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QES continues investing

QES continues investing

25 Mar 2023

Firm unaffected by consumer technology slowdown

BUSINESS is still ongoing as usual for QES Group Bhd and orders are still flowing in at a healthy level despite an apparent slowdown in the semiconductor industry.

The company, which operates in the semiconductor space manufacturing semiconductor equipment for various companies, had recently moved into its new office and manufacturing facility in Glenmarie, Shah Alam on a freehold plot of land which it owns.

It had leased an industrial space just a few lots away before this, and the move to this new space signals its intent to pursue further business expansion.

QES’ new office sits on a bigger 88,000 sq ft floor space facility with a manufacturing facility of almost 40,000 sq ft, which is more than double when compared to its previous space which it had leased.

QES provides manufacturing, distribution and provision of engineering services for precision tech equipment such as to measure or test.

While it operates predominantly in the tech space, some of its clients include traditional manufacturing companies that also require precision tech machines for their operations, says managing director Chew Ne Weng.

“We service various industries, including the automotive, semiconductor and electrical and electronic companies. But our exposure to memory, smartphones, and personal computers are smaller compared to automotive integrated circuits, especially in the last two to three years,” Chew tells Starbizweek.

“Even though there is an ongoing downturn in the wider semiconductor space, on our end, we have not seen a significant slowdown in orders.

“Overall demand is holding up for us. We also have an internal revenue growth forecast of high single digits for the financial year 2023 (FY23),” Chew says.

In its recent report, the World Semiconductor Trade Statistics forecasts global semiconductor sales to ease to Us$556.6bil (RM2.47 trillion) this year from a record high of Us$573.5bil (RM2.54 trillion) in 2022.

This slowdown is seen in the purchasing of consumer electronics mainly caused by inflationary pressures hitting consumers worldwide.

“We believe in investing capital expenditures during this season of slowdown.

“Investment is a must during the bad times. We anticipate that by the third quarter, the market for semiconductors may see a significant turnaround.

“I am not concerned of all the heavy uncertainties such as recession risks, etc, because when you look at the overall semiconductor market in the last 15 years or so, it is still on a long-term uptrend,” Chew says.

Apart from its new facility in Glenmarie, the company is also looking at another expansion in Batu Kawan, Penang which it had acquired a two-acre piece of land two years ago.

“We plan to have a second factory there, an expansion from our existing facility in Glenmarie.

“We have appointed a consultant and would like to farm out the contract jobs to bidders sometime before the end of June 2023.

“The Batu Kawan factory would probably be complete by the early third quarter of 2024,” Chew says.

“It is about a 100,000-sq-ft double-storey plant which will entail a capital expenditure of about Rm25mil that would be funded by internal funds and bank borrowings,” he adds.

After all of its expansion plans are completed, QES is expected to double its capacity to produce 140-160 semiconductor equipment machines per year in a perfect scenario where there are no hiccups such as labour or supply shortages.

QES also plans to house its 30% joint venture (JV) with Applied Engineering called Applied Engineering Technology (M) Sdn Bhd in this new facility in Batu Kawan.

The JV, which is in operation now, is situated on a site which it is leasing and the JV manufactures robotic and medical technology equipment.

These expansion plan is a good indication that demand is expected to hold up and even grow in spite of the threat of recession and companies such as QES are investing in advance so they can profit in the future.

Chew also notes that on the contrary for itself, the company faces issues in ensuring its orders are delivered on time.

“This is an issue for us, coupled with the task to ensure there are enough engineers to work in the facility, as they are tempted to go work elsewhere such as in Singapore due to the weaker currency here.

“Apart from that, there is the issue with the supply chain,” he says.

Issues with long lead times in component supplies are still ongoing and have not been resolved, and this can hamper its ability to ensure orders are delivered on time, Chew notes.

“We presently have an order backlog of Rm106mil as of February that has yet to be delivered.

“On the manufacturing side, we take about five to six months to deliver, while distribution may take up to four months,” he says.

Of the Rm106mil, it needs to fulfil distribution orders amounting to Rm85mil, while orders from the manufacturing side amounts to Rm21mil, which it expects to be fulfilled from the second half of this year.

Apart from this, growth is also anticipated to come from China, as the company expects revenue from China to about double next year from less than 5% at the moment as it is in the midst of securing more customers there.

Meanwhile, QES which had recently graduated to the Main Board of Bursa Malaysia is confident of sustaining its performance, moving forward.

The move to the Main Board gives it more prominence and helps sustain its reputation in order to attract good institutional shareholders to invest in the company, says Chew.

Source: The Star