Frost & Sullivan Sees Promising 2011 for Malaysian Electrical & Electronics Sector

The Malaysian economy has had an impressive run in the first two quarters of 2010. Exports growth was led by the Electrical & Electronics (E&S) sector, which registered a robust growth in production; 29.9% in Q1 and 36.0% in Q2 2010. In the third quarter due to moderation in the external demand the E&E sector witnessed a decline in the production of computers and parts, as a result the production in the E&E sector grew a mere 9.4% in third quarter of 2010.

According to Frost & Sullivan’s Asia Pacific Automation & Electronics Program Manager Tim Chuah, external demand has slowed down compared to the first half of 2010.

“Inventories across the semiconductor industry have been building up and hence production has slowed in many parts of Asia. Output from Malaysia E&E sector is also witnessing a similar trend,” he says.

Still, the overall growth is commendable and can be attributed to factors such as improvements in the global economic situation, stimulus packages and overall growth of the respective export oriented industries.

“In particular, the growth of the electronics sector is fueled by the pick up in external demand for semiconductors, consumer electronic equipments, computers and related equipments and other electronic components and devices,” Chuah says.

With many leading solar cell manufacturers locating their operations in Malaysia in the past three years, the country is positioned to be a favorable destination among the ASEAN countries, laying the foundation for Malaysia to become a hub for solar cell manufacturing and attract more companies to invest in future.

Chuah continues, “Opportunities for the Malaysian E&E sector looks promising with the introduction of the Economic Transformation Programme. In the past few months the country has signed deals which help in furthering the country’s position in the global semiconductor value chain.”

“Segments such as semiconductor fabrication, advanced packaging and design of integrated circuits are likely to receive investments. With strong government support, the E&E sector in Malaysia will slowly inch towards moving up the value-chain and the industry will witness a transition from low-value/high volume to high value added activities,” he says.

The year 2011 is generally positive for the electronics industry at large. Chip makers in Taiwan and Asia will experience slower growth rates after the sharp increase in 2010 after the recession. Still, the outlook for the semiconductor industry remains positive with the world semiconductor industry likely to experience growth of 5-7 % in 2011.

In terms of specific segments of growth, in Asia Pacific the demand is likely to come from PCs, mobile handsets, smart phones, wireless devices, digital cameras, HDTVs and flat panel TVs.

Malaysian E&E exports in the first quarter of 2011 are expected to account for 38-40% of the total exports.