MALAYSIA PRODUCTIVITY CORPORATION D R I V I N G P R O D U C T I V I - PowerPoint PPT Presentation

MOE/CREST Academia/Industry Workshop (Breakout groups) 3 Breakout groups • Digital Front-End and Back-End • Analog Front-End and Back-End Next Steps • Design for Testability (DFT) • CREST to consolidate To consolidate • Summarize the Gaps, Recommendations, • # of training days Priorities, Timelines etc • Report back to Dr. Arham and team in two • Proposed Industry Co-Lecturer weeks’ time (i.e. first week of April) • Proposed University Partner • Challenges and Gaps • Resources Required (tools labs facilities capabilities etc) • Implementation Action Plan 13

MOE/CREST Academia/Industry Workshop (Other Actions) ICD Oversight Committee • Need to establish an ‘oversight committee’ consisting of selected Academia and Industry players, to – Regulate overall EDA tools management – Coordinate MPW (Multi Project Wafers) services – Assignment of Internships to companies – Review curriculum (‘Core’ vs ‘Elective’, what to add, what to drop etc) • Need to define the Terms of Reference (TOR) of this Oversight Committee Single point of contact for Universities • To streamline communication, and to ensure continuity, there will be a single point of contact for each university 14

Update on IC Design Consortium • Agreement reached with key local IC Design companies to work on a legal entity model • The Legal Entity will be the representative to bid for large projects • Legal aspects of JV and ownership and accountability to be drawn up • MIMOS working to identify the Company that will be the legal entity/anchor • Previously identified candidate has chosen not participate; an alternative is being looked into. • MATRADE approached to help publicize and market the local IC Design capabilities; await specific actions from MATRADE • MIGHT approached to assist local IC Design companies to link up GLC’s; propose products/solutions rather than IC Design and/or services. • How do encourage Govt or GLC’s to provide businesses, where possible, to local Design companies ? • Design companies must be solutions or sub-system providers 15

MIDA’s Incentives : ‘Services’ • MIDA s working on a incentive scheme for IC Design, Test Development Services and Embedded Solutions Design Services • MIDA has sought and received inputs from a selected few EEPN team members • Proposal tabled in NCI : ok; next stage is MOF • Target for completion by Q3 2019 Proposal to be tabled to MITI, and then MOF, for approval (starting March 2019) 16

Embedded SW Talent focus • Complete review of IAC initiated and TalentCorp funded curriculum enhancement program with universities and companies - Done • This program has not met the objectives for various reasons – Lack of proper program management to track for successful closure – Each company went with its own “application/tool kit” ; failed to identify the fundamental needs – Poor or lack of support from the Heads of Schools – Lack of traction with MOE at the onset – Training of interested students during summer vacation – not sustainable – Mismatch of expectations of universities: continuous funding from industry • Review the needs of industries; include local companies – June 2019 • Use similar approach to that of IC Design Curriculum Enhancement and work with MOE – June 2019 start • Is there a common need for EEPN and ICTPN ? 17

Thank You https://www.facebook.com/MPCHQ @MPC_HQ MPC TIP @mpc_hq 18

MALAYSIA PRODUCTIVITY CORPORATION D R I V I N G P R O D U C T I V I T Y O F T H E N AT I O N KS#2 Update to GC Meeting 2/2019 Chair: Dato’ Seri SH Wong Boardroom, Inari Amertron Berhad, P201| 21 st March 2019 | 10:30a.m. ~ 1:00p.m. 19 EEPN - SULIT

KS#2 Work Plan 2019 KPI 2019 Measure Key Strategies Action Items 1. Industrial Upskilling for Yet-to-be employed engineering graduates 100 # of heads trained (25 Mechanical & 75 Electronics Engineers) Budget (RM) 5,800K Lead by EEPN supported by HRDF 2. MSc program for existing workforce. Explore 1:1 matching with companies 40 # of heads trained from HRDF fund Budget (RM) 2,400K Lead by EEPN supported by HRDF 3. Training for strategic I4.0 programs Nurture 15 # of heads trained Talent Budget (RM) 475K Development Lead by EEPN supported by MPC 4. Transformational leadership programs to develop global/regional leaders. 25 # of heads trained Explore 1:1 matching with companies from HRDF fund Budget (RM) 2,000K Lead by EEPN supported by HRDF 5. In-house technicians development for current workforce enhancement 3,000 # of heads trained Funded by HRDF via respective companies Budget (RM) - Lead by respective Companies/Industry Captains Total Budget for 2019 (RM10,675K) 10,675K Note: Achievement of KPIs is subjected to availability Note: Achievement of KPIs is subjected to availability 20 of requested funding for EEPN, and delivery partners of requested funding for EEPN, and delivery partners

Award Ceremony for AMCHAM USAINS HRDF INBASE Program 21

Meeting with MOHR and HRDF team Meeting with Betty Hassan of MOHR and HRDF team on 31 st Jan 2019 at Putrajaya Two Action items were proposed: 1. EEPN to prepare proposal for National Talent Strategy for E&E Industry and submit MOHR. Ms. Betty to review and advise on next action plans 2. EEPN to prepare proposal to utilize MOHR-MOE RM 14 million on reskilling budget for existing workforce and yet-to-be employed graduates related to I4.0, for both KS#1 and KS#2 22

KS#2: Action Item 1 (yet-to-be-employed) 2018 Status: • Trained 121 fresh E&E graduates • Constrained by HRDF 2019 Plan: • E&E engineers reduced to 75 • Include 25 Mechanical engineers • Still exploring for source of funding 23

KS#2: Action Item 2 (MSc for E&E) 2018 Status: • Trained 139 engineers for PostGrad MSc • Constrained by HRDF 2019 Plan: • Still exploring for source of funding • Explore 1:1 matching ?? 24

KS#2: Action Item 3 (Strategic I4.0 programs) 2018 Status: • Initiated procurement process 2019 Plan: • Appointed USAINS to conduct “Upskilling Industry 4.0 Practical Training” • Training starting from March 2019 25

KS#2: Action Item 4 New Project for 2019 • Finalize Source of funding • Develop Terms of Reference (TOR) for training by Feb 2019 26

KS#2: Action Item 5 (Inhouse technicians) 2018 Status: • Actual trained = 2,062 • Goal was 500 • From 6 MNCs 2019 Plan: • Continue same approach • KPI increased to 3,000 technicians 27

Thank You https://www.facebook.com/MPCHQ @MPC_HQ MPC TIP @mpc_hq 28

MALAYSIA PRODUCTIVITY CORPORATION D R I V I N G P R O D U C T I V I T Y O F T H E N AT I O N KS#3 Update to EEPN GC 2/2019 Meeting Chair: Dr. Thomas Ooi (Manager, Intel Corp) Co-Chair: Vimala Murugan (Director, MITI) Boardroom, Inari Amertron Berhad, P201| 21 st March 2019 | 10:30a.m. ~ 1:00p.m. 29 EEPN - SULIT

