 10% and 20% of Malaysians are leaving the country.

However, amid these challenges, the country continues to attract significant investments, he adds.

Intel Corp is set to invest over Us$7bil in constructing a new chip-packaging and testing factory in Malaysia.

Additionally, Infineon Technologies AG has announced a substantial expansion of its Kulim facility, aiming to establish the world’s largest 200-millimetre silicon carbide power fabrication plant, with an additional investment of up to €5bil.

The influx of investments also means the country has to gear up for additional headcount.

The increased investments, coupled with the United States Plus One, China Plus One and Taiwan Plus One strategies, puts Malaysia on a favourable front, Wong says.

However, he acknowledges the persistent talent issue should be addressed to fully capitalise on the potential advantages offered by these developments.

“All these factors are likely to contribute to a rising demand for workers and talent. Currently, with low demand, there’s a temporary pause in talent, akin to a momentary mull,” he adds.

Moreover, he highlights that the global semiconductor industry is poised to become a trillion-dollar industry by 2030.

He urges the government to prepare for that growth and figure out how to attract talent.

Wong acknowledges the government’s initiative in Budget 2024 with the introduction of the Long Term Social Visit Pass, allowing foreign students to work in Malaysia upon graduation, although specific details have not been specified.

This measure is seen as a potential solution to the talent shortages that the country is facing.

To further address the issue, he urges the government to attract foreign fresh graduates.

Responding to concerns about whether such policies might deprive Malaysians of job opportunities, Wong says: “Reflecting on historical instances in nations like the United States, Singapore and Australia, we observe that such initiatives ultimately create more job opportunities.”

Meanwhile, Bloomberg Intelligence technology sector senior industry analyst Steven Tseng suggests that leading semiconductor companies diversifying their production capacity to new regions and countries can help tech supply chains hedge their bets.

This approach includes clearing new paths to emerging growth markets.

“Several such destinations for supply chain relocation – particularly India and South-east Asia – are widely considered to harbour favourable economic outlooks for the foreseeable future, boding well for their tech product demand,” he notes in a report on the technology sector.

He notes that the gradual shift in electronic manufacturing’s production capacity could introduce higher structural costs into its supply chain.

Navigating these increased costs associated with the supply chain shift may pose a challenge, he adds.

However, Tseng says the access to promising end-markets is expected to yield long-term benefits, potentially offsetting the challenges posed by the higher costs associated with the shift in the supply chain.

“Tech production’s slow decoupling from China may bring higher costs as the electronics manufacturing services (EMS) sector rewires its supply chains. Inefficiency, and few local components amplify its woes.

“Yet, relocation could boost the EMS supply chain’s resilience, positioning it better to meet burgeoning demand from South-east Asia and India,” he notes.

Top picks

On the local front, Kenanga Research’s Tan has named Inari Amertron Bhd and Kelington Group Bhd as his top picks within the sector.

He says Inari is showing signs of recovery quicker than its peers, with margins reaching optimum levels despite facing the same challenges as the rest of the players.

On Kellington, Tan justifies that the group possesses an order book of Rm1.8bil and a tender book of Rm2.3bil, providing earnings visibility.

Apex Securities’ Leong, on the other hand, identifies QES Group Bhd and Frontken Corp Bhd as his top picks within the sector.

He explains that QES, due to its diversification of customer segments beyond heavy reliance on the semiconductor industry, has positioned itself to mitigate risks during the semiconductor downturn and gain resilience in fluctuating markets compared to its peers.

Regarding Frontken, he anticipates improving production volumes in the near future, mainly driven by advancements in artificial intelligence and electric vehicle technology.

“The group will also be implementing price adjustments in response to higher raw material prices.

“Additionally, with a greater contribution from Plant 2, which commenced operations in the first quarter of 2023 and mainly produces advanced nodes (five nanometers or nm, 3nm) commanding better average selling prices, an improved utilisation rate is expected in the coming months,” he says.

Source: The Star

Visible upturn for semiconductors

The semiconductor industry is making a comeback, with demand growing on the back of technological advancements.

THE semiconductor industry in Malaysia has emerged as a vital and rapidly growing sector of the economy, playing a pivotal role in the development of the nation.

Over the past few decades, Malaysia has strategically positioned itself as a hub for semiconductor manufacturing and innovation, while becoming one of the most prominent players in the global landscape.

Things were going well, from the beginning of April 2020 where the demand for semiconductor chips used in tablets, laptops and smartphones surged massively because people were staying home due to lockdowns and travel restrictions.

What further drove the market at this time was the gaining popularity of electric vehicles (EVS), artificial intelligence (AI) and the fifth-generation (5G) network, all of which required some form of chips.

Then in May 2022, a declining trend had emerged, as industry players began reporting downturns in their financials and a lowered forecast in sales and distributions.

This continued right through to 2023 due to greater economic ambiguity, high inflation and borrowing costs as well as a slowdown in demand worldwide.

According to the Semiconductor Equipment and Materials International Association’s (SEMI) Market Outlook, integrated circuits (IC) sales for the first half of 2023 decreased 25% year-on-year (y-oy) as memory sales plummeted more than 50%.

