Market Watch 2012 Electrical & Electronic Industry in Malaysia

Market Watch 2012 Electrical & Electronic Industry in Malaysia General information about Malaysia Malaysia is centrally located within the Association of South-East Asian Nations (ASEAN). Consisting of two regions separated by the South China Sea the Malaysian Peninsula and the states of Sabah and Sarawak on the island of Borneo Malaysia is a federation of 13 states and three federal territories. The former British colony gained its independence in 1957. Since Independence, Malaysia has adopted the political system of a parliamentary democracy with a constitutional monarch whose position is rotated every five years between each of the nine hereditary state rulers. The political scene has been characterized by an extra-ordinary degree of political stability and continuity through an encompassing national coalition of political parties. Its territory comprises approx. 330,000 sq km, four fifths of which are covered by tropical rainforest. Due to its bio-diverse range of flora and fauna offering excellent beaches and brilliant scenery, the country is one of the region s key touristic destinations. Malaysia is a multi-ethnic, multicultural and multilingual society with 28.66 million members. Ethnic Malays make up the majority of the population at 57.1% followed by Chinese at 24.6%, Indian at 7.3% and other local ethnicities at 11%. The Malaysian constitution guarantees freedom of religion, although Islam is the largest and official religion. Approx. 61.3% of the population practice Islam, 19.8% Buddhism, 9.2% Christianity, 6.3% Hinduism, and 2.6% practice Confucianism and other traditional Chinese religions. The official language of Malaysia is Bahasa Malaysia, but English as well as Chinese are the business languages. Economical Overview Malaysia is a dynamic country which is constantly evolving. Being a middle-income country, Malaysia has transformed itself since the 1970s from a producer of raw materials into an emerging multi-sector economy spurred on by high technology, knowledge-based and capitalintensive industries. Malaysia s Economic Performance ranking improved to 7 th place out of 59

economies this year compared with 12 th position in 2007. 1 It is one of the 20 largest trading nations worldwide and was headed of Taiwan, Sweden, Canada, Australia, the United Kingdom and Switzerland. 2 The World Competitiveness Yearbook 2011 Report released by the Institute for Management Development (IMD) continued to rank Malaysia as among the top 5 most competitive nations in the Asia-Pacific region, taking 6 th position in the 20 million population category and 2 nd position after Taiwan in the GDP per capita less than US$20,000 category. 3 Moreover, the country is the 21 th largest exporter among all trading nations worldwide. Strategically located in the heart of South-East Asia, Malaysia offers a cost-competitive location for investors intending to set up offshore operations in order to manufacture advanced technological products for both regional and international markets. In addition, Malaysia has a market-oriented economy which is supported by pro-business government policies. Last year, the Malaysian Government launched the Economic Transformation Programme (ETP) which is managed by PEMANDU (Performance Management & Delivery Unit) under the patronage of the Prime Minister. 4 The ETP identifies 12 National Key Economic Areas (NKEAs) which are drivers of economic activities that have the potential to materially contribute to the growth of Malaysia. Its objective also known as Vision 2020 is to transform Malaysia into a high income country by year 2020. The programme will lift Malaysia s Gross National Income (GNI) to US$523 billion by 2020, and raise per capita income from US$6,700 to at least US$15,000, meeting the World Bank's threshold for high income nation. 5 To achieve the targets set, Malaysia needs an annual growth of GNI of 6%. There are plans to revitalize Malaysia's private sector, to grow the service sector from 58 to 65% and to create 3.3 million new jobs. 6 The Government will also introduce other transformation plans in 2012. 7 In Malaysia, the 2011 GDP growth edged lower to 4.0 percent year-on-year due to a weaker domestic demand. Further implementation of ETP projects and a RM232.8 billion 2012 Budget 1 Malaysia s economy attains 7 th position, New Straits Times, 20 th May 2011. 2 Ibid. 3 Ibid. 4 See www.pemandu.gov.my. 5 Forbes.com, 21 st September 2011. 6 Ibid. 7 Malaysia Budget 2012 Main Highlights, www.financesentral.com accessed on 21 st November 2011. 2