KS#3 Work Plan 2019 (revised budget and KPIs) KPI 2019 Measure Key Strategies Action Items 1. Identify 2 areas of technologies/solutions as Prioritized Pillars 2 # of Prioritized Pillars Budget (RM) 50K Lead by EEPN, supported by MITI, MPC, MIDA, SIRIM & MIMOS 2. Shortlist and nurture technologies/solutions companies as I4.0 Solution 6 # of SMEs Providers Budget (RM) 150K Lead by EEPN, supported by MITI, MPC, MIDA and MATRADE 3. Drive IIoT PLUGFEST activities for I4.0 Adoption. Estimate 2 engineers per 60 # of companies company Accelerate the Budget (RM) 200K Lead by EEPN, supported by MPC and Intel Adoption of 4. Drive regional I4.0 technology hackathon activities for the identified technology 1 Industry 4.0 # of hackathon event areas Budget (RM) 50K Lead by EEPN, supported by MITI, MPC and Intel Expert centre 5. Establish long term regional I4.0 technology expert centre . Aligned with Industry4WRD - 1 Strategy T3: Research, Innovation, Commercialisation and Entrepreneurship (RICE) program approved for Lead by EEPN, supported by MITI and MIDA Budget (RM) - implementation 6. Establish regional conference for I4.0 technology and EEPN related activities 1 # of conferences Lead by EEPN, supported by MPC and MITI, co-organized with research Budget (RM) 150K universities Note: Achievement of KPIs is subjected to availability Note: Achievement of KPIs is subjected to availability Total Budget for 2019 (RM) $600K 30 of requested funding for EEPN, and delivery partners of requested funding for EEPN, and delivery partners

KS#3: Action Item 1 and Action Item 2 Sophic HF Tech IOT T.E.M. Smart Solution MDEC to Propose Big Data 31 EEPN - SULIT

EEPN PLUGFEST Convention 2019 • March 07 2019 launch by MITI DM YB Dr. Ong • Venue: MPC, Kepala Batas, Penang 345 participants attended the convention (87 from E&E Sector; 55 from Manufacturing; 78 from Services; 63 from Public sector and 62 from Academic) 6 Proof of Concepts (POCs) showcased 32 EEPN - SULIT

EEPN PLUGFEST Convention 2019 33

EEPN PLUGFEST Convention 2019 6 POCs showcased Graphic or Picture Graphic or Picture Graphic or Picture Company: ALLIANCE CONTRACT MFG Sdn Bhd Company: K-ONE INDUSTRY SDN BHD Company: CPI (P) SDN BHD Name of project:IIoT implementation at motor test Name of project: IIoT implementation at manual Name of project: IIoT implementation on manual rig assembly line THERMO HYGROMETER Graphic or Picture Graphic or Picture Graphic or Picture Company: OSRAM OPTO SEMICONDUCTORS (M) Company: TF AMD Microelectronics (P) Sdn Bhd Company: SANMINA-SCI SYSTEMS (M) Sdn Bhd SDN BHD Name of project: Oven Thermal Controller Data Name of project: IIoT of Label Applicator Name of project: IIoT implementation for oven Integration & Violation Reaction System 34 EEPN - SULIT

IIoT PLUGFEST 2019 (Overall) Upcoming IIoT PLUGFEST 2019 EEPN PLUGFEST Convention 1. Central – April 2019 - March 07 2019 launch by MITI DM YB Ong 2. Southern – June 2019 - Venue: MPC, Kepala Batas, Penang 3. Northern – July 2019 - Showcased 6 POCs from 2018 during IIoT PLUGFEST Additional 3 Proof of Concept (as at Outcome 2018 (Plan) 2018 (Actual) 2019 (Plan) 19-Mar) Attendees 60 32 120 1. Inari Technology Sdn Bhd Proof of 30 17 60 2. Motorola Solutions Malaysia Sdn concept Bhd 3. Sandisk Storage Malaysia Sdn Bhd Showcase 8 8 20 Proposed Charges Program - Explore full HRDF claimable Day 1 – Introduction - MNC – Explore charging them for starter-kits Day 2 – Hardware configuration - SME – FOC Day 3 – Full Configuration + Node Red - External Consultants – Paying full amount 35 EEPN - SULIT

IIoT PLUGFEST 2019 (First Event) UP NEXT Best Western Petaling Jaya Participants : 20-23 SMEs (Max 2 participants per company) Cost Incured : The fee for a participant is RM 2800 for all 3 days. RM 500 surcharge for additional participants from same company (Starter kit to be shared) Total budget required for Central region is RM70,000. http://www.psdc.org.my/events/2019/iiot-plugfest-2019 36 EEPN - SULIT

IIoT PLUGFEST PM training for SDCs Objective: To enable state skills development centres nationwide to Program Manage and conduct IIoT workshops e.g PLUGFEST at their own respective regions SDC under FMSDC (13) Northern: PSDC, KISMEC, PESDC, PHCDC Central: SHRDC, MISDEC Southern: NSSDC, PUSPATRI, East Coast: Pahang Skills, TATI, TESDEC Sabah: SSTC Sarawak: PPKS 37 EEPN - SULIT

Regional Hackathon Objective: Drive regional I4.0 technology hackathon activities for the identified technology areas • Explore partnership with CREST (primary) with support from Universities • Objectives of Hackathon • Solve problem • Collaborate in a team to come out with solution • Present the solution at the end of the hackathon • Theme / Technology Areas will be • IOT or • Big Data • Next Steps: • Draft Problem Statement • 1-day event • As a supporting event (e.g. 1 day before actual) for MITI Industry 4.0 Summit (Oct 2019) • CREST’s contact person 38 EEPN - SULIT

Regional Expert Centre Objective: Establish long term regional I4.0 technology expert centre 1. Opportunity #1: Regional I4.0 Expert Centre with Elliance • Batu Kawan, Penang • Consortium of I4.0 related companies • Showcasing technologies related to Automation, Robotics, IOT and Big Data 2. Opportunity #2: MDEC’s ADAX • Bangsar South, focus on Big Data Analytics and AI • These are aligned with our KS#3 Prioritized Pillars 39 EEPN - SULIT

Regional I4.0 Conference Objective: Establish regional conference for I4.0 technology and EEPN related activities • Leverage MITI Industry 4.0 Summit – Oct/Nov 2019 • 2~3 days Summit • EEPN to collaborate with MOE (Prof. Dr Arham) • Execution parties are • UTM (Prof. Dr. Ali Selamat, School of Engineering) • USM (Dr Rusni, Dean of School of Computer Science) • USM (Prof Dr Hooy Chee Wooi, School of Management) 40 EEPN - SULIT

Thank You https://www.facebook.com/MPCHQ @MPC_HQ MPC TIP @mpc_hq 41

MALAYSIA PRODUCTIVITY CORPORATION D R I V I N G P R O D U C T I V I T Y O F T H E N AT I O N KS#4 Update to GC 2/2019 Chair: Mr. KC Lau (Inari) Co-chair: Mr. Zaky Moh (SME Corp) Boardroom, Inari Amertron Berhad, P201| 21 st March 2019 | 10:30a.m. ~ 1:00p.m. 42 EEPN - SULIT

