E&E sector undergoing transformation in Northern Corridor

  • NCIA ensures investments into region benefit and upgrade expertise of local companies
  • AMD invests RM783m into adding testing services to its existing IC packaging and assembly

E&E sector undergoing transformation in Northern Corridor“THE LAST time I saw a semi-automatic washing machine was at my aunt’s house when I was a kid,” recalls Datuk Redza Rafiq (pic), chief executive officer of the Northern Corridor Implementation Agency (NCIA). He and his friends were quite in awe of the machine and how it worked. That was in the early 1980s.
 
Fast forward to 2011 and Redza was again getting familiar with semi-automatic washing machines because they were the hottest selling item of ECE Technologies Sdn Bhd which designs, manufactures and distributes audio visual, home and kitchen appliances for the local and international market.
 
With over RM7 million revenue in 2010, ECE is in the midst of expanding out its local supplier base by identifying 13 new suppliers to increase the local component portion of its popular washing machines from around 50% to 70% next year.

[RM1 = US$0.33]
 
This is where NCIA comes into the picture. Nurturing the local supplier base is a critical component of building out the ecosystem, with the aim for these players to first supply the needs of Malaysian anchor companies.
 
The agency plays it part by aiding in upgrading and upskilling local businessmen to grow into competitive small and medium sized businesses (SMBs), enabling them to then target multinational clients.

Thus far NCIA has helped ECE identify four suppliers. With 65% of its exports going to developing markets and with an expected 3.2 billion Asians expected to move into cities by 2050, Redza is excited about the opportunities that lay ahead for ECE and its network of local suppliers.

“They even do their own design and are not an OEM player. This design capability they have is high value, high knowledge work and can eventually be applied to other areas,” he points out.
 
Gearing up for this demand, ECE has invested RM50mil in 2011 just for a washing machine plant and with a further RM40 million to be invested in two more plants in 2013.     
 
Growing out the local supplier base is a key feature of the work NCIA does. Even when it secured a big investment from Singapore Aerospace Manufacturing in 2011 which was worth RM500 million, the usual goodies extended to foreign investors came with the condition that Singapore Aerospace award a certain number of contracts to local companies, Redza points out.
 
But what if local companies are not competent enough to meet the standards expected? This is where the various Centers of Excellence (COEs) in the Northern Corridor come into the picture to advise, provide the expertise and training to local suppliers. There are five such centers in the country including one in University Science Malaysia, which houses the Engineering COE.
 
At the same time NCIA is upskilling the SMBs in the northern corridor, Redza notes that the electronic and electrical sector which is the heartbeat of the region, is also going through something of a transformation with a focus on higher value work. This is best exemplified by AMD which has moved from just packaging and assembly of IC chips to testing. An investment of RM783 million was made, of which RM14.1 milion came from NCIA. “A catalystic investment from us,” notes Redza.
 
This testing focus has created 700 high value jobs.
 
The creation of high value jobs is also the ultimate aim of another agency that was created in June. CREST or Collaborative Research in Engineering, Science and Technology aims to be the bridge between the research that goes on in universities and the commercialization of that research which is best done by the private sector.
 
Helmed by Jaffri Ibrahim, what is unique about CREST is that its board is made up of key private sector players in the north such as Agilent, Alterra, Motorola, Avago and others. As a result, “the collaboration between CREST and industry is like nothing I have seen before,” says Redza who is excited about the strong buy-in he sees from the private sector towards the efforts of CREST.

In fact, Redza shares that it was a representative from Agilent who made the initial presentation to the Implementation and Coordination Meeting chaired by the Prime Minister about how CREST would work.
 
Meanwhile, July saw a development in the Northern Corridor that Redza says has the potential to be a huge ecosystem boost. This was when Datuk KS Pua, chairman of Taiwanese listed Phison Electronics opened design and development center, Phisontech Electronics (M) Sdn Bhd in Penang.

Phison is a global leader in controller technologies, which also include USB flash drives, flash memory cards, solid-state devices (SSDs), and embedded NAND Flash solutions.

Pua also recently signed a deal with three local companies, including Pensonic Bhd, to source components from them. Apart from his eventual total investment of RM60 million into the R&D center, the fact that Pua is taking a personal interest to help elevate the semiconductor design and development capabilities in the Northern Corridor bodes well for the continued relevance and future competitiveness of the region as a magnet for high value investments into the region.
 
“Pua is pulling together other local companies to do bits and pieces for him because he is a fabless player and this will elevate their capabilities because once they can meet his demanding standards, they are ready to compete for global business and attract other key players in the value chain to Malaysia,” notes Redza.
 
And when this happens, NCIA is there to play its role in ensuring the investments come into the Northern Corridor and with the right trickle-down components to spur local industry and elevate their capabilities.

Previous Installment: NCER scores big by letting the private sector lead

 
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