MALAYSIANS should be happy that global demand for semiconductors has moved beyond smartphones and tablets to making other things — from wearables to cars, billboards and medical devices — smarter. This creates more demand for manufactured goods, which make up the lion’s share of the country’s exports. It also helps power economic growth and had made Malaysia the world’s 24th largest exporter in 2016, accounting for 1.2% of global exports, according to data from the World Trade Organisation.
Electrical and electronic (E&E) products continue to be the main pillar of the country’s exports as well as the manufacturing sector, which contributed 23% to Malaysia’s GDP growth in 2016. E&E exports rose 20.5% year on year to RM314.27 billion in the first 11 months of 2017, making up 36.7% of total exports.
Carsem (M) Sdn Bhd (part of the Hong Leong group’s Malaysian Pacific Industries Bhd), Unisem (M) Bhd, SilTerra Malaysia Sdn Bhd (under Khazanah Nasional Bhd), Inari Technology Bhd (wholly-owned subsidiary of Inari Amertron Bhd), Dominant Opto Technologies Sdn Bhd (subsidiary of D&O Green Technologies Bhd) and Globetronics (Technology Bhd) Group are the six local E&E companies listed on the website of the Ministry of International Trade and Industry (Miti).
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The top 10 E&E multinational corporations in Malaysia are Western Digital Group, Panasonic Group, Intel Group, Samsung Group, Flextronics, HP Malaysia Manufacturing Sdn Bhd, Dyson Manufacturing Sdn Bhd, First Solar Malaysia Sdn Bhd, Infineon Group and OSRAM Opto Semiconductors Malaysia Sdn Bhd, Miti’s website shows at the time of writing.
Helped by the availability of oil and gas as feedstock and a strong base of supporting services, the chemical and petrochemical subsector is the second largest contributor to exports. Exports of petroleum products rose 34.7% year on year to RM65.85 billion in January-November 2017 while exports of chemical and chemical products rose 28% year on year to RM62.59 billion.
Petronas Chemicals Group Bhd leads the pack of major petrochemical players in Malaysia, with the others being Lotte Chemical Titan Holding Bhd, BASF Petronas Chemicals Sdn Bhd, Idemitsu Chemicals and Toray Plastics, Miti’s data shows.
The major oleochemical players are Kuala Lumpur Kepong Bhd’s KLK Oleo, IOI Oleochemicals (a subsidiary of IOI Corp Bhd), Sime Darby Plantation Bhd and Felda Global Ventures Holdings Bhd while the leading players in other speciality oleochemicals are CCM Chemicals Sdn Bhd (under Chemical Company of Malaysia Bhd), Synthomer Sdn Bhd (Synthomer PLC is UK-listed) and Taiko (under KLK).
A number of these companies are oil palm planters that also contribute to exports of palm oil and palm-based agricultural products, which reached RM49.75 billion in January-November 2017, up 13.4% from the previous corresponding period.
Miti also counts the following companies as some of the major players in the plastics industry: Scientex Bhd, V.S. Industry Bhd, Thong Guan Industries Bhd, BP Plastics Holding Bhd and Tomypak Holdings Bhd.
Another sizeable export contributor is the machinery and equipment (M&E) subsector, whose growth is helped by sales of air conditioners and specialised products for the oil and gas exploration and production industry as well as parts for sinking and boring machinery.
Citing data from the Malaysian Investment Development Authority (Mida), Miti’s list of top five Malaysian M&E manufacturers are ViTrox Technologies Sdn Bhd (a unit of Vitrox Corp Bhd), SRM Integration (M) Sdn Bhd, Alliance Contract Manufacturing Sdn Bhd, Alpha Precision Turning & Engineering Sdn Bhd and KNM Process Systems Sdn Bhd (a subsidiary of KNM Group Bhd).
The top five foreign M&E manufacturers are Asiaflex Products (from France, in Johor), FMC Technologies (from the US, in Johor), SKF Bearing (from Sweden, in Negeri Sembilan), Aker Solutions (from Norway, in Selangor) and Schlumberger Seismic Manufacturing (from the US, in Penang).
It is worth noting that Malaysia made 3.8 million air-conditioning units in January-November 2017, more than the 2.68 million units produced in the whole of 2016 and above the 2.91 million units produced in the whole of 2014. Some of these probably come from Panasonic Manufacturing Malaysia Bhd’s 40%-owned associate company, Panasonic Malaysia Sdn Bhd, whose electrical appliance-making plant in Shah Alam can reportedly make 3.1 million air conditioners for the local and export markets every year.