KS#4 Work Plan 2019 (original) KPI 2019 Measure Key Strategies Action Items 1. MNCs/LLCs to identify and develop local SMEs. Additional 10 SMEs for 2019 10 # of SMEs Budget (RM) - Lead by EEPN supported by MIDA 2. Nurture selected SMEs in strategic focus areas e.g. test services, automation 10 # of SMEs & mechanization, vision systems etc Budget (RM) 200K Lead by EEPN supported by MPC 3. Develop local SMEs to be Solution Providers for total integration for smart # of Solution 2 manufacturing environment and end-to-end supply chain Providers Strengthen Budget (RM) 100K Lead by EEPN SME 4. Competency enhancement program for SME owners. Development 40 # of SME Owners 20 paxs/class X 2 batches Budget (RM) 340K Lead by EEPN, supported by MPC 5. Maximize value from E&E Directory, emphasizing SMEs. Link potential 100 # of registered users customers and suppliers esp from overseas. Budget (RM) 30K Lead by EEPN, MIDA, MATRADE, SME Corp and MPC 6. Manufacturing Innovation Center (MIC). To provide guidance to MIC Establishment - management to drive for SMEs development of MIC Budget (RM) - Lead by MITI, supported by EEPN Note: Achievement of KPIs is subjected to availability Note: Achievement of KPIs is subjected to availability Total Budget for 2019 (RM) 670K 43 of requested funding for EEPN, and delivery partners of requested funding for EEPN, and delivery partners

KS#4 Work Plan 2019 (revised) KPI 2019 Measure Key Strategies Action Items 1. MNCs/LLCs to identify and develop local SMEs. Additional 10 SMEs for 2019. 10 # of SMEs Organize workshop to share best practices Budget (RM) - Lead by EEPN supported by MIDA 2. Facilitate a locally designed and developed IIoT Starter Kit to promote I4.0 Done Starter Kit prototype adoption by SMEs Budget (RM) 200K Lead by EEPN supported by MPC 3. Convert Inari’s Manufacturing Execution System (MES) into a generic system Availability of 1 package for adoption by other SMEs. generic MES System Strengthen Budget (RM) 20K aLead by EEPN supported by Inari SME Development 4. Developing Stronger SMEs Owners Program to enhance competency, plus 25 # of SME Owners development of training module (One batch of 25 participants) 228K Budget (RM) Lead by EEPN, supported by MPC 5. Maximize value from E&E Directory, emphasizing SMEs. Link potential 100 # of registered users customers and suppliers esp from overseas. Budget (RM) 30K Lead by EEPN, MIDA, MATRADE, SME Corp and MPC 6. Manufacturing Innovation Center (MIC). To provide strategic guidance to MIC Establishment - management to drive SMEs development of MIC Budget (RM) - Lead by MITI, supported by EEPN Note: Achievement of KPIs is subjected to availability Note: Achievement of KPIs is subjected to availability Total Budget for 2019 (RM) RM478K 44 of requested funding for EEPN, and delivery partners of requested funding for EEPN, and delivery partners

KS#4 Action Item 1 (List of SMEs to develop) 15 SMEs Identified (2018) Grow them 1. Waftech Sdn Bhd (2019) 2. QI Sdn. Bhd 3. TT Vision Technologies Sdn Bhd 4. CPI (KL) Sdn. Bhd. (for Junction Box In Strategic Focus Areas 5. Win-Hall Tech Sdn. Bhd. (Automation) To be Solution Providers 6. NationGate Sdn. Bhd. 7. Prism Precision Engineering 8. Bloomic Engineering Technology 9. Swift Bridge Technologies 10. UWC 11. Conquest Electronics Sdn. Bhd. 12. Crystal Clear Technology (CCT) Additional 10 SMEs 13. MDS Advance (Machining) (2019) 14. Coraza-STS (Metal Frame) 15. Camtronics (Wire Harness) Supporting Companies Can also leverage: 1. Firstsolar Malaysia • KS#1 can assist with Design tools 2. OSRAM Opto • KS#2 can assist with Talent Development 3. Finisar • MIDA’s assistance re: incentives for specific areas 4. Keysight Technologies 5. Plexus of D&D 6. Inari Ametron Bhd. 45 EEPN - SULIT

KS#4 SME Development List • Inari has 3 SMEs • Waftech Sdn Bhd http://www.waf-tech.com/ • QI Sdn. Bhd. • TT Vision Technologies Sdn Bhd http://www.ttvision-tech.com/ • FirstSolar KHTP has 2 SMEs • CPI (KL) Sdn. Bhd. (for Junction Box) • Win-Hall Tech Sdn. Bhd. (Automation) http://www.winhalltech.com/ • Finisar has 1 SME • NationGate Sdn. Bhd. • Osram Opto Semiconductors has 3 SMEs We have 16 SMEs identified • TT Vision http://www.ttvision-tech.com/ (from 6 MNCs) • Prism Precision Engineering http://prismprecision.com/v2/ • Bloomic Engineering Technology http://www.bloomictech.com/ • Keysight Technologies has 4 SMEs • STRICKLY CONFIDENTIAL Swift Bridge Technologies https://www.swiftbridgetechnologies.com/ • UWC http://www.uwcholdings.com/ WITHIN EEPN ! • Conquest Electronics Sdn. Bhd. http://www.conquestelec.com/ • Crystal Clear Technology (CCT) http://www.cct.com.my/ • Plexus Manufacturing has committed 3 SMEs • MDS Advance (Machining) • Coraza-STS (Metal Frame) • Camtronics (Wire Harness) 46 EEPN - SULIT

Proposed to Organize a Workshop re: SME Proposed to Organize a Workshop among flagship companies Flagship Companies are: – Firstsolar, OSRAM Opto, Finisar, Keysight Technologies, Plexus and Inari Amertron Bhd • Objectives of workshop: Each flagship company to: – List of their SMEs under development and their capabilities (segment, back ground, plan and status of their SMEs) – Create business opportunities for these SMEs to other flagship companies – Improve SME’s cost competitiveness • Localization of raw materials • Automation of process – Share each flagship’s SME Business Development Model, and how to measure SME progress (growth phases) 47

Next Steps re: SME Development • Participating flagship companies (as of 13 th March 2019) – Keysight (Tay Eng Su) – Plexus (ML Au and CL Chuah) – Silterra (Tahir) – Inari (Azidi) • Organize Phase 1 Workshop among flagship companies Eventually we will link with MIDA’s ‘Domestic Investment and Supply – Date: Tentatively April/May 2019 Chain Coordination’ Division – Venue: Penang – High level objective is share each flagship’s SME Business Development Model, and how to measure SME progress (growth phases) • Organize Phase 2 Workshop among SMEs companies 48

‘Made in Malaysia’ IIoT Starter Kit GOAL : To facilitate a locally designed and developed IIoT Starter Kit Background • EEPN IIoT PLUGFEST has been a success • 6 POCs were show-cased at PLUGFEST Convention • Current Starter Kits are sourced overseas • We aspire to develop a Made-in-Malaysia Starter Kit • The prototype will have more features than current starter kit e.g. more USB ports etc • The cost will be ‘cheaper’ or ‘the same’ to current model • The prototype must be ready (tested and commissioned) by Q4 2019 49 EEPN - SULIT

