The Penang Automation Cluster (PAC) has taken up the challenge of localizing Malaysia's geographically scattered manufacturing industry, which could prove to be an example for industrial development elsewhere in the country.
According to industry figures, the global automation market is set to scale USD350 billion in 2020. This paradigm shift will gain momentum with the implementation of Industry 4.0. With this in mind, Malaysia’s industrial matrix in the 2015 to 2020 period focused squarely on factory automation. Therefore, June 24, 2016, was a turning point as PAC, a joint industry-government initiative, was established to advance the competitiveness of electronics and engineering (E&E) enterprises. It was envisioned as a comprehensive machinery & equipment solutions cluster that would principally house SMEs combining innovative and productive potential with world-standard quality and consistency. Moreover, the output of the hub was destined to meet local and export market demand of multinational corporations (MNCs) in such areas as semiconductors, electronic and electrical equipment, medical devices and avionics. While resident SMEs will initially engage in metal fabrication, supplying tooling and machining products to MNCs, over time they will advance to the design and development of high precision components for diverse industrial applications.
Malaysia has been working to ensure industrial readiness for the imminent ubiquity of Industry 4.0, and the orchestrated manufacturing enabled by IOT. In October 2018, Malaysia’s International Trade and Industry Ministry kicked-off its Industry4WRD: National Policy on Industry 4.0 to champion the digital transformation of manufacturing. As of March 2019, around 300 SMEs had sought assistance from the ministry to assess their state of preparedness for Industry 4.0.
…is Not Just Robots
The government has made sure that skilled workers are available to operate the technologies of tomorrow, and such programs as the National Dual Training Scheme under the Human Resources Ministry taps local talent, while double tax deduction incentivizes wider adoption of Industry 4.0 specialization. Locally E&Es printed 6.4% growth in 2018, solely trailing transportation equipment and repair services. It also delivered MYR380.8 billion (USD91 billion) of total volume of goods exports, accounting for 39.4% of the total on 11% YoY growth. That’s north of the year’s 6.7% growth in overall exports.
The numbers, as ever, say it best. 98.5% of Malaysia’s businesses are SMEs. What is more, official figures estimate their share of GDP by 2020 at 41% by 2020, accounting not just for 65% of employment, but 23% of exports (18.6% in 2016). PAC is a strategic JV of three large local firms, namely ViTrox Corporation Berhad, Pentamaster Technology, and Walta Engineering—the first two being listed companies with 35% stakes apiece. The hub will ensure the local availability of manufactured products, and these three firms are earmarked to account for 50% of resident SMEs’ output. By the end of 2019, all 18 SMEs are due to be in residence within the PAC ecosystem, with around 500 skilled jobs created. Those businesses will enjoy reduced rent for the first five years, as well as training in advanced technological processes. The owners estimate that for 2021 each SME could generate revenue of MYR6.5 million apiece, amounting to MYR118 million. In terms of markets, Vitrox serves customers in the semiconductor outsourced assembly and test (OSAT) business, as well as printed circuit board manufacturers, original equipment manufacturers (OEMs), original design manufacturers (ODMs), and electronics manufacturing services (EMS) providers among others. Automation solutions and service provider Pentamaster is engaged in advanced automation manufacturing and technology solutions for the semiconductor, automotive, and medical device industries. Meanwhile, Walta Engineering provides solutions, among others, for the hard disk drive, pharmaceutical, and medical devices industries, plus assembly and installation of automated systems. Malaysia’s government is to roll out eight training initiatives this year to facilitate the adoption of Industry 4.0. The PAC hub, and potentially other such industrial clusters, will play a key economic role. In fact, by 2030, Malaysia, together with the other ASEAN member states of Indonesia, Thailand, Singapore, Vietnam, the Philippines, Brunei, Cambodia, Myanmar, and Laos, stand to become the world’s sixth-largest economy.