Looking to build the E&E ecosystem

  • Nothing beats success to spur interest of others to follow suit, says KS Pua of Phison Electronics
  • Creative Product Development Program hopes to be catalyst for 35,000-strong design community to get involved

Looking to build the E&E ecosystemMALAYSIA’S electronics and electrical (E&E) sector has long been an economic pillar, but K.S. Pua (pic) is not overly impressed by the billions in revenue the industry has generated, nor the hundreds of thousands of jobs it has created.
In 2011 E&E exports were valued at RM236 billion (US$76 billion), accounting for a 50.3% share of Malaysia’s manufactured exports and a 34.1% share of total exports.
“It [the E&E sector] is built on low-cost labor and generous incentives thrown in by the Government to attract multinationals here” – a model which is not sustainable, he says, adding, “They [the multinationals] can leave anytime.”
Nor has there been significant value-add. “There has been no technology transfer to speak of,” he claims.
Why should Pua’s opinion on this matter? Because the Malaysian is chief executive officer and founder of Phison Electronics Corporation, a Taiwan-listed fabless IC (integrated circuit) design company which had revenue of US$1.1 billion with net profits of US$88 million for its financial year 2011. It is currently in the third quarter of its 2012 financial year.
And also because Pua, who has been in Taiwan since the 1990s, first as an engineering student, has seen how the Taiwanese Government’s push to create a home-grown E&E sector has paid off handsomely.
“If you go to the tech parks in Taiwan today, over 95% of the companies there are Taiwanese. Now that’s sustainable and value-added growth,” he says.
That is why, soft-spoken as he is, when Pua talks about the E&E sector, his words carry a lot of weight. In fact, the Taiwanese Government considers him as part of that nation’s success story too, and regularly invites him to share his experience with university students to inspire them.
With over 20 start-up competitions a year in Taiwan, university students are eager to become entrepreneurs. “I speak to between 100 and 200 kids at my talks and they are all eager to do something different, but I tell them to be patient and get some experience under their belts first,” he says.
“Do you think this is happening in Malaysia today?” he poses. Answering his own question, he says: “It’s tough. And that is because there are simply no success stories here, whereas there are plenty in Taiwan and nothing inspires people more than role models and success.”
Creating success stories in Malaysia
It is his desire to help Malaysia replicate the E&E success of Taiwan that led him to launch an R&D (research and development) subsidiary, PhisonTech Electronics Malaysia, in Penang in March last year.
And why he has got Phison involved in the Creative Product Development Program for Malaysian designers that was launched recently with five industry partners (including Phison) and Mida (the Malaysian Investment Development Authority).
The other industry partners are Pensonic, Fusion Wave, EMTEC and Cari.com.
It was important enough that Pua attended the launch. To him, the Creative Product Development Program is all about creating Malaysian success stories. But those stories can only be created by encouraging Malaysians to become entrepreneurs.
Many will fail but it is on the shoulders of the successes that the building blocks of an entire ecosystem will be created, gradually but surely, as with Taiwan. “From nothing, we will try to create everything,” he says, meaning creating an ecosystem for the E&E sector that is Malaysian-based. The design element of this program is thus an important component.
The program is targeted at the over 35,000 creative entities defined as companies and individuals involved in various design work – that is, fashion design, industrial design, branding, public relations, 3D modeling and even R&D.
The program aims to encourage these creative types to target the global market opportunity of US$170 billion in the digital entertainment and lifestyle product market.
Looking to build the E&E ecosystemFancy thumb drives
In this consumer market, the look and design features matter because in this red ocean of product commoditization, this is the only way to stand out and command a premium in pricing. ‘Look’ is all about the design, the art of the product; ‘feature’ is about the digital technology embedded in the product.
For example, you and I may both have a USB thumb drive, but your Superman-shaped thumb drive casing is way cooler than my utilitarian one and you are ever ready to whip it out and show it off. And more importantly, you are willing and happy to pay a premium for that.
Just ask Henri Vignat (pic). Showing me the amount of detail that goes into an Angry Bird-shaped flash drive, which consists of nine separate parts carefully glued together by hand, he exclaims: “This is a work of art!”
The Frenchman is director of Emtec, a French company that sells various digital products such as flash drives, hard drives, MP3 players and memory cards. But its flash drives and MP3 players come in the shape of cartoon characters from Looney Tunes, Warner Bros and now Angry Birds.
But more important than the high quality of the Angry Bird flash drive is the fact that consumers, even in the Malaysian market, have been willing to pay a premium for his products.
A well designed product sells. The designers, especially if they own their own intellectual property, make money and those IT resellers who complain of razor-thin margins will make more money.
And here is the interesting part: Even Malaysian-designed characters are selling in this market segment. Just ask Luk Chee Chew, design director of Fusion Wave which has a character called Dweyy, also available as a flash drive. Based on its success with this, Fusion Wave will provide support to designers by helping translate their ideas into market-accepting products.
Cari.com, as one of the Top 10 most popular sites in Malaysia by traffic, will provide online and e-commerce support.
Pensonic is going to create an incubator space in its new Penang facility to house some of these design creatives to help them with the development and distribution of their products.
And this coming together of industry players to spark success stories is really the trigger for Mida to support this program in the hope that the fragmented design communities will join forces with the industrial design engineers to help boost the E&E ecosystem in Malaysia.
The integrated chip R&D houses like PhisonTech help add the electronic components to the design elements. For instance Pua shares that PhisonTech helped translate the 2D drawings that Emtec’s Vignat gave them into a 3D model that took into account production costs and technology integration.
For the Angry Bird, flash drive, PhisonTech’s interpretation of the design had 15 separate parts which Emtec cut down to nine, taking into consideration the market price of the end product.
Under the Creative Product Development Program, Emtec is a global partner and has chosen PhisonTech to be its partner in providing the electronics, housing design and manufacturing. This gives PhisonTech immediate revenue while it waits for local players to engage its services.
Pua’s hope is that the success of Emtec’s creatively designed products will inspire Malaysians to get into this space too. He has done his part; now it is up to the design communities to do theirs.
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