KS#4: Action Item 3 GOAL : Convert Inari’s Manufacturing Execution System (MES) into a generic system package for adoption by other SMEs Approach • Currently, Inari has a Manufacturing Execution System (MES) to manage their entire manufacturing shopfloor lines • This MES software is scalable to any SME which has a ‘process - centric’ manufacturing environment e.g Surface Mount Technology (SMT) or Assemble lines • We want to make this MES Software available to other SMEs with certain customization for adoption • Showcase successful ‘Use Case’ adoption, with ‘Before’ and ‘After’ improvements 50

Inari’s MES (Manufacturing Execution System) (Data Input, Integration & Measurement) Elevating the operations prowess with MES REALTIME REMOTE PREVENTION: IMMEDIATE DEVELOPMENT PERFORMANCE Mistake proof DETECTION: Accurate & Accessibility & processes Fast Respond Control Immediate 1 st LEVEL – MES Linkage With Sub Module Of Machine Interface 1) MES linking activities of all machine interfaces 2) Traceability on machine interface movement & error log 2 nd LEVEL - Error Log Code Analysis 1) Real time error code analysis & decoding 2) Identify suspicious/high risk error 3) Log the error code/mc event 3 rd LEVEL – Block Machine & System Transaction 1) Block machine to proceed when high-risk error detected. 2) Block/Hold Shopfloor transaction of affected Lot 4 th LEVEL – Real time feedback to PIC 1) Notification to next level/PIC on current error encounter 2) Shows actual root cause as a result from analysis 3) Perform adequate CA & PA 51

Developing Stronger SMEs Owners Program 2018 Actual Successfully organized one training on Developing Stronger SMEs Owners 2019 Plan • We will organize 1 additional training targeting 25 participants • 6 days duration • Will be in central region on 1 st week of August until 3 rd week of August Project Paper was Approved during last GC 1/2019 Meeting 52

Developing Stronger SMEs Owners 2019 Post 2019 Strategy: Revised module based on 2018 feedback 1. Strategic Change and Business Strategy • Develop training 2. Selecting your Game Changer, be competitive package/modules with the 3. Business Acumen of Winning Deals (to current training provider include how to achieve total customers • Training package/modules to satisfaction) be owned by MPC 4. HR Management (to include total employee engagement and performance management) • Eventually, will pass the 5. Outside the Box Thinking about Digital training package/modules to a Transformation Government related training 6. Financial Strategies to Support Growth (to agency (INTAN etc.) for include How to prepare for listing) sustainable proliferation 53

KS#4: Action Item 5 (E&E Directory) As agreed with MIDA on 12 th Feb 2019 Activities Timeline (2019) Populate 400 companies End of Feb (MIDA’s existing database) Finalize Portal (Ver 1.0) End of March Double check with MIDA on timeline and any screenshots Launching of Portal 1st week of Need to check with Norhizam April Fine tune portal with new Apr & May features Populating of database from June associate agencies e.g. MATRADE, SME Corp etc Conduct survey of pilot End of 2019 platform & user friendliness Portal (Ver 2.0) 2020 54

KS#4: Action Item 6 (MIC) GOAL : To provide strategic guidance to MIC management to drive for SMEs development Background So far, our EEPN initiatives are mostly ‘tactical’ • due to short time frame and limited resources We will leverage MIC for provide a strategic • umbrella for overall SME development MIC SME DEVELOPMENT STRATEGY tactical actions Business Platforms / Incubation & tactical actions Market Access Commercialization tactical actions Design and Financial & Funding Development tactical actions Regulatory and Kaizan, Quality & tactical actions Policies Productivity 55

Agenda: GC Meeting 2/2019 TIME ITEM AGENDA PRESENTER 10:30am ~ 1 Opening Remarks. The Chairman 10:40am 10:40am ~ 2 Brief update by each Key Strategy (25 mins X 4) Respective KS 12:20nn Chairpersons Executive summary: “Study on Productivity and UTAR 12:20pm~ 3 12:35pm Contribution of the Malaysian E&E Industry” (Final Report) 12:35pm ~ 4 Other matters arising, and next meeting The Chairman 1:00pm 56 EEPN - SULIT

A Study udy on Produ oductivi vity and nd Cont ontribut ution n of the he Malaysian n E&E Indu ndustry 21 March 2019 57

1. Objectives of the Study 2. Research Methodology 2.1 Secondary Data Analysis 2.2 Qualitative Study 2.3 Quantitative Study 3. Key Highlights 3.1 Findings from the Study 3.2 Manufacturing and Technology Enhancement 3.3 Areas of Improvement 4. The Contributions of E&E 4.1 Economics Perspectives Industry 4.2 Multiplier Effects 4.3 Contributions of E&E Companies in Malaysia – beyond Manufacturing 5. Recommendations for MIDA 2019 Plan Incentive Process 6. Recommendations 6.1 Short-term Recommendations 6.2 Mid-term Recommendations 6.3 Long-term Recommendations 7. Best Practices MNCs, LLCs & SMEs 8. Summary 58

1. Objectives of the Study i. To identify the state-of-the-art manufacturing and technology adopted as well as productivity issues faced by selected companies in Malaysia's E&E sub- sectors; ii. To analyze the contribution and the best practices of E&E sub-sectors; iii. To recommend some policies to improve E&E industry's productivity and iv. To identify some relevant and important statistical data for the E&E industry, which are yet to be collected and systematically compiled in Malaysia. 59 SULIT

2. Research Methodology 2.1 Secondary Data Analysis • DOSM, OECD, and others • To determine the Output Multiplier (OM), Domestic Output Multiplier (DOM) by sectors. Based on the national Input-Output Tables (IOT) and Leontief inverse matrices provided by OECD, relevant multipliers were calculated for 36 industries in Malaysia (based on United Nations International Standard Industrial Classification of All Economic Activities Revision 4 [ISIC Rev 4]). The most updated Input-Output Tables that are available is for year 2015. • One of the advantages of using the OECD IOT is that it allows Cross-Country Comparison of the multiplier effects in the E&E industry. 60 SULIT

2. Research Methodology 2.2 Qualitative Study • Targeted respondents are management personnel from MNCs, LLCs and SMEs of 8 sub- sectors from the E&E Industry: Automation, IE, Semiconductor, EMS, Storage, LED, Solar & IoT. • Face-to-face interview was conducted with the with the firm’s management, held from the 15th May to 20th June 2018, 16 companies (5 MNCs, 4 LLCs and 7 SMEs) located at Kedah, Penang, Perak, Selangor, and Johor. 61 SULIT

2. Research Methodology 2.3 Quantitative Study • Targeted respondents are management personnel from MNCs, LLCs and SMEs of 8 sub-sectors of E&E Industry: Automation, IE, Semiconductor, EMS, Storage, LED, Solar & IoT. • The sampling locations are Penang, Kedah, Perak, Kuala Lumpur, Selangor, Negeri Sembilan, Johor, and Sabah. Nearly 800 companies were approached to participate in the survey. This report is based on the responses from 104 companies across various MNCs, LLCs and SMEs. • The data collection was conducted from August to December 2018. 62 SULIT

