US electronic firms in Malaysia see rebound in exports

August 30, 2001 – Malaysia – US electronic manufacturers in Malaysia expect exports to rebound from October but sales of electronic goods to drop by 11.8%, according to a survey by the Malaysian-American Electronics Industry (MAEI).

Survey respondents, comprising 17 US electronic firms in MAEI, are expecting positive growth in FY02, to be driven by a rise in demand for personal computers during the new school term, holiday season sales as well as the introduction of new software.

Following the downturn in global electronic sector, sales of electronic goods by MAEI member companies this year is forecast to drop by 11.8% to RM38.7 billion. Last year, sales rose 23% to RM43.9 billion.

MAEI Chairman Teh Chin Bin said the drop in exports this year is due to the overall slowdown in the world economy.

“But most member companies indicate small growth in the fourth quarter,” he said.

MAEI has 18 member companies such as Dell Asia Pacific, Intel Technology, Seagate Industries and Motorola Malaysia. All members generated between 60 to 65% revenue from total exports of US companies in Malaysia.

Their operations include manufacturing of semiconductors, multilayer printed circuit boards, hard disk drives and components, silicon wafers, optoeletronics, computers and telecommunication components and devices.

Electronics is the main driver of Malaysia’s growth as it accounts 60% of the country’s manufacturing export.

Bank Negara Malaysia’s latest quarterly report showed output from the electronics sector plunged by 25.2% in the 2Q year-on- year, after a 1.2% fall in the 1Q.

American Malaysian Chamber of Commerce’s President Nicholas Zefferys said the bottoming out of the slump in the electronic sector is indicated by the slow upturn in chip equipment manufacturing.

He said excess inventory at manufacturers’ plants has been cleared, which is another sign of the bottoming out of the electronic slump.

“Malaysia’s electronic export will gradually build up as the consumer spending in the US is also recovering,” he noted.

Investments for expansion and diversification by MAEI member companies are expected to fall to RM1.8 billion this year from RM2.6 billion in 2000.

Teh said for the past one or two years, about two-thirds of new investments flowed to China.

However, he said Malaysia will continue to attract investments from US firms due to its good infrastructure, political stability and workforce. He also said workers productivity has trebled in the last four years due to increasing automation and high tech manufacturing.

“Last year, sales per employee was RM780,000, compared with RM215,000 in 1996,” he noted.

Teh said new investments are still flowing in but the bulk of US electronic investments comprise re-investment as most firms have been in Malaysia for more than 20 years.

Zefferys said despite stiff competition from China, Malaysia will be able to maintain its attractiveness as investment destination due to the Government’s support in reducing red-tape and promote a business-friendly environment. He noted that US companies are looking at Malaysia as an “anchor” or strength for the region.

The survey also found an increase in R&D expenditure as MAEI firms continue to move from labor-intensive to capital-intensive, high-tech manufacturing. Investments in R&D is forecast to increase to RM251 million from last year’s RM228 million.

According to the MAEI survey, total permanent employees is expected to fall 10% to 50,450 workers from 56,053 in 2000. MAEI attributed the drop in total employees for the past few years to automation and relocation of low-end operations to China.

Meanwhile, Zefferys said there are on-going hirings of highly skilled or multi-skilled employees despite reported retrenchments in local electronic sector. He said MAEI companies resort to voluntary separation scheme or shorter workweek to support job security in the sector.

The survey found that MAEI spending on salaries and benefits continue to rise despite employee headcount has steadied from 1996 until 2000. Last year, total salaries and benefits expenditure amounted to RM1.6 billion, from RM1.2 billion in 1996.


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