tabled by Prime Minister Datuk Seri Najib Razak will boost domestic demand, but unlikely to offset underperformance in net exports. 8 Economical Key facts Malaysia 9 Currency: 1 Ringgit (RM) = 100 Sen Exchange rates: 1 EURO = RM4.3; 1 US$ = RM3.2 (17.11.2011) GDP (billion RM): 2009: 679.94; 2010: 765.97; 2011: 829.34 GDP - real growth rate: 2010: 7.2%; 2011: 4.0%, 2012: 5.0% (est.) 10 Inflation rate: 3.3-3.5 % (est. 2012 IMF) Exports: RM513.59 billion (Jan- Sep 2011) Exports - commodities: Electronics 34.5%; petroleum & products 9.9%; palm oil 9.3%; chemical products 6.9%; machinery 3,4%; manufactures of metal 3.0%; rubber products 2.6 Exports partners: Singapore 13.3%, China 12.5%, Japan 10.5%, USA 9.5%, Thailand 5.3%, Hong Kong 5.1%, Germany: 2.7% Imports: RM424.37billion (Jan Sep 2011) Imports - commodities: Electronics 31.2%, petroleum & products 10.1%, chemical products 9.2%, machinery 8.0%, manufactures of metal 5.9%, transport equipment 5.1%, iron & steel products 4.3%, optical & scientific equipment 3.2%, processed food 2.2%, other products 20.8% Imports - partners: Japan 12.6%, China 12.6%, Singapore 11.4%, USA 10.6%, Thailand 6.2%, Germany 4.0% Unemployment rate: 3.0% (2011) 11 Average wage 2011: Project manager IT: RM8,415, lecturer/speaker: RM3,459, mechanical engineer: RM3,070, account executive: RM2,572, plantation worker: RM850 12 8 Malaysian Economic outlook by Malaysian Institute of Economic Research (MIER), www.mier.org.my/outlook accessed on 21 st November 2011 & Malaysia Budget 2012 Main Highlights (Finance Sentral 2011). 9 Malaysia External Trade Development Corporation (MATRADE), www.matrade.com.my. 10 Malaysian Institute of Economic Research (MIER), www.mier.org/outlook/ accessed on18 th November 2011. 11 Bank Negara Malaysia, Economic and Financial Data for Malaysia, last updated on 14th November 2011. 3

Population below poverty line: 3,6% 13 Bilateral Trade: Malaysia & Germany Malaysia is EU s second largest trading partner inside ASEAN, behind Singapore, with bilateral trade in goods reaching 31.9 billion Euros in 2010 and the EU s 22nd largest trading partner. Germany enjoys intensive trade relations with Malaysia and is one of the main foreign investors in Malaysia, while among members of the European Union, Germany is Malaysia s leading trade partner. 14 Besides, Malaysia ranks 2nd as a consumer of German products among the ASEAN countries. The Electric & Electronic Industry in Malaysia Introduction to the Electric & Electronic Industry The strong E&E industry in Malaysia is a result of the Government s initiatives to promote laborintensive and export-oriented industries. Since the establishment of the first semiconductor plant in Penang in 1972, Malaysia has become a major global manufacturing hub for the electrical and electronics industry, as attested by the large number of multinational companies (MNCs) from USA, Japan, Europe, Taiwan and Korea which have chosen Malaysia as their base. Unsurprisingly, the E&E sector has grown into Malaysia s largest contributor to output, employment, investments and exports (35% of total exports 15 ) 16. The presence of leading electronic manufacturing services (EMS) companies such as Flectronics, Solectron, Celestica, Jabil, Plexus and Sanmina-SCI provides opportunities for local companies to be part of their supply chain in the supply of equipment, materials, parts and components, and dedicated services such as contract design, burn-in testing, failure analysis and rapid prototyping. Other local supporting industries focus on activities such as moulds, tools and dies, metal stamping, surface treatment, plastic injection moulding and M&E (Mechanical & Electrical). Nowadays, there are more than 50 companies operating as contract manufacturing services (CMS) or EMS companies. 12 www.payscale.com/research/my/conutry=malaysia/salary accessed on 21th November 2011. 13 Index Mundi, www.indexmundi.com/g?r.aspx?v=69 accessed on 18th November 2011. 14 http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/countries/malaysia/ accessed on 21st November 2011. 15 Dato Noharuddin Nardin, Chief Executive Officer of MATRADE, trademart magazine, May/June 2011 16 Malaysia External Trade Development Corporation (MATRADE), Electrical and Electronics Directory 2011-2013 4