2.3 Quantitative Study 2.3.1 Re Respondents Profil ile E&E subcategory by MNC, LLC, and SME Total Total Sub-category MNC LLC SME (n) (%) 16% Automation 0 2 15 17 25% Industrial Electronics (IE) 6 3 17 26 21% Semiconductor 10 2 10 22 20% Electronics Manufacturing Services (EMS) 8 5 8 21 Storage 1 0 3 4 4% LED 0 2 6 8 8% Solar 2 0 2 4 4% Internet of Things (IoT) 0 0 2 2 2% 100% Total (n) 27 14 63 104 63 SULIT

2.3 Quantitative Study 2.3.1 Re Respondents Profil ile (cont.) Figure 2.1: Summary of Respondents Figure 2.2: Distribution of Ownership 62% 51% 49% MNC & LLC 39% 29% 26% 19% 17% 15% SME 10% 10% 8% 61% 5% Less than 50% 50% to 99% Malaysian 100% Malaysian 100% Foreigner Malaysian Ownership Ownership Ownership Ownership MNC & LLC SME Total 64

2.3 Quantitative Study 2.3.1 Re Respondents Profil ile (cont.) Figure 2.3: Number of Employees Figure 2.4: Annual Sales Turnover 76% 100% 60% 38% 31% 46% 46% 39% 28% 28% 17% 15% 13% 13% 13% 8% 5% 5% 5% 8% 5% 2% Less than 5 5-75 persons 76 – 100 persons 101 – 200 More than 200 Not more than RM5 RM5.01-RM30 Million RM30.01-RM50 More than RM50 persons persons persons Million Million Million MNC & LLC SME Total MNC & LLC SME Total 65

2.3 Quantitative Study 2.3.1 Re Respondents Profil ile (cont.) Figure 2.5: Malaysia Market vs Export Markets 49% 48% 39% 29% 27% 26% 24% 17% 11% 8% 7% 5% 5% 4% 2% Malaysian market (more than 80%) Malaysian market (60 – 80%) Both Malaysian and Export Export market (60 – 80%) Export market (more than 80%) markets MNC & LLC SME Total 66

3. Key Highlights 3.1 Findings from the Study 3.1.1 Emerging Strong Competition from Other Countries • There is a sign that the E&E industry in other countries is tailing Malaysia closely. • Thailand, Vietnam and Philippines have emerged as close competitors to Malaysia in the E&E industry. Due to lower costs of production, Thailand, Vietnam and Philippine are developing their potential as an important global manufacturing and assembly hub for E&E in the region. • Trade Balance: Vietnam (2012: -US$567.6 million; 2017: +US$11.5 billion) • Trade Balance: Philippine (2010: -US$2.1 billion; 2017: +US$9.5 billion) • Vietnam is likely to move up the E&E value adding chain over the medium term, creating increasing competition for Malaysia in lower value added segments of the industry (The Edge Financial Daily, 2017, February 10). 67 SULIT

3.1 Findings from the Study (cont.) 3.1.2 Different Perception on the Productivity Measurement among MNCs, LLCs and SMEs. • For MNCs, it is mostly productivity and cost-oriented. The utilization of machine and resources in production is calculated by using both operating elements (equipment, machine, operational efficiency and yield), and secondary elements (production time, unit output and target unit per hour) in addition to labour productivity (man to machine ratio). • For LLCs, the measurements used are usually cost oriented. The productivity depends on project complexity, man hours involved and the design of the intellectual property. • For SMEs, the measurements for productivity are generally based on profitability and cash flow method. 68 SULIT

3.1 Findings from the Study (cont.) 3.1.3 Most of the MNCs and LLCs are Aligned Figure 3.3: New Initiatives/Activities or New with Industry 4.0 Developments lately • The current technology used in the production processes of MNCs and LLCs are aligned with Yes; 71% Industry 4.0. For instance, the automated test system, assembly and test automation, latest Yes; 58% No; 51% surface mount technology, big data analytics Yes; 49% and etc. No; 42% • For some of the SMEs, their production heavily No; 29% relies on human hands where products are assembled by workers instead of robots or machines. This is due to staff dislike to try new things and always use conventional methods. Besides, the repair cost for high-end machines MNC & LLC SME Total and the staff re-train costs required when a No Yes new product or technology is adopted are high. 69 SULIT

3.1 Findings from the Study (cont.) Most of the MNCs and LLCs have produced Intellectual Properties (IPs) and filed their IPs in the US, Japan, Taiwan, Singapore, China, Germany and France. On the contrary, only a handful of SMEs have filed their IPs in Malaysia. Figure 3.4: IP Ownership Figure 3.5: IP Filing No; 75% 95% No; 66% 69% No; 54% Yes; 46% Yes; 34% 38% 38% Yes; 25% 25% 20% 11% 5% 0% MNC & LLC SME Total MNC & LLC SME Total No Yes Malaysia Overseas Malaysia and Overseas 70

3.1 Findings from the Study (cont.) 3.1.4 Sources for Direct Materials – MNC & LLC from Overseas Suppliers and SME from Local Suppliers The materials used for production are sourced from local suppliers and import from overseas. On average, 57% of the direct materials of MNCs and LLCs are imported material from overseas - especially MNCs from Solar, EMS, IE and Semiconductor (Figure 3.6). Figure 3.6: Sources of Direct Materials from Local Suppliers an Imports Imports; 57% Local Suppliers; 57% Local Suppliers; 52% Imports; 48% Local Suppliers; 43% Imports; 43% MNC & LLC SME Total 71 Local Suppliers Imports

3.1 Findings from the Study (cont.) 3.1.5 MNC/LLC are Leading in Product and Process Innovation • About 66% of MNCs/LLCs have claimed that they have introduced new/significantly improved products onto the market for the past 3 years as compared to 63% of SMEs. • About 63% of MNCs/LLCs have claimed that they have introduced new/significantly improved process innovations/methods of manufacturing or producing goods for the past 3 years as compared to 59% of SMEs. Figure 3.7: Introduced a new or significant products and a new or significant improved methods for the past 3 years 66% 64% 63% 63% 61% 59% MNC & LLC SME Total New or significantly improved goods (exclude the simple resale of new goods and changes of a solely aesthetic nature). New or significantly improved methods of manufacturing or producing goods or services. 72 SULIT

3.1 Findings from the Study (cont.) • Training for innovative activities and acquisition of new equipment (i.e. physical/software), in- house R&D are the main innovation activities for MNC/LLC and SME. Figure 3.8: Product Innovation and Development 80% 76% 70% 48% 42% 38% 38% 33% 33% 31% 30% 26% MNC & LLC SME Total Your company by itself Your company together with other companies or institutions Your company by adapting or modifying processes originally developed by other companies or institutions Other companies or institutions 73

3.2 Manufacturing and Technology Enhancement Electronic industry in Malaysia has moved from labour intensive manufacturing in the 1970s to the current research, design, develop and manufacture with Industry 4.0 elements. 3.2.1 IoT: Products Business Development & Technology Evolution • Very fast-pace changing industry • Requires the knowledge of electronics hardware, software coding, big data analytics and Artificial Intelligence 2005 - 2010 2010 - 2015 2015 - now • • • IoT sensors can be viewed 2010-2015: Viewing and Big data analytics of huge and controlled remotely controlling of IoT sensors volume of data collected through the Internet anytime, anywhere from IoT sensors • (computer) through smartphone Automatic control of IoT mobile application and sensors remotely by cloud 3G/4G mobile networks computing using Artificial Intelligence technology SULIT 74