Leading natural and synthetic rubber glove makers, such as Top Glove Corp Bhd, Hartalega Holdings Bhd, Kossan Rubber Industries Bhd and Supermax Corp Bhd, also likely contributed to export growth as did home-grown condom-maker Karex Bhd.
Between January and November 2017, Malaysia exported 661.9 tonnes of rubber gloves — 8.4% more than the 610.51 tonnes exported in the first 11 months of 2016 — according to data from the Department of Statistics Malaysia. The value of these glove exports rose to RM14.59 billion, up 22.1% from the previous corresponding period. This could be a reflection of Malaysian products selling at better margins or prices, coupled with an attractive ringgit to US dollar exchange rate for purchasers.
Due to their production of surgical and examination gloves, Top Glove Sdn Bhd and Kossan Latex Industries (M) Sdn Bhd are on Miti’s list of major local companies in the medical device industry. Other local companies listed are ABio Orthopaedics Sdn Bhd, Straits Orthopaedics (Mfg) Sdn Bhd, Vigilenz Medical Devices Sdn Bhd, Granulab (M) Sdn Bhd, Hospitech Manufacturing Services Sdn Bhd and OSA Technology Sdn Bhd.
Large local pharmaceutical companies listed by Miti are Pharmaniaga Manufacturing Bhd, CCM Pharmaceuticals Sdn Bhd, Hovid Bhd, Kotra Pharma (M) Sdn Bhd (a subsidiary of Kotra Industries Bhd), Xepa-Soul Pattinson (M) Sdn Bhd and Ain Medicare Sdn Bhd.
Most of the companies mentioned above contribute to the economy and export growth in varying degrees.
A quick search on Bloomberg for companies that derive more than 50% of their top line from outside Malaysia yielded 179. These are not all exporters as a number of them have overseas earnings. Some of the companies mentioned above are among the 179.
Apart from the usual list of key exporters among the semiconductor and tech companies, glove makers and planters, companies with sizeable export sales and earnings listed on Bursa Malaysia likely include Nestlé (M) Bhd, which is the largest producer of halal products within Nestlé Group globally and exports halal products to at least 51 countries, its 2016 annual report says.
Fraser & Neave Holdings Bhd also supports Malaysia’s development as a global commercial and halal hub, telling shareholders in its 2017 annual report that it had further expanded its export market network in the global Muslim market, where the company’s halal certification carries added leverage. Its products are already exported to 55 countries worldwide with its top exports being condensed milk in cans, 2.5kg pouch packs and 20kg bag-in-box for industrial customers. The export revenue of dairy products from Malaysia rose 26% in FY2017 and the company told shareholders in its latest annual report that it “is confident that through [its] transformation programme, [it] will be able to maximise growth opportunities for exports from Malaysia to surpass its RM500 million sales target ahead of 2020”.
Here is a snapshot of The Edge’s choice of 15 companies to watch for sizeable export contribution today and possibly in the years to come.
Globetronics Technology
This Penang-based outsourced semiconductor assembly and test company piqued investors’ interest for its strong position in the US smartphone customer supply chain. Globetronics’ sensor products include those for light, gesture and 3D imaging. It is expected to benefit from Apple’s adoption of the TrueDepth camera system for 3D sensing and facial recognition, rumoured to be among key features for several new iPhone models this year.
Hartalega
The world’s No 1 nitrile glove maker invested RM2.2 billion in a next-generation integrated glove manufacturing complex in Sepang in 2014 to boost capacity from 14 billion to 42 billion. Its new product, a “non-leaching anti-microbial glove” that is said to kill 99.99% of germs within five minutes of contact, could rake in more business once the company obtains the necessary approvals. Thanks to China’s anti-pollution drive, Hartalega’s gloves are sold out through April.
Inari Amertron
Inari Amertron, which counts global chip giant Broadcom Ltd as its single largest customer, is expected to see strong demand at its radio frequency division, given the proliferation of RF content in smartphones to support the faster 4G LTE speed. It has to stay lean as Penang-born Tan Hock Eng, who heads Broadcom, is known to be a cost-cutter. Growth could also come from infrared LED for Osram (Inari Optical Technologies) and the mixed signal testing division (under Inari Integrated System).
IOI Corp
The integrated oil palm planter with over 207,000ha of planted estate in Malaysia and Indonesia entered a new epoch when it sold 70% of its speciality fats producer, IOI Loders Croklaan, to global grains trader Bunge Ltd for US$946 million. While IOI keeps only a 30% stake, IOI Loders would benefit from Bunge’s expertise and network in over 40 countries. The proceeds will come in handy for future expansion.