The key to sustaining a healthy growth within this key sub-sector is surely automation and harnessing innovation talents that can take the E&E industry to the next level 17. Major sub-sectors of the E&E industry include Electronic components Industrial electronics Consumer electronics Electrical products Top Malaysian companies based on market capitalization in E&E sector Company Market capitalization in mln US$ Revenue in mln US$ Malaysian Pacific Industries 299 464 Hong Leong Industries 272 933 Panasonic Manufacturing Malaysia 206 175 Unisern 173 370 ETI Tech Corporation 156 25 Table 1 - Top Malaysian companies based on market capitalization in E&E sector 18 Malaysia s success can be attributed to a winning combination of pull factors: a stable government, good economic policies, topnotch infrastructure and a skilled knowledge workforce. As a result, Malaysia has developed significant expertise for the manufacture of a wide range of semiconductor devices, high-end consumer electronic and information and communication technology products 19. Based on the Malaysian Industry Development Authority s (MIDA) records, from a total of just four companies with 577 employees and a total output value of RM25 million in 1970, today the E&E industry has expanded to more than 1,695 companies with total investment of RM108 billion and a workforce of more than 600,000 people 20. Investment-Projects Approved by E&E Sector Domestic Investment (US$) in mln Foreign Investment (US$) in mln Total Proposed Capital Investment (US$) in mln Jan. - Oct. 2011 419.4 2.450.7 2.870.0 2010 471.2 3.844.9 4.316.1 Table 1 - Investment-Projects approved in the E&E sector 21 17 Dato Noharuddin Nardin, Chief Executive Officer of MATRADE, trademart magazine, May/June 2011 18 Bloomberg, December 2010 19 Malaysia External Trade Development Corporation (MATRADE), Electrical and Electronics Directory 2011-2013 20 Malaysian Investment Development Authority (MIDA) www.mida.gov.my, 15.12.2011 21 Malaysian Investment Development Authority (MIDA) www.mida.gov.my, 15.12.2011 5

Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 Market Watch 2012, Electrical & Electronic Industry in Malaysia Performance of the Electric & Electronic Industry In 2010, the E&E industry is the leading sector in Malaysia s manufacturing sector, contributing significantly to the country s manufacturing output (31%, in 2008: 29.3%), exports (48.7%, in 2008: 55.9%) and employment (33.7%, in 2008: 28.8%). The gross output in 2010 of the industry totaled RM166.2 billion or US$55.8 billion (in 2008: RM167.2 billion or US$53.9 billion), exports amounted RM249.8 billion or US$83.8 billion (in 2008: RM233.8 billion or US$75.4 billion) and the industry created employment opportunities for 336.408 people (in 2008: 296,870) 22. 150 100 50 0 Malaysia Export of E&E by Index (Sep. 2008 = 100), OCDC Bank Chart 2 - Malaysia's export Index in E&E sector (2008 = 100%) 23 Siemens, Bosch and Infineon are just some of the well-known companies, who have moved their production to Malaysia. Based on a statement by The German Electrical and Electronic Manufacturers Association (ZVEI), Asia will stay the growth region of the future, with China leading the pack. Smaller nations like Malaysia will get their fair share of this development if they continue to offer economic and political stability. The industry has moved up the value chain into the manufacture of high-end products and has moved away from labour-intensive to more capital-intensive operations. The capital investment per employee (CIPE) ratio showed a growth from RM79,149 per employee in 1995 to RM333,830 per employee in 2000 and RM578,469 per employee in 2007. These include intensification of research and development efforts and outsource non-core activities domestically. 22 Malaysian Investment Development Authority (MIDA) www.mida.gov.my, 15.12.2011 23 OCBC Bank, www.ocbc.com, 20.12.2011 6