3.2 Manufacturing and Technology Enhancement (cont.) 3.2.2 EMS: Business Development & Technology Evolution 1990s 2000s 2015 - now 2015 - now OEM’s rapidly Many OEMs sold their EMS providers in Well-connected installing Surface assembly plants to Malaysia have started automation, self- Mount Technology EMS aggressively to move into photonic optimization and (SMT) lines and EMS vying for larger integrated substrate, predictive concept became market share. A wave integration of manufacturing that is compelling and OEMs of consolidation semiconductor and aligned with began outsourcing followed, as the more photonics, medical Industrial 4.0. PCB assembly (PCBA) cash-flush firms were equipment assembly, in a large scale. able to swiftly buy-up 3D printing, additive both existing plants manufacturing and as well as smaller advanced complex EMS companies. PCBA 75 SULIT

3.3 Areas of Improvement 3.3.1 Weak Linkages and Low Value-Added • Weak linkages and low value-added in the E&E industry in Malaysia. It is important to develop a competitive and sustainable E&E industry in Malaysia, with the assistance of MNCs and active participation of LLCs and SMEs. (Qualitative survey: Responses from 1 SME and 3 MNC respondents) • Some of the E&E companies are located in FTZ and LMW areas, which requires them to export 80% of their production. As a result, local suppliers supplies less to their value-added. • In the long run, there should be policy in strengthening linkages and increase value-added. 3.3.2 Lack of Access to a New Market • Lack of a matured ecosystem within the semiconductor sector. Our local IC design and manufacturing companies are required to seek businesses overseas. However, local companies do not have the access or rather lack of access to the global supply chain. (Qualitative survey: Responses from 2 SME and 2 MNC respondents) 76 SULIT

3.3 Areas of Improvement (cont.) 3.3.3 Lack of Funding to Develop a New Product and Invest in R&D • Most of the SMEs did not invest much in R&D and human capital (such as training and workshop). Majority of SMEs do not engage frontier research facilities with Malaysian universities. This causes SMEs to have low value-added and innovative product, low labor productivity and inflexibility. (Qualitative survey: Responses from 4 SME and 1 LLC respondents) • SME’s have lack of capital to invest in R&D. (Qualitative survey: Responses from 2 SME, 3 LLC and 3 MNC respondents) 77 SULIT

3.3 Areas of Improvement (cont.) 3.3.4 Mindset of SMEs • Some SMEs are not aware of the incentives given by the government since the information may not reach them. Companies, especially SMEs, have limited ability to fill out complicated forms since there is no clear guidelines provided. • In addition, some companies are not sure which products can claim incentives (e.g. most of the SMEs’ product is only a part of the final product from other companies). Besides, writing and submitting the reports to the government after receiving the incentive would be a burden to SMEs since most of their workers are technicians. (Qualitative survey: Responses from 1 SME and 1 LLC respondents) • Some SMEs are aware of numerous programs, but they are reluctant to send their staff for training due to resources constraints and perceive difficulty in retaining trained staff. 78 SULIT

3.3 Areas of Improvement (cont.) 3.3.5 Insufficiently Skilled Engineers • Some respondents opined that some of the engineers in the current market are not meeting the expectation of E&E industry (Qualitative survey: Responses from 1 SME and 1 MNC respondents) • In reality, many MNCs are able to hired experience and qualified engineers. However, some SMEs cannot afford to pay for it (experience and qualified engineers), and complain about engineers’ competency. 3.3.6 High Production Cost and Import Duty on Raw Materials • This results in E&E companies (especially SMEs) unable to compete with other countries, particularly China, even when Malaysian firms has the capability to design. (Qualitative survey: Responses from 4 SME respondents) 3.3.7 Increased Investments on Infrastructure (e.g. Broadband and transport networks to speed the movement of people and goods) 79 SULIT

4. The Contributions of E&E Industry 4.1 Economics Perspectives • Electrical and electronics is the leading sector in terms of foreign investments and become Malaysia’s major contributor to employment, output and exports. 2016 (E&E) 2017 (E&E) Indicator RM billion RM billion 287.7 a 343.0 b Exports (36.6% of total exports) (36.7% of total exports) 209.9 c 252.9 b Imports (30.0% of total imports) (30.2 % of total imports) 77.8 90.1 Net Exports (88.3% of total trade balance) (91.5% of total trade balance) Self-Calculate (77.8/88.15 d ) Self-Calculate (90.1/97.25 d ) 62.64 g 67.75 g Value Added at basic price 106,647 g 110,858 g Labour Productivity in Manufacturing (RM) 132,085 g 139,724 g Labour Productivity in E&E (RM) 474 g 485 g Employment (‘000) Sources: MITI, 2016 a & 2017 b ; MITI bulletin 2017 c ; MITI 4 th Quarter, (2017) d ; MPC, 2018 g 80 SULIT

4.2 Multiplier Effects 2015 (2011) Electronic Electrical Multiplier Ratio Rank Ratio Rank 3.512 2 3.222 7 Output Multiplier (OM) (3.792) (3) (3.795) (2) 1.712 20 1.566 29 Domestic Output Multiplier (DOM) (1.498) (31) (1.760) (21) 1.800 1.656 Imported Intermediate (OM – DOM) (2.294) (2.035) 56.4 54.2 Imports content of exports (as % of exports) (67.4) (62.7) Source: OECD Input-Output Tables 2018 Edition (ISIC Rev 4) 81 SULIT

4.2 Multiplier Effects (cont.) Multipliers and Key Indicators of the E&E Industry in Malaysia, Vietnam, China and Thailand (2015) Malaysia Vietnam Thailand China Indicators Electrical Electronics Electrical Electronics Electrical Electronics Electrical Electronics Output Multiplier (OM) 3.222 3.512 3.663 3.516 3.024 2.822 3.349 3.428 Domestic Output Multiplier 1.566 1.712 1.632 1.375 1.474 1.514 2.800 2.477 (DOM) Value Added at basic price 2,757.6 17,506.6 3,330.6 3,817.1 3,187.8 13,418.4 151,730.0 223,220.9 (US$ million) Imports content of exports, 54.2 56.4 59.1 62.5 55.9 47.8 19.0 30.4 as % of exports Exports (US$ million) 7,917.1 54,972.3 5,842.6 11,888.7 9,323.2 33,389.8 211,025.6 493,044.9 Imports (US$ million) 7,763.1 29,936.6 8,019.2 18,051.0 11,465.1 23,372.6 51,555.9 327,427.1 Net Exports (US$ million) 154.0 25,035.7 -2,176.6 -6,162.3 -2,141.9 10,017.2 159,469.7 165,617.8 Source: OECD Input-Output Tables 2018 Edition (ISIC Rev 4) 82 SULIT

