Adding premium to E&E industry

The Economic Report from Star online.

Greater economic benefit can be realised if the electrical and electronics (E&E) industry progresses to higher value segments.

Despite Malaysia's long reliance on the industry, local manufacturers have largely confined themselves to the low value-added segment of the industry.

The section titled "Upscaling Malaysia's Electrical and Electronic Industry" said that with the sector contributing significantly to the manufacturing sector, significant revenue increases could be reaped by moving up the value chain.

Towards this, the Government has initiated strategies focusing on semiconductor clusters, leveraging on information and communication technology (ICT) and enhancing R&D capabilities.

It also talks about developing human resource and the creation of centres of excellence.

In addition, with increasing focus on design and development elements of the value chain, it is anticipated that the import bill for intermediate products can be reduced.

In the long run, involvement in higher value-added activities of the E&E value chain will allow Malaysia to establish international brands and link up with the global supply chain.

Under the Ninth Malaysia Plan, the E&E industry and the electronics sector in particular has been targeted as one of the key industries to move towards a higher level of technology adoption and to produce greater value-added outputs.

In this regard, the E&E cluster in the Northern Corridor Economic Region comprising Penang and Kulim High Technology Park (KHTP) will be further developed.

The synergies arising out of locating related companies operating along the entire E&E value chain will enable them to optimise benefits and minimise costs.

A privately initiated high-tech electronics hub will also be established to complement KHTP.

The presence of multinational companies (MNCs) in the industry will remain significant, nevertheless, as local manufacturers have developed the skills and expertise to support the MNCs requirement for parts and components.

The Third Industrial Master Plan (IMP3) will also provide a clear plan of action to move the industry up the value chain.

Among the strategies under the IMP3 is the strengthening of institutional support, including a comprehensive package of support schemes to encourage investments, as well as expanding the role and functions of industry associations.

The IMP3 will promote new and emerging technologies in biotechnology, cognitive technology and nanotechnology that it expects to further strengthen the E&E industry.

Meanwhile to leverage on new and emerging technologies, the Government – in collaboration with the industry - will also establish the Electronic Industry Advisory Panel to spur the development of such technologies as well as identify local companies capable of applying them.

The industry should also ride on advancements in ICT and make use of Internet facilities as well as convergent products, such as personal digital assistants, to enhance performance.

To intensify R&D, particularly in higher revenue generating activities in design and fabrication, several agencies will actively provide R&D and commercialisation funds.

Malaysia Technology Development Corp, Multimedia Development Corp and Malaysia Biotechnology Corp are already actively engaged in providing financing with the Techno Fund, Inno Fund and Technology Acquisition Fund for the development of significant design and indigenous R&D capability and technologies.

These agencies would also encourage the creation of Malaysian-owned multinational electronic companies.

Another aspect is the development of human resource.

To sustain R&D capability and enhance innovation through design and product development, significant investment in human capital development is a pre-requisite.

Several programmes have been put in place to facilitate human resource development for the E&E industry.

Various "microsystem" programmes jointly developed with world-class design centres such as the Toppan Technical Design Centre, Japan and the Silicon Valley Institute and IPC in the United States are already being offered.

In addition, the Malaysian Institute of Microsystems under the Selangor Human Resource Development Centre has established an advanced technology centre of learning for design development and innovation particularly in IC design.

In terms of funding, Pembangunan Sumber Manusia Bhd, which manages the Human Resource Development Fund helps to defray the training costs incurred by the industry.

Another strategic initiative by the Government for the strengthening of the sector is the creation of Centres of Excellence.

These centres will be responsible for providing technology support, R&D facilities, incubators for start-ups, market intelligence and access to funding for the industry.

Under the IMP3, measures will also be introduced to promote the specialisation of R&D by creating Centres of Excellence in public universities.

Specifically, Universiti Sains Malaysia (USM) has been designated for microelectronics, Universiti Teknologi Malaysia and Multi-media University for ICT, Universiti Kebangsaan Malaysia for micro-electro-mechanical system and Universiti Malaya for photonics.

In line with the mandate given, USM spearheaded the upgrading of the Collaborative Micro-Electronic Design Excellence Centre (CEDEC) into a Centre of Excellence, comprising seven universities with USM as the secretariat.

The CEDEC initiative towards the value-added aspiration for the nation's E&E industry includes increasing the pool of IC designers, supporting fabrication foundries by creating local clusters of design houses and enhancing university design skills in fabrication.

CEDEC will also encourage local fabless start-ups through strengthening development and technological capabilities as well as to encourage the entrepreneurial spirit to spawn start-ups.

In addition, it will build up systems design capabilities through developing hardware and software design engineers.

CEDEC has already enabled collaboration and coordination in design activities amongst its members.

In order to further enhance this cooperation, the Fabless Malaysian Integrated Circuit Design Association was formed in June.

The two bodies are expected to fast track the upgrading of design activities as well as grooming more Malaysian designers and product developers.

The IMP3 targets an industry growth rate of 7.2% or RM5.5bil per annum, with a total approved investment of RM82.4bil by 2020.

With total approved investment in the industry of RM8.2bil in the first half of 2007, Malaysia is on track to achieve this target.