Malaysia s Exports and Imports in the E&E Sector Diagramm 1 - Malaysia's Exports to World by Product (HS Code) in mln US$ and %Change \ Diagram 1 Malaysia s Imports and Exports of E&E Products 24 85XX Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories 8517 Telephone sets, including telephones for cellular networks or for other wireless networks 8527 Reception apparatus for radio-broadcasting 8528 Monitors and projectors 8529 Parts suitable for use solely or principally with the apparatus of headings 85.25 to 85.28. 8534 Printed circuits. 8536 Electrical apparatus for switching or protecting electrical circuits 8537 Boards, panels, consoles, desks, cabinets and other bases 8541 Diodes, transistors and similar semiconductor devices 8542 Electronic integrated circuits. 8543 Electrical machines and apparatus Table 2 - HS Code as use in Diagramms above Electronics Sector Accounting for almost 90% of the E&E industry in Malaysia, the electronics sector is the main contributor to Malaysia`s gross domestic product (GDP) growth. More than 1.600 companies have emerged within the electronics industry, encompassing three broad subsectors i.e. electronics components, consumer electronic and industrial electronics 25. 24 WTA, World Trade Atlas, 05.01.2012 25 Malaysia External Trade Development Corporation (MATRADE), Electrical and Electronics Directory 2011-2013 7

100000 Malaysia's production of Electronics in mln RM 50000 0 2005 2006 2007 2008 2009 2010 Computing Industrial Communications Consumer Components Diagram 2 - Malaysia's production of Electronics 2005-2010 in mln RM 26 Malaysia's Exports of Electronic Products in 2010 in mln RM 25800 Electronic components 105500 Industrial electronics 93300 Consumer electronics Figure 1 - Malaysia's Exports of Electronic Products in 2010 in Million RM 27 Over the years, Malaysia's electronics industry has developed significant capabilities and skills for the manufacture of a wide range of semiconductor devices, high-end consumer electronic and information and communication technology (ICT) products. International Trade and Industry Minister Datuk Seri Mustapa Mohamed said upon realization of the already signed memoranda following the 10 th Malaysian plan, the partnerships had the potential of generating RM1.9bil in investments over the next five years and creating 6,500 new jobs by 2020. Electronic Components The electronic components are the most important sub-sector and accounted for 44.6 per cent of the total investment approved in the electronics sector in 2010. Within the electronics components subsector, semiconductor devices are the largest contributor, comprising more than 30% share of the E&E exports. Malaysia is currently the world s leading location for semiconductor assembly and test operations, with more than 70 mostly multinational companies (MNCs) specialising in these devices 28. Semiconductor products constituted of export 26 Yearbook of World Electronics Data Volume 2 2011 27 Malaysia External Trade Development Corporation (MATRADE), Electrical and Electronics Directory 2011-2013 28 Malaysia External Trade Development Corporation (MATRADE), Electrical and Electronics Directory 2011-2013 8