4.3 Contributions of E&E Companies in Malaysia – beyond Manufacturing • Funding assistance to employees to further their studies. Talents • Transfer activities – sending people overseas to learn and transfer skills & knowledge gained. • Conferences, seminars and benchmark activities. • Set up training centers in Malaysia with overseas trainers. • Workforce transformation (postgraduate degree for engineers – collaborate with USM; Technicians to Associate Engineers; Operators to Manufacturing Specialists). • Finance, IT & HR Shared Services, Global Sourcing & Emerging Logistics Hubs, Profit Expansion of & Loss (P&L) and Operation Centers. Responsibilities • Many MNCs made Malaysia as the hub of their operations in the region - Osram Opto Semiconductors, B. Braun's Global Center of Excellence for Intravenous Access products which comprise of the production and R&D functions, Peugeot's ASEAN manufacturing hub and Honeywell's ASEAN Regional Headquarters (MIDA, 2018). 83 SULIT

4.3 Contributions of E&E Companies in Malaysia – beyond Manufacturing (cont.) • Management competencies – exposure, teamwork cohesion and organizational Regional and innovation in influencing organizational performance in Malaysia’s E&E industry. Global • More than 99% of local managers are leading MNCs . Leadership • Information Technology hub (data centers and networks, software & application Establishment of for new technologies). Information and • Contribute to technology development (for example, Keysight Technological Technology contribution to automotive – introduce 76 – 81 Ghz Radar and LIDAR technologies Development targeting Advanced Driver Assisted System for Automotive Collison Avoidance Centres Application). • Infineon is collaborated with UTAR, UniMAP, USM, IIUM, UM, AIMST and KDU Cooperation (MIDA, 2017). with Universities • Intel has also collaborated with UiTM, USM, UTM, UTP, UNITEM, MMU, UniMAP, and UTAR for advisory panels or in curriculum development (MIDA, 2017). 84 SULIT

4.3 Contributions of E&E Companies in Malaysia – beyond Manufacturing (cont.) • SME Corporation Malaysia’s (SME Corp) capacity building programme to Others produce local solid-state lighting (SSL) champions and aims to develop Malaysia’s SSL value chain towards chip and application R&D (Prime Minister’s Department, 2017). • A shared test and measurement hub was set up in Penang in year 2014, led by Keysight Technologies and facilitated by NCIA, to develop local test and measurement companies as they seek to grow their research, development and commercialization capabilities (Prime Minister’s Department, 2017). • As of 2017, MIMOS has established an E&E shared services platform for advanced analytical services in the semiconductor industry which is currently utilized by over 300 companies (Prime Minister’s Department, 2017). 85 SULIT

5. Recommendations for MIDA Incentive Process 2019 Plan (Recommendations) 1. The Government should formulate a Strategic Investment Policy to provide guidance for the types of investment which are aligned with the strategic directions of the nation; 2. The ‘Promoted Investments’ list, under PIA, should be regularly updated and revised to stay relevant with the global technological and market trends; 3. Consider extending the incentive period, from 5 years to 10 years so that NCI is empowered to make such decisions without going to MoF as long as criteria is met; 4. Where there are concerns or uncertainty on meeting criteria/guidelines, it is recommended that NCI seeks professional/expert opinions to support new applications and those that do not fall under PIA’s ‘promoted investment’ ; 5. NCI must be empowered to make decisions and thus be responsible and accountable, for their approvals of applications. As such, the recommended tenure of NCI’s membership is minimally 3 years; 86

5. Recommendation for MIDA Incentive Process 2019 Plan (Recommendations) 6. NCI’s Committee should be a person with experience, knowledge on the industry, and able to provide leadership to effectively support the strategies of the country in both local and FDI investments; 7. NCI should explore getting additional representative(s) from MOF’s Fiscal and Economics Division (FED) so that the economic concerns from the industry can be better appreciated. 8. Other IPAs such as Iskandar Johor, Northern Corridor Economic Region and etc. should be rationalized and consolidated under NCI. 9. Feedback from SMEs is that it is not easy to fill out the forms to apply for incentives. It is suggested that MIDA to continually to review the forms regularly to stay relevant aligned with industry trends. 10.There is a need to form a Federation of E&E industry to provide feedback and advocate to the government the strategies of the industry, and recommendation on the PIA list and its concerns. 87

6. Recommendations 6.1 Short Term Recommendations 6.1.1 Focus on Human Capacity Development • Training is important for skills formation and the development of core competencies. Training is highly emphasized by both MNCs and LLCs in order to remain competitive; • However, SMEs’ training is significantly lacking, which might be due to several factors (e.g. high training costs); • More emphasis on E&E-related trainings could be offered through several specialised training centres that are HRDF-claimable, with a higher priority for SMEs personnel to attend trainings; • Training providers should discuss with selected E&E SMEs to conduct a comprehensive Training Needs Analysis (TNA) to better cater to their needs; • The current conferences are more focused on theoretical discussions. Therefore, conferences emphasizing more on practical is needed to allow E&E organizations to share, demonstrate and discuss on latest manufacturing processes and products as well as quality management topics. 88 SULIT

6.1 Short Term Recommendations (cont.) 6.1.2 To Recruit Foreign Knowledge Workers Who Graduated from Malaysia Higher Education Institutions (especially with postgraduate qualification) • The E&E industry may consider to hire foreign experienced engineers (especially those who have studied in Malaysia with postgraduate qualification); Table 6.1: Number of Students' Intake, Enrolment and Output for Science, Table 6.2: Number of Students' Intake and Mathematics, Computer, and Engineering, Manufacturing & Construction in Enrolment and Output (Non-Malaysian) by Level of Public Universities and Private Higher Education Institutions (HEIs), 2017 Studies in Private HEIs, 2017 Intake Enrolment Output Level of Studies Non-Malaysian Intake Enrolment (General) Public Universities PhD 626 2,414 Science, Mathematic & Computer 1,459 5,120 1,094 Master 2,297 8,279 Engineering, Manufacturing & 1,984 6,457 1,319 Construction Bachelor 8,998 45,774 Private HEIs With University Status Diploma 2,428 37,119 Science, Mathematic & Computer 1,725 10,247 No information Certificate 2,225 7,179 Engineering, Manufacturing & 2,438 15,290 No information Construction Total 16,574 100,765 Source: Ministry of Education Malaysia, Higher Education, 2018 89 SULIT

6.1 Short Term Recommendations (cont.) 6.1.3 To Strengthen Linkages between Universities and Industry • Continual programme to retrain and upgrade the competency of unemployed engineering graduate to full the needs of E&E industry; • Encourage more Work-Based Learning (WBL) programmes in universities. WBL is a current educational model that provides learners with real-life work experiences where they can make use or merges academic knowledge with practice to increase their employability - In Malaysia, they are 7 universities to offered 2u2i programme; • It is suggested that the internship programme to be extended from 3-4 months to at least 6 months. Companies have commented that the duration of the internship is too short for meaningful training to be conducted. A purposively designed internship curriculum is critical to enable students to undergo structured and proper training and • Industry may work with university to develop industry-related projects for students to work on, to address critical and real issues encountered by the industry, and to train future workforce. 90 SULIT