Capital expenditure for semiconductor fell 5% y-o-y in the second quarter of this year and is expected to further tumble 15% y-o-y in the third quarter of 2023.

However, not all hope is lost for the industry, as 2024 is the year experts and industry players believe will make a comeback.

In fact, the semiconductor market is expected to grow at a compounded annual growth rate of 10% from 2023 to reach US$1 trillion by 2030, according to SEMI.

“We think data creation will be the key driver accelerating the growth. We live in a world that is shaped by big data, 5G and 6G, artificial intelligence and Internet of Things.” Vittorio Villari

Better times ahead

AT&S Malaysia managing director Vittorio Villari told Starbizweek that after a downcycle in 2023, the industry expects a growth phase at the start of 2024.

Villari says while he does not expect sales to reach high numbers quickly, the decline within the industry has stopped and is moving into an ordinary pattern once again.

“Automotive is currently a strong driver for electrification, while notebooks and computers have been an extreme outlier for the last two and a half years.

“The server market was weaker than expected in the beginning of the year but is projected to recover next year,” he says.

For servers and edge computing, a strong push for AI was recorded, creating short-term winners while sending signals that the market will benefit from these trends in a wider and more sustainable way, moving forward.

Villari says research firm Gartner has projected the semiconductor industry will grow by 17% next year after a decline of 11% in 2023, while until 2026, the compound annual growth rate is estimated to be 13%.

“Our views are aligned with this, and we think data creation will be the key driver accelerating the growth. We live in a world that is shaped by big data, 5G and 6G, AI and Internet of Things.

“With these, the data volume is expected to increase by nearly three times in the next three years. The next big trend is electrification, which is mostly prominent in automotive but generally happens all around us,” he explains.

On mitigation steps in facing challenges next year, Villari says every industry player has been set up differently, and thus copes with situations differently too.

“We were coming from a fast growth path into the current situation. Hence, we implemented cost optimisation programmes and re-evaluated the ongoing projects.

“As a result, we are continuing investments to be ready for the expected upturn and next generation of electronics,” he says.

The Austrian manufacturer of high-end printed circuit board and IC substrates currently has a global presence in Austria, India, China, South Korea and Malaysia.

AT&S industrialises technologies for its core business segments that consists of mobile devices, automotive and medical, to name a few.

The group recently announced that it will provide IC substrates for AMD and is currently preparing a significant expansion of capacity for AMD at its new plant in Kulim, Kedah.

AT&S chief executive officer Andreas Gerstenmayer said the demand for central processing units and graphic processing units for data centres is expected to continue growing healthily in the next couple of years.

“We are already working on new technologies for substrates that will allow our customers to integrate a high number of chips into very fast and efficient packaged systems that will help to analyse and transmit data in the cloud fast and reliably,” he said in a statement.

The group added that the last few years proved the importance of the semiconductor industry globally, as well as how critical it was to have a strong and geographically diverse supply chain.

Across the industry, sentiments are alike, all with the same hope that a resilient recovery is on its way.

Segments will turn around at different pace

Malaysia Semiconductor Industry Association vice-president Datuk Lim Yong Jin says that for this year, he expects a reduction of 12% to 13% y-o-y overall for the industry globally.

But, different segments are reducing at different levels, he says.

“For example, one of the worst segments this year is memory, down by 50% in sales. On the other hand, for the automotive and especially the AI segments, 2023 was a tremendous growth year for them.

“All the other segments are generally down and this current semiconductor downturn is the worst in the last decade,” he says.

However, he says that for 2024, the sector is forecast to grow at between 14% and 15%, as inventories have stabilised with the highest growth coming from AI as the main driver.

“Automotive will likely see a down year as EV is not seeing the tremendous growth of the recent years. Memory will climb from the trough although it is not as high as 2022,” he says.

He adds that 2025 will be another growth year and it is forecast to come between 12% and 13%, amounting to Us$670bil.

According to Lim, inventory correction is almost sorted and next year’s growth is expected to be broad based.

“Demand for AI is there, memory will come off the bottom, while EV and advanced driver assistance system will be strong enough based on their recent highs.

“Another segment is auto high-performance computing, which is expected to grow at a high percentage but start from a lower base,” he says.

He notes that industry players, however, are aware of the cyclical nature of the business, and therefore have been trying for decades to predict this boom-and-bust cycle with limited success.

“For this cycle, it was pandemic driven whereby the work-fromhome, remote working had occurred, and much more money was diverted into the electronic sector, driving tremendous demand.

“To make matters worse, when the pandemic set in, a lot of chip users deferred or outright cancelled their demand. When the drop in demand didn’t happen, chip demand soared through the roof and the pressure to invest heavily occurred.

“In the end, it was the over-investment here that drove the ‘bust’ cycle,” he explains.

Despite global semiconductor shipment revenue projected to be down 12% to 13% this year, Lim says Malaysia is expected to be down by only 2%, so this was weathered quite well.

Lim cautions, however, that these projections were subject to exclusions from any deep recession in Europe, the United States or any unforeseeable black swan event.

