TPA NEWSLETTER 2011 2nd QUARTER

April - June, 2011 Issue

Electrical & Electronics Industry News

E&E is Major Contributor to Export Growth The electrical and electronics (E&E) sector is expected to remain a major contributor to Malaysias export growth in 2011 on the back on rising global demand for semiconductor devices. Malaysia External Trade Development Corporation (Matrade) chief executive officer Datuk Noharuddin Nordin said more than half of the demand would come from the Asian market, followed by the United States and Japan. "Based on the first quarter trade performance, we can see that we are able to sustain our presence in the global E&E market. Recently, there is also an announcement about a major investment by major global and local players in the solar industry to invest significantly in Malaysia. Their factory is expected to be fully operational by the year-end and the products from this centre will be reflected in the E&E classification that will further strengthen our E&E exports," he told a briefing on Malaysias trade performance in the first quarter of 2011 here yesterday. The Semiconductor Association recently projected a 6.8% growth in the global semiconductor market to US$318.76bil this year. Noharuddin also said Malaysias major export markets recorded growth in the first quarter except the US. He said the US was no longer a prominent manufacturing hub of E&E products. "Most of the American companies have shifted their assembly operations elsewhere, so their E&E product imports are mainly in the form of finished products," he said. (Source: The Star, 10 May 2011)

Globetronics Upbeat on Sales Globetronics Technology Bhd is looking at "good" first and second quarters this year, despite the recent earthquake and tsunami in Japan. Chief executive officer Heng Huck Lee said although 40 per cent of its total RM280 million sales were to Japanese manufacturing companies, things are looking optimistic for the Bayan Lepas-based integrated circuits manufacturer, which is engaged in the energy-saving and environmental LED lighting market and crystal-based timing devices. Heng said Globetronics is on track to achieve its projected growth and progress in the LED lighting and timing device markets for the first two quarters of 2011. "We are optimistic about enjoying another good year, although we are cautious due to the unrest in the Middle East and Africa, and also the recent disaster in Japan, among others. "Until now, we have suffered only minimal impact from the Japan disaster but as a key component manufacturer in the global supply chain, we must also consider direct and indirect effects as well, like the possibility of other suppliers in the chain not being able to deliver the goods on their side for the end products," he said after annual general meeting here yesterday. Therefore, Heng said, there might be uncertainties such as possible product cancellations by end-customers during the third and fourth quarters of the year, even though most of the company's Japanese clients did not operate around the Fukushima area and had outside plants, where they could move some of their operations to. Globetronics closed its 2010 year with revenues of RM279 million and RM30 million net profit, improvements of 28 per cent and 88 per cent respectively compared to 2009's

numbers. The group spent a record RM107 million in capital expenditure in the growing LED lighting and timing device industries, compared to the RM95 million invested in 2008 and 2009. Heng said Globetronics would be slowing down on its capital expenditure after having spent over RM200 million in the past three years. Last year, it made three dividend payments totalling RM17.8 million to shareholders, and managed to close the year with over RM55 million in cash and other investments. He said the group is optimistic that such a performance would be sustained for this year. Heng noted that as part of its corporate social responsibility, it had recently donated 2.5 million yen (RM93,548.98) to the Japanese Red Cross Society to help victims of the twin disasters. (Source: New Straits Times, 19 May 2011)

Malaysian to Helm Intel Ops in Penang, Kulim The world's biggest chipmaker Intel Corp is set to see its operations in Penang and Kulim helmed by a Malaysian soon. Business Times has learnt that Penang-born Robin A. Martin, vice-president of the company's Technology and Manufacturing Group (and currently based in China), is set to assume the role of Intel Malaysia managing director, taking over from Atul Bhargava effective July 1. Bhargava has helmed Intel Malaysia since 2007 and is expected to return to Intel's operations in the US. Sources said Martin will likely continue to maintain his global role as vice-president for assembly test and manufacturing while serving as managing director of the Intel operations in Penang and Kulim in Kedah. Malaysia was the chipmaker's first offshore facility in 1972 and the company has invested in excess of US$3.9 billion (RM11.86 billion) in the country to date. Intel Malaysia comprises three campuses and employs more than 10,000 people. Intel Penang is a key assembly and testing site, Intel Kulim assembles processor packaging and serves an important operations centre for mobile modules, while Intel Kuala Lumpur boasts a development centre as well as a sales and marketing office. Intel Malaysia corporate affairs manager Loo Cheng Cheng when contacted said that "Intel has not made any new announcement". Loo also clarified a Business Times report yesterday that the voluntary optional retirement plan for Intel employees would be offered to 500 and not 200 employees as reported. (Source: New Straits Times, 27 May 2011)

