Have you ever wondered what makes your electronic devices work the way they do, and where they come from?
Chances are that at least one of the components in your various devices was made locally here in Malaysia.
In the 1970s, In the 1970s, the ‘Eight Samurai’ (National Semiconductor, Intel, Advanced Micro Devices (AMD), OSRAM, Hewlett Packard, Bosch, Hitachi and Clarion) began operations at the Bayan Lepas Industrial Park in Penang.
Since then, some 300 multinational corporations (MNCs) have started offices in Malaysia, creating an electronics and electrical (E&E) hub that has been likened to the Silicon Valley in the United States.
This is an important sub-sector for Malaysian exports.
In June 2018, E&E products (worth RM29.89 billion) comprised 38% of total exports, which was a significant increase of 6.9% from June 2017.
Electrical goods here include electrical motors and generators, domestic appliances, wiring, lighting and others.
Meanwhile, electronics consist of computers and peripherals, electronic components and boards, communication equipment and consumer electronics.
Global trends in electrical and electronics manufacturing
The Electrical and Electronics Manufacturing Global Market Report 2018 revealed that the largest segment in the E&E manufacturing market worldwide was electrical equipment manufacturing, which had a market share of 55%.
This was due to the high sales volume and value of items manufactured, including switchboards, transformers, switchgears and other electrical equipment.
The second largest segment was electronic products manufacturing, with a market share of 31%.
In 2017, Asia Pacific held 55% of the market share.
Thus, it was considered to be the largest region in the electrical and electronics manufacturing market.
North America came in second (17%), while Africa held the smaller share (around 3%).
In the quest to improve plant efficiency and productivity, companies have begun automating and using robotics.
Sensors installed in machines have also improved the efficiency of factories, as they reduce potential breakdowns.
Global trends in consumer electronics
As more people connect to the Internet from all over the world, the sales of connected electronic products will continue to rise, the Euromonitor International projected in its Consumer Electronics Global Industry Overview (2017).
And as volume increases, retail value growth is expected, because consumers expect better quality devices for the price they pay.
The industry is expected to experience robust growth due to fast innovation, shifting market frontiers, premiumisation and shopping being reinvented as an online experience.
However, even with the popularity of IoT, people will continue to buy laptops and LCD TVs, as these mature product categories are important to them.
Nonetheless, these categories are being reinvented by manufacturers to make them more premium, in order to increase profit margins.
The report also mentioned that artificial intelligence (AI) will continue to be integrated into electronic devices, to help consumers simplify their lives.
The Malaysian scenario
According to the 25th Productivity Report 2017/2018, the E&E sector accounted for 36.7% of Malaysia’s total exports and 44.7% of Malaysia’s manufacturing exports in 2017.
In fact, it was the largest export earner (RM343 billion).
The top export destinations were Singapore, the United States (US), China, Hong Kong, Japan, Germany, Mexico, India and the United Arab Emirates (UAE).
Due to an industry-wide effort to transition from low value-added activities to high-value operations, the added value for E&E rose from RM62.6 billion in 2016 to RM67.7 billion last year.
This shift was necessary for businesses to stay competitive in the global economy.
The continued improvement and growth in the E&E sector – caused mainly by robust demand – has seen an increase of 5.8% in productivity to RM139,724 last year.
In addition, employment in the sector grew by 2.3% to 485,000 workers in 2017. This number constitutes 19.9% of the Malaysian manufacturing workforce.
Nonetheless, despite the positive developments, the Malaysian E&E sector continues to face challenges.