Electronics Production in Malaysia

02/01/1997

Electronics production in Malaysia

Michael Pecht, University of Maryland, College Park, Maryland, William Tucker, IBM, Austin, Texas and Sam Wennberg, Delco Electronics, Kokomo, Indiana

Discrete semiconductor and integrated circuit packaging holds the number one position - accounting for over 25% in 1995 - of Malaysian electronics production. Recently, the Malaysian government identified semiconductor manufacturing as one of its focus areas. Through the Vision 2020 plan, the government has stated its desire to increase R&D in semiconductors by offering incentives to existing businesses.

Malaysia is the world`s third largest producer and the leading exporter of finished semiconductors.

Current semiconductor output totals approximately $8 billion/year, which represents over 40% of Malaysia`s electronics sector. Further, Malaysia is well situated to exploit GATT as a means to increase this diversification. Semiconductors represent a significant cost for any electronic product. With strategic diversification in areas of flat panel displays, molding, and circuit boards, system suppliers can avoid import duty. Some examples of the investments in semiconductor manufacturing and packaging by firms in Malaysia are given below.

? Intel Corporation, one of Malaysia`s largest high-tech investors, has production and R&D facilities in its Penang factory. The R&D center is now designing 8- and 16-bit very large scale integrated microcontrollers for broad market applications. It currently has 200 engineers in the factory and spends about $15 million annually on packaging R&D.

? InterConnect Technology, founded by the Malaysian government, is the country`s first state-of-the-art semiconductor manufacturing facility. The 200 mm facility, which produces 25,000 wafers/month, is equipped with 0.35 mm equipment and has a roadmap to achieve 0.25 mm.

? Motorola has increased monthly capacity in its Seremban wafer fab to 4000. The fab uses a 3-mm bipolar process on 100-mm wafers. Sixty percent of the wafers are used by Motorola`s own assembly and test facilities in Malaysia.

? Kedah Wafer Emas, a Malaysian company owned by Taiwan-based Hualon, is at work on a new wafer fab costing $800 million. The fab will use 0.5-mm CMOS technology to produce 24,000 wafers/month.

? Malaysian IC packaging firm Unisem experienced a 60% growth from 1993 to 1994. The majority of Unisem`s business comes from the US. The company doubled its capacity from 1994 to 1995 and is expanding into final testing.

? The Malaysian Institute for Microelectronic Systems (MIMOS) will be building Malaysia`s own microchip plant at a cost of $44 million. The plant was planned to be functional by the end of 1996, and will produce chips for domestic needs. MIMOS will also set up a Microelectronics Center in the Kulim Hi-Tech Industrial Park in 1997.

Products and services

The Vision 2020 plan hopes to increase Malaysia`s diversification in the electronics industry so that the country can act as a comprehensive production and supply base for global markets. This goal has resulted in an increased drive for those in the semiconductor industry to move from simple assembly and testing to wafer facilities. However, while Malaysia has placed heavy emphasis on semiconductor manufacturing, the consumer electronics and electronic data processing (EDP) sectors have begun to steal some of the spotlight.

Two of the fastest-growing sectors of electronics exports are the audio and visual (AV) equipment and EDP sectors. The AV equipment sector has had a compound annual growth rate (CAGR) exceeding 15% over the last five years. The EDP sector experienced an impressive CAGR of 35% over the same period. Aside from corporations, the electronics industry has seen aid from organizations established by the government.

MIMOS and the Standards and Industrial Research Institute of Malaysia (SIRIM)have placed an enormous emphasis on the research and development of electronics and electronics systems. Some of the recent investments that Malaysia has seen from both corporations and the government in the consumer electronics sector are described below.

? Engineers at Hewlett-Packard Malaysia are working closely with R&D teams in San Jose in areas ranging from product development to equipment purchasing. Over the next few years, the Malaysian R&D center will contribute 25% of HP`s worldwide R&D.

? Komang USA, the world`s leading manufacturer of hard disks, has an R&D facility in Penang that employs 80 engineers. They are working on a thinner, lighter, and cheaper hard disk with faster access time. Komang has invested $100 million to produce a new 500-Mbyte 8.7-cm disk, making Malaysia the third country in the world after the US and Japan to manufacture the product. Komang plans to make the Penang plant into the regional manufacturing center and headquarters for its high-end products.

? Motorola has developed a walkie-talkie for lowband VHF and UHF in its Penang R&D facility. The Penang center also contributed to the development of the CT2 product enhancement program for subscriber handsets and public base stations. Motorola`s R&D activities in Malaysia include product design and development.

? Eng Technology Holding Berhad, a Penang-based Malaysian company, has been contracted to manufacture E-block rotor assemblies, a component of hard disk drives, for Quantum Corp. Its subsidiary Eng Technology Sdn. Bhd. was also contracted by Micropolis Corp., a major US high-capacity disk drive producer, to perform R&D on two of its products.

? The German firm Robert Bosch has invested heavily in R&D in its Penang factory. The facility is to design new car stereo components and electronics for controlling windshield wipers. It currently has 32 engineers in Penang.

? Sony has opened an R&D center in Selangor, its third outside Japan. The other overseas R&D centers are in Britain and the United States. The Malaysian center was established to design television sets and other audio-visual products.

