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EMS providers to gain from broader manufacturing recovery

EMS providers to gain from broader manufacturing recovery

08 Nov 2021

The Electronics manufacturing services (EMS) providers stand to gain from the uptick in manufacturing activities, according to industry analysts, as the shift to remote work, virtual communications, and increased demand for cloud computing were among the leading trends accelerated by the Covid-19 pandemic.

Further, digitalisation will also be beneficial and cover a broader range of activities, from banking and financial services to automation of factories and new products being rolled out for consumer electronics.

The EMS sector widely follows IHS Markit’s gauge of Malaysian manufacturing performance and the Malaysia Manufacturing Purchasing Managers’ Index (PMI), which recorded the strongest expansion in October 2021 at 52.2 compared to the previous five months.

Maybank Investment Bank Bhd head of retail research Tee Sze Chiah said the bank-backed firm noticed the continued rollout of 5G wireless communication technology driving demand for electronics components related to the Internet of Things (IoT) such as integrated circuits (ICs) and microchips for products used by consumers as well as businesses and organisations.

“The main challenges for E&E activities are the supply-chain issues as well as the lack of foreign migrant workers.

“Lifting the ban on migrant workers will help support the recovery in the manufacturing sector,” Tee told The New Straits Times.

EMS providers are one of two main parties in the electronics manufacturing industry, part of the manufacturing sector’s wider electrical and electronics (E&E) subsector.

EMS providers manufacture electronics parts and products for the brand or product owner.

Their services include printed circuit board assembly manufacturing, subassembly, final product assembly and various in-process and final inspection and testing.

TA Securities Holding Bhd analyst Wilson Loo said barring disruptions from the Covid-19 pandemic, the research firm views prospects for Malaysia’s EMS sector to remain bright, especially with observations of sustained interest by companies abroad to diversify contract manufacturing away from China to countries in the ASEAN region amid the ongoing US-China trade tension.

“Among the key merits for trade diversion to Malaysia is its well-established E&E ecosystem backed by its supportive manufacturing incentives and track record with multinationals,” he said.

According to the Statistics Department, the E&E subsector accounted for 29.7 per cent of the real gross domestic product of Malaysia’s manufacturing sector, earning an export revenue of RM386.1 billion or 39.4 per cent of the gross value of exports in 2020.

Leveraging on the base of E&E activities, Malaysia has become a hub for EMS with both foreign multinational companies (MNCs) and local companies operating in the country producing a range of products from electronic components, modules, devices and systems across various industries.

Listed local EMS companies include ATA IMS Bhd, V.S. Industry Bhd, EG Industries Bhd, P.I.E. Industrial Bhd, JHM Consolidation Bhd and Salutica Bhd while foreign MNCs with operations in Malaysia include Jabil Inc, Flex Ltd and Plexus Corp.

Another local company, Aurelius Technologies Bhd (ATech), based in Kulim, Kedah, has plans to list on the main market of Bursa Malaysia.

ATech focuses on industrial products, particularly communications and IoT products, and has also expanded into manufacturing semiconductor components comprising multicomponent ICs for IoT applications.

The company has an established track record of 28 years and strong MNC clientele in the US, China and Europe.

Source: NST