Renewal trade war makes businesses 'Silicon Valley'; in Malaysia

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PENANG, Malaysia (Reuters) – Years after pressure to move to China, Lee Hung Lung says that he paid his bet. Sales at its Hotayi Electronic based in Malaysia are growing, it is recruiting more workers, considering expanding, and selecting and selecting orders.

PHOTO FILE: An employee of the designer automated testing equipment and solutions provider Aemulus Berhad Holdings carries out inspection of printed circuit board at production facility in Penang, Malaysia, September 20, 2019. REUTERS / Lim Huey Teng / File Photo

Lee is the founder and CEO of Hotayi, which manufactures and assembles tables and other electronics products. The plants are located in the coastal state of Penang, formerly known as “Silicon Valley of the East” once its giant 47-year-old electrical and electronics industry (E&E) before losing its light to China.

Then, the trade war between the two largest economies in the world, mainly pushing US companies to seek factories outside China to avoid revenge tariffs, led to Penang's revival after what a fund manager said “ten years of drowsiness”.

Penang is not just one of the areas across Asia competing for supply chains looking for new sites and lower tariffs.

But its two industrial zones have an advantage from established ecosystems suppliers and customers in one place and in cheaper labor than the Singapore regional competition. Both zones are connected to a 24 km (14.9 mile) bridge over the Port of Malacca.

The other factor associated with Penang is that many semiconductor products and other electronics products from Malaysia do not attract US tariffs, unlike the 25% rate for China.

In June, Hotayi opened its second plant – which is 350,000 square feet five times the first one. On a visit this month, we were employed by testing equipment which will help build products for clients including Samsung, LG and Sharp.

“Around 2007, I was under pressure from my management because China was cheaper than Malaysia – up to 30% in labor costs,” said Lee, who was born in Taiwan, leaving her white striped factory outfit. while settling down for an interview in a conference room is still smelling paint.

“Instead I decided to go a smarter way, which means more investment on IT, software. Today Hotayi is becoming more, more and more, ”he said. “Due to the trade war, customers are shifting their entire production lines from China.”

FIRST INTEL FOREIGN PLANT

Foreign direct investments in Penang succeeded 11 times to about $ 2 billion in the first half of this year – much more than it attracted in any other full year. The government expects that the second half will be so strong, but refused to give any estimate of the jobs generated.

In its federal budget for next year presented on Friday, Malaysia said it would provide tax incentives to promote high value-added activities in its E&E industry.

U. companies like chipmaker Micron Technology (MU.O) and iPhone supplier Jabil Inc (JBL.N) building factories in Penang. The state is releasing more land urgently, including through reclamation, to make space for new plants, said its chief elected officer, Prime Minister Chow Kon Yeow.

Penang handling in 1972 whenINTC.O) built its first international manufacturing plant. After that, there were many other U. names like Broadcom (AVGO.O), Dell (DELL.N) and Motorola ( tMSI.N).

But investments remained largely flat for more than ten years starting in 2005, showing government data, as China put companies away. Intel opened a factory in Chengdu City of China the same year, encouraging some Malaysian suppliers to move as well.

“Penang was a sleeping home afterwards,” said Geoffrey Ng, director of strategic investments at Fortress Capital, an asset management company in Malaysia.

“It's almost like a new revival for Penang. Penang is starting to look at the second wave of investments after many years after he has lost light to China. ”

Micron this year promised to invest 1.5 billion smart ring ($ 358 million) in Malaysia over the next five years. Hotayi, who spent 1 billion ring ring to build his new facility, could spend a further € 1 billion in the first or two years to expand production, said Managing Director Goh Guek Eng.

Its sales are set to sell up to 40% to $ 100 million this year – the best ever and compared to an average growth of 20%. A labor shortage, which forced Hotayi's recent refusal order, could limit the growth of E&E of Malaysia which she added.

“TRANSFER OF PROGRAM” t

Among other companies in Penang zones, Qdos, which makes flexible printed circuits that it provides to companies including Hotayi, hopes to benefit from the trading war next year when some customers cut back new orders. .

Globetronics Technology (GNIC.KL, who left China in 2011 as production costs increased and focused on Malaysia's performance was decades of age, he said he got more than 10% of share in the market this year for its sensor products and was expanding production capacity.

Chief Executive Heng Huck Lee said that some of the company's prospective clients were “looking primarily at fast-moving and start-up through a ready-to-rent facility and transferring some of their mature operations to Malaysia”.

Slideshow (6 Image)

Pentamaster (PMAS. KL), a manufacturer of automated factory systems from Malaysia, said it finished its second production plant in Penang last year and is now expanding its first plant's 10% -15% floor space. He said he wanted to sell more to China since some companies are barred from buying certain high-tech equipment from the United States.

E&E January-August exports of Malaysia rose 0.7% on the year to 247.6 billion ringings, while total exports fell by 0.4% to 650.8 billion ring. In recent years exports from other countries such as South Korea and Singapore have fallen.

“We understand Malaysia's relative strength as moving up the electronics value chain,” said ING economist Prakash Sakpal. “And if so, performance should continue even if the recent strength is declining in a global downturn.” T

Reporting by Liz Lee and Krishna N. Das; Additional reporting by Joseph Sipalan; Edited by Raju Gopalakrishnan

Our Standards:The principles of Thomson Reuters Trust.

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