value RM97,856.5million (US$32,837.75million). It contributes 92.7 per cent of the total export of electronic components or 43.6 per cent of the total electronics export for 2010 29. Although the manufacture of semiconductor devices and electronic components sector still dominates the E&E industry landscape, clear changes have been observes in its composition. Semiconductor companies have moved beyond basic operations such as assembly, testing and packaging of semiconductors to high value-added activities such as cutting and polishing of silicon wafers, IC design and wafer fabrication. The global trend in the segment has led to many semiconductor companies undertaking specialisation and adopting new technologies such as nano-technology in their manufacturing processes. The present of many large MNCs has also created another positive trend: a very sizeable local market for components and supporting/ancillary industries. There now exists a strong network of inter- and intra-industry linkages in the electronics industry. Since the inception of the Industrial Linkage Programme in 1997, a total of 170 small and medium-size local companies have forged linkages with larger companies and MNCs, notably in the areas of electronics, machinery, fabricated metal products and engineering support industries. Another rising trend is the emergence of local companies that form part of these MNCs supply chain. Currently at least 50 companies operate as contract manufacturing services (CMS) or electronic manufacturing services (EMS). In other words, the electronics sector is shifting into higher value-added products and activities, which make sense, in the light of rapid globalisation and increasing cost pressures. Many MNCs have already upgraded their operations into integrated manufacturing centres (IMCs), which fuse the manufacturing concept with research and development, product design and development, marketing and distribution activities 30. Industrial Electronics This sub-sector consists of multimedia and information technology products such as computers, computer peripherals, telecommunication products and office equipment. The Industrial electronics sub-sector accounted for 24 per cent of the total investment approved in the electronics sector in 2010. In 2010, the majority of the investments approved amounting to RM2.6 billion were from Electronic Manufacturing Services (EMS) companies producing low volume high 29 Malaysian Investment Development Authority (MIDA) www.mida.gov.my, 15.12.2011 30 Malaysia External Trade Development Corporation (MATRADE), Electrical and Electronics Directory 2011-2013 9

mix products for various applications such as medical, aerospace, oil and gas and telecommunication 31. Consumer Electronics Malaysia s consumer electronics devices market, defined as the addressable market for computing devices, mobile handsets and AV devices, was projected at about US$10.7mln in 2011. This is expected to increase to US$13.5bn 2015, driven by rising incomes and growing affordability of key products. Demand will grow at a CAGR of about 6%, as Malaysian consumers regain confidence. Economic growth will moderate in 2011 and 2012, but overall Malaysian spending on consumer electronics will remain robust in key product segments such as LED TV sets. Malaysia also emerged in 2010 as one of the fastest-growing regional smart phone markets. Vendors will continue to target products innovation to drive revenues, with growth areas including smart phones, notebooks and HDTV 32. The leading companies are now undertaking R&D activities in the country to support their global and Asian markets. Exports of consumer electronic products in 2010 amounted to RM25.8 billion (USD8.7 billion) 33. Multinational companies such as Apple Computer Systems Malaysia, Samsung Malaysia Electronics and Canon Marketing continued to have a stronghold on consumer electronics in Malaysia. Due to their strong brand equity, they were able to record high value growth. In addition, the sheer amount of competition between these companies has driven down prices, making consumer electronics more affordable than ever before 34. Offering consumers the benefit of in-store customer service as well as the opportunity to preview products before buying, specialist retailers such as Senheng Electric and Harvey Norman continued to be the preferred distribution channel for consumers. Senheng Electric in particular has been successful due to the rapid expansion of its outlets across the country. Increasing affluence will ensure that more consumers are able to afford to buy consumer electronics. Reaching new levels of convenience and entertainment, products such as cameras and smartphones will continue to see strong growth. 31 Malaysian Investment Development Authority (MIDA) www.mida.gov.my, 15.12.2011 32 http://www.researchandmarkets.com/reports/1885013/ 33 Malaysian Investment Development Authority (MIDA) www.mida.gov.my, 15.12.2011 34 http://www.euromonitor.com/consumer-electronics-in-malaysia, 05.01.2011 10