US Electronic Firms Expect Lower Export Sales This Year Export sales for the US electronic firms are expected to decline this year as personal computer-related companies continue outsource their manufacturing activities to countries like China. The Malaysian American Electronics Industry, in its annual survey 2010/2011, said export sales are expected to ease 1.5 per cent to RM51 billion. Its chairman, Datuk Wong Siew Hai, said without the PC-related companies, the growth rate of the semiconductor companies is forecast to be 5 per cent for 2011 in line with the expectations of the Semiconductor Industry Association's 6 per cent growth forecast. "Member companies are cautiously optimistic, with uncertainties still hovering in Europe and the US, calamities and disasters and also the ringgit's appreciation versus the US dollar," he said. Drivers of growth would revolve around computing and consumer electronics, followed by communications, medical devices and automotive semiconductor market and gadgets. Total exports fell by 26 per cent in 2010 due to changes in manufacturing strategy of PCrelated companies as they chose to outsource the manufacturing activities. "We can

expect to see the residual effects this year too," Wong said, adding that the move by the PC companies was in line with the global industry trend of contract manufacturing of their products elsewhere, focusing on designing instead. Wong said minus the PCrelated companies, the growth rate is 26.3 per cent. For the semiconductor product segment, the export sales recorded 30.2 per cent of growth rate. (Source: New Straits Times, 9 June 2011)

MAEI Export Sales at RM51.8bil Export sales by Malaysian American Electronics Industry (MAEI) members dropped to RM51.8bil last year from RM70bil in 2009 due to the shift of production by personal computer makers here to other countries. However, this was replaced by new investments in high-end activities like product design and development, said chairman Datuk Wong Siew Hai yesterday. This is positive for Malaysia as companies that shifted their operations here go higher up the value chain. In fact, capital spending by American manufacturers jumped to a high of RM3.87bil last year, he said at a briefing on MAEI Annual Survey 2010/2011. For this year, Wong said spending by American manufacturers was expected to be moderate at RM2.87bil. In 2010, MAEI's export sales accounted for 20.7% of Malaysia's total electrical and electronic exports. Our biggest challenge is talent. There is a shortage of talent pool to meet the potential demand of the industry, particularly in design and development, he said. He added that there were 4,500 design and development engineers in the country last year and the figure was expected to grow to 4,700 this year. Wong said MAEI was optimistic of achieving growth this year despite worries about the economies of Europe and the United States, natural disasters and the ringgit appreciation. He believes that growth would revolve around computing and consumer electronics sectors, followed by communications, medical devices as well as automotive semiconductors and gadgets. He forecasts the total export sales by MAEI to stabilise to RM51bil this year. MAEI is an industry committee of the American Malaysian Chamber of Commerce. About 60% of MAEI members are based in Penang, with the rest operating their facilities in the Klang Valley and Melaka. (Source: The Star, 9 June 2011)

Slower Outlook for Electronics Penang-based companies producing automated-equipment and precision engineering components for the electronics and semiconductor sector expect slower second and third quarters. A projected slower year for worldwide semiconductor spending, high unemployment figures in the US and the ongoing economic crisis in Europe, as well as higher production cost due the increase in electricity rates are among the key challenges facing manufacturers. Penang Foundry & Engineering Industries Association (PENFEIA) president Datuk Ng Chai Eng told Starbiz that orders for precision engineering components used in the electronics and semiconductor equipment were slower in the second quarter, compared with last years corresponding period. The orders for the third quarter are also coming in slowly, due to high unemployment figures in the US, which is a big customer of Malaysian-made precision engineering components. A strong ringgit coupled with higher electricity cost have also eroded our margins. Due to the intense competition, it is very hard for us to raise pricing for our overseas customers. It is still too early to tell about the fourth quarter,

as orders for the final quarter usually comes in at the end of the third quarter, Ng added. Unemployment figure in the US, currently standing at 9.1%, is the highest since 1982. (Source: The Star, 13 June 2011)

