Lower pressure on firms to ramp up production - MIDA | Malaysian Investment Development Authority
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Lower pressure on firms to ramp up production

Lower pressure on firms to ramp up production

25 Mar 2024

The investments entering Penang have yet to exacerbate the labour shortage situation due to the poor global demand.

As the global demand levelled off, the pressure on local companies to engage more workers to ramp production has reduced, according to The Free Industrial Zone, Penang, Companies’ Association president David Lacey.

“However, the manufacturing industry is subjected to cyclical swings, especially the electrical and electronics (E&E) sector, which is volatile.

“The authorities, the federal and the state governments should seize opportunities during this lull to address the labour shortage problem lest the situation returns to normalcy, and labour supply becomes a bigger issue again,” Lacey told StarBiz recently.

He noted that the manufacturing sector provided attractive salaries, bonuses, and compensation packages to workers to compete in the tight labour market in Penang.

“The higher wages come with expectations of improved productivity from individual engineers and also across the different departments in organisations,” he added.

According to Lacey, the semiconductor industry lacks skilled workers in the integrated circuit manufacturing and product design departments.

“These shortages are for skilled engineers with over five years working experience, which will take time to build and is harder to address quickly,” Lacey added.

On the RM35.8bil investment the state attracted for the nine months of 2023, Lacey said it would take at least 12 months, possibly up to 30 months, to implement the projects in phases.

“The new demand for talent grows from now till the end of 2024 and then throughout 2025.

“This can only be addressed by a ‘net migration’ of science and engineering talent to Penang from around Malaysia, creating additional pressures on housing and transportation in the state, as well as economic growth,” he added.

The RM35.8bil investment from 107 projects is expected to create 11,000 job opportunities.

Malaysia’s major competitors are Vietnam and Thailand, while India is the iceberg on the horizon.

“However, Malaysia has a huge advantage over Vietnam and India in the form of the large pool of ‘tacit knowledge’ in manufacturing built up over the last 50 years.

“Manufacturers in Penang have been making price-competitive, high-quality products for decades, and it takes a considerable amount of time and effort to train and develop a workforce who can deliver that.

“The way to boost Penang and Malaysia’s competitive edge is to build upon that strong foundation of tacit knowledge by applying it to advanced manufacturing and new opportunities – continuous change and evolution within companies to find new products and markets,” he said.

According to Lacey, Penang’s niche strength is producing products for markets with high reliability and quality expectations, such as automotive and premium consumer applications.

The opportunity now is to extend that niche into new markets such as medicine.

“For instance, leverage electronics manufacturing to make health monitoring or ‘telemedicine’ products where electronics and software provide wellness info to individuals and doctors via your smartphone,” he added.

Lacey added there was an unexpected surge in demand for industrial land triggered by the pandemic and trade war, causing a short-term shortage, while authorities seek to make ready new industrial parks.

Meanwhile, Malaysia Semiconductor Industry Association president Datuk Seri Wong Siew Hai said the E&E industry faced a labour shortage from 2022 till the first half of 2023.

“Since then, there hasn’t been a shortage due to the slowing down of the global economy.

“We see only strategic hiring currently,” Wong said.

However, there will be a looming labour shortage in the second half.

“As the E&E sector improves, we expect most companies to start hiring again in the second half of 2024.

“Some 15% of our engineers have left to work in Singapore, Australia, the United States and the United Kingdom, reducing local talent supply.

“We are also seeing hiring from Taiwan and China.

“Even those fresh out of university, without any prior working experience, will soon find themselves in demand in our industry,” Wong added.

He also noted the investment would take 18 to 24 months to implement if the new project needed land and building.

“If it is an expansion project with available space, the rollout period will be six to 12 months.

“However, the global economic climate will also determine how fast the project commences and ramps production,” he said.

Wong said the relevant authorities, such as the Economic Planning Unit, Malaysia Productivity Corp, and The Special Task Force To Facilitate Business, helped expedite the approval of expatriate passes for foreigners.

“Before June 2023, the time needed to issue such passes was six months to a year.

“Now, it takes only ten days to issue, which has strengthened our competitive edge,” he added.

Meanwhile, Aemulus Holdings Bhd chairman Datuk Seri Lee Kah Choon said foreign companies were migrating from China because of technically sensitive E&E products (TSP).

“If TSPs are sanctioned, foreign operations in China will eventually be eliminated by the Chinese local competitors too, which is one of the main reasons overseas companies are leaving China.

“The Chinese know that TSPs will be embargoed sooner or later.

“They will need to come out from China to look for alternatives, which is one of the reasons for the surge of Chinese investment overseas.

“Apart from that, the Chinese also need to expand their market overseas for products that have manufacturing advantages, such as solar panels and electric vehicles,” he said.

Lee said Malaysia’s E&E supply chain was manufacturing excellence in the back-end space.

“A non-targeted, general investment flow into Malaysia will not be sustainable because of her limited human resources.

“On the contrary, these non-targeted investments will cannibalise her limited resources,” he said.

Lee said the investment figure might indicate the nation’s attractiveness to investors.

“The figure is based on the Malaysian Investment Development Authority’s approval only.

“The approved projects may still land in other countries.

We need to monitor the implementation rate of these ‘approved’ investments closely,” Lee said.

Source: The Star