However, goods such as DVD players and camcorders are predicted to experience a slowdown in demand as their functions have been superseded by newer technologies. 35 Air Ventilation devices are expected to account for about 10% of Malaysian consumer electronics spending over BMI s fiveyear forecast period. Malaysia s domestic AV device market is projected at US$905mn in 2011. The market is expected to grow at a CAGR of 4% between 2011-2015, to a value of US$1.1bn in 2015. In 2010 LED backlit models in the 40- and 42-inch range were popular, fuelled by promotions from retailers. Malaysian mobile handset sales accounted for about 65% of Malaysian consumer electronics spending in 2010. Malaysian market handset sales are expected to grow to 9.0mln units in 2015, as mobile subscriber penetration passes 124%. Growth will be slower than in the preceding five years due to slowing subscriber growth, but opportunities in Malaysia s youthful market will be driven by demand for smart phones, which in 2011 could account for two thirds of Malaysian handset sales 36. Electrical Sector Dominated by domestic companies, the electrical sector began in the 1960s as a solution to reduce the imports of household appliances, electrical fittings, wires and cables and automotive batteries 37. Broadly speaking, the electrical sector can be classified into three main subsectors: electrical industrial equipment, electrical components and electrical consumer. Notable growth is seen in the sector of the electrical consumer products, once the domain of foreign-owned, especially Japanese, companies. Increased investment in R&D centers has paid off handsomely: Malaysia is now one of the world s largest exporters of home air-conditioners. Malaysian brands such as Pensonic, Khind, and i-berhard have become household names not only locally, but also in the ASEAN region and the Middle East. Local company, OYL, also a major exporter of air-conditioners, exports over 50% of its production to Europe, USA, Australia, the Middle East and Africa and also serves as an OEM for MNCs and ODM for reputable brands like York, Fedders and Lennox. There are also many local contract assemblers who produce consumer appliances for big-name foreign brands such as LG, Electrolux, Kelvinator, GE, Elba and Samsung 38. 35 http://www.euromonitor.com/consumer-electronics-in-malaysia, 05.01.2011 36 http://www.researchandmarkets.com/reports/1885013/ 37 Malaysia External Trade Development Corporation (MATRADE), Electrical and Electronics Directory 2011-2013 38 Malaysia External Trade Development Corporation (MATRADE), Electrical and Electronics Directory 2011-2013 11

Malaysia's Exports of Electrical Products in 2010 in mln RM 6100 6000 15100 Industrial electrical Electrical components Electrical consumer Figure 2 - Malaysia's Exports of Electrical Products in 2010 in mln RM 39 The major electrical products produced are household appliances such as air-conditioners, refrigerators, washing machines, vacuum cleaners and other electrical appliances. There are presently more than 381 companies producing a wide range of products such as household electrical appliances, wire and cables and electrical industrial equipment. These are mainly local companies such as Pensonic, Leader Cable and Tenaga Switchgear. Manufacturing activities in the electrical industry have evolved from mere assembly to design and marketing of local' brands for the regional and global markets. The capital investment in this sub-sector amounted to RM13.2 billion (US$4.4 billion) for the year 2010 40. Other sub-sectors experiencing rapid growth are the automotive electrical sub-sector which is fuelled by the advent of intelligent driving systems. The automotive connectors market is tipped to be the fastest growing segment in the global automotive electrical products market, expected to records a compound annual growth rate (CAGR) of over 11% in the 2001-2010 periods 41. Another must-watch segment for automotive electrical products is the automotive batteries market, which is estimated to account for the market share of 19.8% in 2009, and is the second largest segment in the automotive electrical products industry 42. Towards greener Technology Malaysia recognizes the enormous growth potential of the solar energy sector and is putting in place attractive incentives and support facilities to realize its development. Malaysia is ready to create a globally competitive solar industry cluster. To date, Malaysia has attracted five foreign direct investments, worth up to RM13.8bil, to set up solar PV manufacturing facilities in Malaysia. These include US-based companies First Solar Inc at the Kulim Hi Tech Park (KHTP) and US-based 39 Malaysia External Trade Development Corporation (MATRADE), Electrical and Electronics Directory 2011-2013 40 Malaysian Investment Development Authority (MIDA) www.mida.gov.my, 15.12.2011 41 Malaysia External Trade Development Corporation (MATRADE), Electrical and Electronics Directory 2011-2013 42 Malaysia External Trade Development Corporation (MATRADE), Electrical and Electronics Directory 2011-2013 12