6.1 Short Term Recommendations (cont.) 6.1.4 To Enhance and Encourage Cooperation, Linkage and Knowledge Sharing among E&E Industry • Compile the list of E&E companies, inclusive of MNCs, LLCs and SMEs in Malaysia. This list needs to be classified based on the Malaysia Standard Industrial Classifications 2008. The proposed list needs to be updated at least annually; • The list will be useful in disseminating the updated information on productivity issues, technology development, government policies and strategies, conferences, seminars, and workshops to E&E companies, especially SMEs; • There should be a specified new or existing center or agency (for example, “Technology Center”) in charge of collecting and compiling the data and information on cutting-edge productivity and innovation management, latest products and manufacturing processes, and best practices, and • This center and agency will then disseminate the data and information to the entire E&E industry. This center and agency can establish programs that focuses on developing customer insights in emerging markets that provides market information back to domestic manufacturers. Information and market data should be shared within the industry, investors, researchers, academics, and the public sector to improve chances of successful commercialization. 91 SULIT

6.1 Short Term Recommendations (cont.) 6.1.4 Collect or Compile Useful Statistics • Percentage of the materials from a specific company are sourced from local suppliers; • Name of New/Significantly improved goods (exclude the simple resale of new goods and changes of a solely aesthetic nature) for the past one or 3 years; • Name of the New/Significantly improved methods of manufacturing or producing goods or services, and • Percentage of services type activities such as R&D, marketing and sales, and customer support in manufacturing’s employment. 92 SULIT

6.2 Mid Term Recommendations 6.2.1 Focus on High Value-Added Activities • High value-added activities such as designing and developing high-end activities, particularly at the upstream level needs to be given extra attention; • Due to huge investment costs needed and lack of expertise, there is limited effort for local companies to move up the value chain - local companies should be provided with the opportunity to partnering with MNCs for new products development, rather than focusing on their traditional assembling, testing and providing low value-added support services to MNCs (unless it is state-of-the-art), and • Fund allocation given by the government to support local companies may be considered. Incentives may be provided to MNCs to encourage them to shift some of their sophisticated operations to Malaysia, in order to ensure proper technology transfer takes place. 93 SULIT

6.2 Mid Term Recommendations (cont.) 6.2.2 To Grow Local Leaders (LLCs and SMEs) & To Keep the Momentum of MNC, LLC, and SME • Policies which facilitate technology transfer and collaborations in the form of joint research and development activities, and to promote comprehensive entrepreneurship education to create students’ interest in entrepreneurship as well as to foster talents and capabilities among students, are of key importance; • Building conducive institutional framework, especially to rationalize and simplify regulations, reduce administrative burdens and compliance costs as well as to create more transparent and competitive business environment are essential; • The momentum of MNC, LLC, and SME need to keep through improving technology management (to keep the competitiveness of MNC and LLC), improve industrial linkages with local players (to develop SMEs), enhance R&D activities and capacity development, and • There could be many potential “hidden champions” in the E&E sector in Malaysia, who are doing incremental rather than radical technology or process (distribution, marketing and sales) rather than products innovation, but unidentified - These “hidden champions” could be nurtured to become local champions to further develop the existing supply chain ecosystem. 94 SULIT

6. Recommendation 6.3 Long Term Recommendations 6.3.1 Strengthen Industrial Clusters within the E&E Industry • The successful establishment of Penang’s semiconductor cluster, with an integrated E&E ecosystem supported by MNCs; • The emergence of disruptive technologies and technology advances, there is an urgent need to adapt to changes to maintain its competitiveness - no longer compete on cost competitive advantage; • The main challenges currently facing the E&E industry are lack of a breakthrough in innovation, and lack of supporting industries and linkages within the E&E ecosystem, particularly with SMEs; • Creation of platforms to promote strong partnership between businesses, public entities and knowledge institutions, such as the one-stop supply chain hub to be set up by ViTrox, Pentamaster Corp Bhd and Walta Engineering Sdn Bhd, and • Industry leaders should take the initiative to promote the linkages, because they will also benefit from a stronger cluster developed . Incentives in the form of tax reduction or subsidies to companies facilitating such industrial linkages and networking, especially with local suppliers and supporting industries, funding to encourage the development of local technologies through R&D, improved supply chain management and technology management capabilities. 95 SULIT

7. Best Practices Area MNCs • The current technology and equipment adopted are aligned with Industry 4.0 - state of the art technology know how (robotic automation, smart torque technology, automated test system), state- Technology of-the-art equipment (transportation using robotic, cyber-physical system), Supply Chain Dashboard, Smart factory with M2M communication, and Big Data analytics. • The management is rich internal and external experience which resulted from a strong leadership. • Adopting flat and lean structure which allows for cost-efficient in the organization, higher flexibility as well as clear and direct communication among the knowledgeable and experienced employees. Management • The management encourages an open door policy where to ensure higher transparency and trust with their employees. • Homegrown system (E-dashboard / Manufacturing Execution Systems; MES to monitor productivity) to allow for real-time data collection that enables the management and operators to understand the problem and constraints to address the issue in the production. Productivity • Automation journey will drive significant quality improvement and reduce labour cost. • Web-based shop floor enables tracking of personnel output and quality, as well as tracking the test station utilization and downtime. 96 SULIT

7. Best Practices (cont.) Area LLCs • LLCs possess the latest automation and software tools in moving towards Industry 4.0 Technology • Some companies possess an R&D team with the right balance of skills and talent which contribute to success in product improvement and product innovation. • Management is encouraged and actively attend or participate seminar more often in order to update their latest knowledge, especially on technology aspect. • Management continuously updates their knowledge by attending trainings. Management • Management started using Microsoft Dynamics AX Enterprise Resource Planning (ERP) solution, aimed at improving the internal processes and controls for sales, product design, purchasing, inventory management, production and logistics. • Embarked on a company-wide 5S & lean program to increase efficiency and reduce Productivity wastages in the production process. 97 SULIT

7. Best Practices (cont.) Area SMEs • Customize R&D and product design for the customer. • Adopting industry standard to enable universal data communication for the usage of data Technology analytic and unlock data value. • Possess a well-developed ERP system to track on the internal processes and controls for sales (orders), product design, purchasing orders, inventory management (raw materials, finished product), production and logistics. • Good mix of the management team with diverse background and expertise in different Management areas. Helps to expose new ideas and perspectives for product design as well as solving problems under different conditions. • Reports and technical challenges are daily discussed and shared in a centralized manner, so that information can be obtained and executed well by each staff. • Practice on 5”S” on the workplace manufacturing process to eliminate waste, streamline Productivity production, optimize workplace efficiencies, and improve workplace safety. 98 SULIT

8. Summary i. The E&E industry has huge and significant impact on the Malaysian economy in terms of international trade balance, productivity and employment, especially the contribution by MNCs and LLCs; ii. The E&E industry, especially MNCs, has helped the Malaysian government to produce and train significant number of skilled workers plus local leaders/managers who are equipped with knowledge and can handle high-technology equipment's as well as produce high value-added products; iii. Our nation needs them to grow local leaders. To develop the expertise in management and technical areas, to focus on high value-added activities such as designing and developing high-end activities, and to increase sectoral competitiveness through policies, such as investment policy as well as import and export policy; 99 SULIT

8. Summary (cont.) iv. To promote strong linkages between industry and universities, and v. Country must have a long-term development plan and strategic to enhance the E&E industry in Malaysia due to huge and significant contribution on the Malaysian economy. 100 SULIT