KESM Industries
The world’s largest independent burn-in and test service company KESM does not make chips but has shipped about a billion burn-in and test devices to its customers — semiconductor companies. Although it does not directly export products, KESM is a company to watch as it supports and sells to exporters and works closely with top semiconductor firms. Its aggressive capital expenditure into the automotive burn-in and test business could rake in returns from the growth of autonomous and smarter vehicles.
Kuala Lumpur Kepong
One of the largest oil palm estate owners in the business, KLK has land bank of over 270,000ha in Malaysia (41%), Indonesia (51%) and Liberia (8%). Rubber estates make up about 7% of the planted area — the largest among Malaysia-listed planters. KLK’s recent acquisition of Elementis Specialties Netherlands BV in Delden for RM187.2 million is part of its strategy to increase its market penetration abroad and accelerate growth in its downstream chemical speciality business in Europe.
Malaysian Pacific Industries
MPI is a main player in quad flat no-leads packages used in a variety of applications, including sensors, power management and communication chips. It exports almost 100% of its products, mainly to the US and Europe. One of MPI’s factories is a supplier to some of the largest independent parts suppliers for the automotive industry in Europe. The company is looking to significantly increase sales to the automotive segment for growth as well as to balance out any weakness in the smartphone and tablet market.
Nestlé Malaysia
Malaysians drink about six million cups of Milo a day and consume 600 million packets of Maggi instant noodles a year, which means strong local sales. But Nestlé Malaysia is also Switzerland-headquartered Nestlé SA’s largest producer of halal products and exports to at least 51 countries from here. Its Shah Alam manufacturing site is one of the largest in the Nestlé family.
Panasonic Manufacturing
One of the largest consumer electronics manufacturers in Malaysia with a 15% to 20% market share, the company makes and distributes home appliances under its own brand, Panasonic. The company, which was listed on Bursa Malaysia in 1966 as Matsushita Electric Co (M) Bhd and took its current name in 2005, owns 40% of Panasonic Malaysia Sdn Bhd. Products made at its plant in Shah Alam are exported to more than 120 countries in the world, including Japan.
Petronas Chemicals Group
One of the largest integrated chemicals producers in Malaysia and Southeast Asia, Petronas Chemicals is in the process of expanding its production capacity of 10.8 million metric tons per annum (mtpa) to more than 16 million mtpa by 2020. Its Pengerang Integrated Complex, which is slated to be operational next year, will allow it to broaden its portfolio of speciality chemicals and solutions. Its Sabah Ammonia Urea (Samur) project is poised to boost its exports to Thailand, Australia and other Asean countries.
Scientex
One of the world’s largest producers of industrial stretch film, Scientex exports to more than 60 countries globally. It has 13 manufacturing facilities in Malaysia, Vietnam and the US. It is also a leading player in polypropylene strapping bands in Asia, and a leading producer of other industrial packaging products.
Top Glove Corp
Already the world’s largest (latex) rubber glove maker, Top Glove is actively looking for acquisition targets that would complement its product mix or help it have better control over costs. A beneficiary of the recent surge in demand for rubber gloves, Top Glove, which also has plants in China, is maintaining its annual 8% to 10% capacity growth target. Its recent RM1.37 billion purchase of surgical glove maker, Aspion Sdn Bhd, has solidified its top position in the global market.
UCHI Technologies
This Penang-based producer of electronic control modules for coffee machines is riding its European customers’ love for coffee and the high-end contraptions that make them. The cash-rich company, founded by a Taiwanese, also makes electronic control modules for other high-end consumer electronic appliances, biotech laboratory equipment and industrial equipment such as high-precision weighing scales and centrifuges.
ViTrox Corp
A leader in machine inspection, ViTrox Corp is another beacon in global semiconductor growth. The company designs and makes machine inspection systems, such as its 3D Advanced Optical Inspection and Advanced X-ray Inspection, which are used to detect defects commonly found in production lines. Exports make up most of its sales but the Machine Vision System is highly dependent on single customers with mostly non-recurring sales.
V.S. Industry
One of the largest home-grown electronics manufacturing service providers in Malaysia, V.S. Industry provides clients with one-stop solutions as it also has in-house printed circuit board and battery-pack assembly capabilities. The Johor-based firm can fulfil the manufacturing needs of companies “with global brand names for office and household electrical and electronic products” and is the sole vertically integrated supplier for a coveted large company in Malaysia.
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