SunPower Corp in Malacca, the China-based ReneSola in Johor Baru, the German company Q-Cells in Selangor Science Park 2, and the Japanese firm Tokuyama Corp in Sarawak. With the current unprecedented increase in fuel costs and the impact of global warming, the demand for renewable energy and also energy efficient products and systems is booming. With an estimated growth of 20-25 % per annum, a bright future exists for this sector of the industry. Realising the potential, the Ministry of Energy, Green Technology and Water is putting special efforts in the solar energy sector in the country and has launched several programmes such as Malaysian Energy Efficiency Improvement Programme (MIEEIP) and Centre for Education and Training in Renewable Energy and Energy Efficiency (CETREE) and the Feed-in Tariff for renewable energy production. This project is aimed at intensifying the usage of rewable energy or solar energy as an alternative source of electricity as well as to jump start local capabilities and development of the solar industry in Malaysia. Since its launching, MIDA and Malaysian Energy Centre have been collaborating to further promote the industry by identifying major players to invest in the country. The first approach is the most intuitive. Large researches show that there are energy saving potentials up to 80% in lighting, 30 % in ventilation, 10 % in lifts and escalators, 70 % in water and space heating and 80 % in cooking equipment 43. With the ever growing energy costs it is only a question of time until the investment capital is outpaced by the amount of saved energy costs. In this context such initial investment can face both risks at once and contribute to both an economical and ecological advancement. Performance contracting is an alternative that may help to overcome the barriers of the capital investment and therefore minimizing the associated risks. It leverages the energy saved for installing energy efficient equipment and throughout that pays for the capital investment. The charged energy service company measures and verifies the saved energy costs which will be shared between the owner and the company to payback the project costs. The performance contract runs until the total payback of the initial project costs. These two ways underline the growing possibility and ability of Malaysian electrical & electronic companies to face two contrasting problems at once. But besides facing difficulties they create knowledge and experience for the growing global key market in the future. 43 The Electrical and Electronics Association of Malaysia, http://www.teeam.com/ 13

Outlook With a sterling track record of nearly four decades, the future of the E&E industry in Malaysia looks bright. Industry players involved in both the front-end and back-end of the semiconductor supply chain informed encouraging demand trend. The overall demand for solid-state drives is very promising and based on the growing needs of the enterprise solid-state drive industry, as well as consumer solid-state drive devices. Flash memory applications such as secure digital cards, USB flash drives and MP3 players will continue to be the drivers of growth. The country has the intellectual and physical resources to provide for its continuity, evidenced by the everincreasing pool of MNCs who have shifted their key products, processes and other manufacturing related activities from their home bases to Malaysia, as well as the many success stories of local companies 44. 100000 10000 1000 100 10 1 Malaysia Market development and Forecast by E&E Subsectors in mln US$, Yearbook of World electronics Data, Volume 2, 2011 2007 2008 2009 2010 2011 2012 2013 Electronic Data Processing Office Equipment Control & Instrumentation Medical & Industrial Communication & Radar Telecommunications Consumer Components TOTAL Figure 3 - Malaysia's Market Development and Forecast in E&E Subsectors in mln US$ 45 44 Malaysia External Trade Development Corporation (MATRADE), Electrical and Electronics Directory 2011-2013 45 Yearbook of World Electronics Data Volume 2 2011 14

Important Malaysian Electrical & Electronic Trade Fairs 2012 Contact: NEPCON Malaysia Date: 12th 14th June 2012 Venue: Penang International Sports Arena (PISA) Mr. Thomas Brandt at: thomas.brandt@malaysia.ahk.de Ms. Chuah Sue Wei at: suewei.chuah@malaysia.ahk.de We hope the market report serves you with actual information on the Malaysian market. Our core business is to establish contacts, finding distribution partners, project acquisitions, etc. our Office-in Office will give you a permanent address to develop the market. Please contact us for further information. 15