Significance of the sector

Lim says the sector is a very important part of Malaysia’s economy, even back when it first began flourishing in the 1970’s.

“If we look at the sector in Malaysia through the lens of history, the electrical and electronics

(E&E) sector began in 1971 when the seven ‘Samurais’ entered Penang and the Klang Valley.

“Exports in 1972 was Rm230mil, with employment at around 10,000 people. In 2022, 50 years later, exports reached almost Rm600bil.

“This is a fantastic improvement and this really puts Malaysia on the world stage in this future-defining sector,” he says.

In 2022, the E&E sector contributed 38% of the country’s total exports, also becoming the largest sector to do this.

Lim says while there is a tendency that the value-add in this sector is small, in terms of percentage it stands correct.

“We tend to focus on assembly, test and packaging, making it really important for Malaysia’s trade surplus.

“In 2022, Malaysia’s external trade surplus amounted to Rm255bil, of which Rm199bil came from our E&E sector. This is 78% of the total surplus and it is no small thing,” he notes.

Additionally, Villari says the sector plays a huge role in terms of employment and finding talent.

“In terms of jobs, the E&E industry hires more than 600,000 people and this job creation aspect will further escalate the economic growth, which is an aspect that the Malaysian government is now working on through the Malaysian Industrial Master Plan 2030,” he says.

During the recent Budget 2024 announcement, Prime Minister Datuk Seri Anwar Ibrahim said his government was committed to fostering economic growth and ensuring social welfare.

TA Research says this commitment included the opening of a high-tech industrial area in Kerian, Perak, that is expected to bode well for the E&E industry’s long-term prospects.

“The northern region’s attractiveness, among others, is attributed to its established E&E ecosystem and the availability of skilled labour,” it says.

TA Research adds that the local E&E industry will also be able to capitalise on ongoing interest from foreign manufacturers adopting a China Plus One strategy.

“We expect their potential entry to have positive spillover effects on local E&E players, including those involved in outsourced semiconductor, assembly, and test, automated test equipment, factory automation solutions, and electronics manufacturing services,” it notes.

Crucial advantage

According to SEMI, Malaysia maintains a crucial advantage in semiconductor manufacturing, noting that the country has successfully attracted significant foreign direct investments (FDIS) in recent years, especially in the E&E sector.

This is mainly attributable to the various incentives that the government has put in place to encourage FDIS, a good ecosystem support within the economy and the country’s skilled workforce.

SEMI expects Malaysia to play an increasingly significant role in the semiconductor industry, as it benefits from supply chain diversification, particularly through the China-plus-one and Taiwanplus-one strategies.

Meanwhile, founder of icapital Bhd Tan Teng Boo says the semiconductor industry plays such a vital role in Malaysia’s economy that whenever the global condition goes up, exports for the country also goes up simultaneously.

“Our economy is very connected to the global semiconductor sales, and of all the industries in the world, the one that has the most promising future is semiconductor,” he says.

Tan says whether it is for EV’S, smartphones, data centres or others, the role of semiconductors is as a crucial component.

“It is what is going to drive global growth, and Malaysia is tied closely to this,” he says.

On the ongoing Us-china trade tensions, Tan says Asean has been smart in playing the neutral party, resulting in investors diversifying operations and moving to this region.

“We can capture these opportunities that the Us-china tensions are creating for us. Malaysia is a favourite investment destination for these companies.

“If the US economy goes into a recession next year, US demand for semiconductor will undoubtedly go down, but this will be offset by the potential increase in demand from China semiconductor companies in tandem with the expected recovery of the latter’s economy next year.

“For stock investment, investors have to be selective. Some companies will benefit from China’s recovery but some others will be affected by the anticipated US downturn,” he says.

Source: The Star

Chips on the rebound

Austrian printed circuit boards manufacturer AT&S is preparing facilities for an expansion of capacity for US chipmaker AMD at AT&S new plant in Kulim, Kedah.

“AMD’s quality requirements are very high, which makes us very proud to have achieved the ramp-up so fast.

“Currently, we are preparing facilities at our new plant in Kulim, Malaysia to expand our AMD capacity,” said AT&S chief executive officer Andreas Gerstenmayer in a statement today.

He said the demand for computer processors and graphic processor units for data centres is expected to continue growing healthily in the next couple of years, which will help to strengthen the partnership between AMD and AT&S.

“Fuelled by new technologies like artificial intelligence, virtual reality and augmented reality, demand for data storage, transmission and analysis is rising globally,” said Gerstenmayer.

Reuters had previously reported that AT&S will begin production for AMD in Malaysia next year.

Gerstenmayer said AT&S is one of the leaders for embedding microchips and components that regulate the associated power and information flows into monolithic systems that make sure that the pathways stay as short as possible.

This ensures information can travel at maximum speed without any significant losses.

“The big substrates that are necessary to build such integrated systems are optimized for reliability and efficiency by using AT&S’ sophisticated simulation technology.

“We are among the technology leaders in the substrate market and have an additional advantage because we can offer manufacturing capacity not only in China but also in Malaysia and Austria,” he added.

Source: NST

Austria’s AT&S to supply more substrate to AMD from upcoming Kulim plant