? Hitachi Electronic Products designs and develops video cassette recorders in its Bangi R&D center.

? Sapura Holding Group claims to have produced the world`s first voice-activated telephone in its R&D center.

? Sharp Corporation of Japan has invested in its largest television manufacturing plant outside Japan through Sharp/Roxy Electronic Corporation Sdn. Bhd. It is also investing $40 million to build an R&D center in Johor to design and develop new TV models.

? Grundig Sdn. Bhd. spends $1 million per year on R&D in Malaysia to develop new audio-visual and electronics products. Its R&D activities include circuitry drawings, engineering and design, prototype production, and testing and evaluation. The R&D center was set up at a cost of $16 million.

? Computer Resources Manufacturing has invested $80 million in R&D to manufacture pocket hard disks. These portable disks store up to 1 Gbyte of data compatible with IBM file servers, personal computers, and notebooks.

? SIRIM will be setting up the Advanced Materials Research Center in the Kulim Hi-Tech Industrial Park. The center will perform R&D on advanced materials such as ceramics, composites, and new materials for aerospace and semiconductor applications.

? IBM World Trade Corporation and MIMOS are collaborating on R&D programs in microelectronics and information technology. MIMOS recently received a Power PC Development Kit to explore the development of

applications relevant to Power PC technology.

Case studies

It is useful to dissect some of Malaysia`s successful corporations and government organizations.

Intel-Penang. Intel`s Penang facility, established in 1972, was the company`s first plant outside the US. Its primary focus at the time was producing low-cost, labor-intensive, low-technical-content products. Over the last two decades, Intel-Penang has grown into a highly automated, capital-intensive IC assembly and test facility. The addition of test capability in the late 1970s was particularly important. In the 1980s, Intel added a customer warehouse and process and product capabilities.

Intel-Penang has now shouldered the customer interface and R&D responsibilities for microprocessor product packaging, processing, and silicon design capability supported by computer-aided manufacturing. The 60-acre facility in Penang houses 3700 employees and has $800 million of capital investment, up from $4 million when it started in 1972. It has about a 1% monthly attrition rate, down from over 30%. Decreased turnover is due mainly to new corporate programs such as profit-sharing, employee stock options, work recreation programs, and Malaysia`s first company-sponsored kindergarten.

The Penang facility packages Intel`s 80486DX, 80486DX2, Pentium, and Pentium Pro microprocessors; 8-, 16-, and 32-bit microcontrollers; Pentium core logic chipsets; and communication devices. It also supports various package types, from large pin count ceramic PGAs to QFPs, PLCCs, and PDIPs. Penang is the most productive facility within the whole Intel organization. Intel will continue to deploy its latest packaging technology in Malaysia for the foreseeable future.

Motorola Microcontroller Technology Group, Kuala Lumpur. The Motorola facility in Kuala Lumpur is the company`s largest IC packaging facility, employing nearly 5000 people. Motorola has been performing manufacturing operations at the Kuala Lumpur site for 22 years. Its other Malaysian sites are in Penang and Serban. The Kuala Lumpur facility is Motorola`s flagship for reliability and quality while sustaining competitive yields for complex package types. The highly automated Kuala Lumpur facility is responsible for volume production of QFPs, DIPs, SOJs, TSOPs, and ceramic packages. It is also currently setting up a BGA production line.

MIMOS. Malaysia`s national center of excellence in microelectronics and information technology, MIMOS, started in 1985 as a branch of the Prime Minister`s Department and is now a full-fledged department of the Ministry of Science, Technology, and the Environment. MIMOS invests heavily in R&D so that the local electronics industry can be more competitive and innovative. MIMOS promotes strategic technologies for national development to stimulate the coordinated development of an integrated electronics industry, to enhance industrial innovation and competitiveness, and to support the development of effective and efficient processes in production, manufacture, commerce, and services. MIMOS conducts research in six areas of technology: semiconductor technology, design methodology, computer technology, product development, industrial technology, and telecommunications.

Conclusion

Semiconductors are the foundation on which the Malaysian electronics industry thrives. Malaysia is the world`s third largest producer and the leading exporter of finished semiconductors and has potential to become one of the world`s premier semiconductor specialists. Wafer fabrication facilities are being constructed to support process and device R&D. MIMOS is offering expertise and facilities in silicon processing, along with training in semiconductor technology to enhance skill availability. As the best international IC companies have come to Malaysia, linkages with R&D have dramatically accelerated technology transfer to the indigenous industry.

Today, there is a cohesiveness built among electronics firms in different sectors that must interact with each other during product development. Rapid growth has led to an all-too-common potential problem: the government and industry are both concerned about land availability and the long-term labor supply. With a strong location for future markets, inexpensive labor, and benefits derived through GATT, the Malaysian electronics industry will continue to grow.

Acknowledgments

This article is an excerpt from the book titled Singapore and Malaysia Electronic Industry by Michael Pecht, Don Beane, and Anand Shukla, which is being published by CRC Press. Research for this book was supported in part through the National Science Foundation WTEC program administered out of Loyola University in MD, MANTECH program grant No. 60NANB500060 administered out of NIST, the CALCE EPRC of University of Maryland, and its over 50 sponsors.

For more information, contact Michael Pecht, CALCE Electronic Packaging Research Center, University of Maryland College Park, MD 20742.