Economic News
Malaysias Economy Attains 7th Position Malaysia's economic performance was acknowledged in the World Competitiveness Yearbook 2011 Report released by the Switzerland-based Institute for Management Development (IMD) on Wednesday, where Malaysia's Economic Performance ranking improved to seventh place out of 59 economies this year. In the ranking for Economic Performance, which gives a macro economic evaluation of the domestic economy and which was based on real/hard data, Malaysia was ahead of Taiwan, Sweden, Canada, Australia, United Kingdom and Switzerland. Malaysia had come a long way since 2007 where it was ranked 12th in Economic Performance, said International Trade and Industry Minister Datuk Seri Mustapa Mohamed in a statement. He also welcomed the fact that the IMD survey continued to rank Malaysia as among the top five most competitive nations in the Asia Pacific region for the second year running, taking sixth position in the 20 million population category and second position after Taiwan in the gross domestic product per capita less than US$20,000 (RM60,000) category. Malaysia was ranked 16th overall in terms of competitiveness among 59 economies, compared with 10th place last year. Mustapa said that enhancing national competitiveness remained a top priority for Malaysia. The government recognised that more engagement and communication at the local and international levels would have to be undertaken. The Malaysian success story would be continuously communicated to the public and various stakeholders. Moving forward, the government was committed to successfully seeing through the realisation of the New Economic Model (NEM), the Government Transformation Programme (GTP) and Economic Transformation Programme (ETP), he said. "The NEM, GTP and ETP have demonstrated positive results." This was shown by the different indices where the total investment commitment so far stood at RM95 billion, which would create almost 225,000 jobs over the next 10 years, he said. The ETP had identified a total of 131 Entry Point Projects (EPP) with a total investment value of RM794.5 billion as part of a major initiative to boost the countrys gross national income to RM1.1 trillion and generate 3.3 million jobs. He said to date, a total of 72 projects had been launched and 41.2 per cent of them were at various stages of implementation, reflecting private sector confidence in the government. The setting up of the Special Taskforce to Facilitate Business (Pemudah), Performance Management and Delivery Unit (Pemandu), Talent Corporation, the coming into force of the Competition Law, corporatisation of Malaysian Investment Development Authority and Malaysia Productivity Corporations (MPC) new role to review regulatory reforms would enhance public sector delivery and create a climate that was conducive to doing business. The Competition Law to govern all firms, including government-linked companies, against anti-competitive practices which would be implemented on Jan 1, should further enhance Malaysias competitiveness. The MPCs role to undertake a comprehensive review of business regulations to reduce the cost of doing business and increase efficiency should usher a new perspective to transparency and competitiveness to the nation, Mustapa said.

(Source: New Straits Times, 20 May 2011)

Employers Oppose Penalty on Minimum Wage The RM10,000 fine to be imposed on employers who fail to comply with the minimum wage requirement would drive away foreign investments while hampering efforts to make Malaysia a high-income nation. Malaysian Employers Federation executive director Shamsuddin Bardan said the proposed law would not be solely on the minimum wage but the formation of the National Wages Consultative Council (NWCC). The clause on the fine seems odd. It's like putting the cart before the horse. Although the minimum wage has not been fixed yet, the penalty for employers has been spelt out, he told The Star yesterday. He added that the proposed fine would also drive away potential investors seeking to set up operations here. Under the proposed Act, employers would be liable to a fine of not more than RM10,000 for each employee if they fail to pay the basic wage once the amount is determined by the Government. Shamsuddin also said imposing a minimum wage would be counter to the Government's effort in turning Malaysia into a high-income nation. Rather than setting a minimum wage, he said the Government should look at ways to enhance employees' income while remaining competitive. Shamsuddin added that some employers may take advantage of the law by keeping workers' wages at a minimum. There may be some employers who will be happy to pay their workers the minimum wage as long as they comply with the law, he said. The NWCC bill was tabled before Parliament on Tuesday by Deputy Human Resources Minister Datuk Maznah Mazlan. Among the provisions in the Bill are the roles and functions of the 23-member NWCC which is to convene four times a year. The council would be responsible for collecting, analysing and researching data and make recommendations to the Government on the minimum wage. The Bill also states that the council must consult the public on the minimum wage rate before making any recommendations. (Source: The Star, 23 June 2011)

MTUC Not Pleased With New Wage Act MTUC has ex-pressed its disappointment over the National Minimum Wage Act which it claims does not differ very much from the Wages Council Act, which has been in force since 1947. In a statement yesterday, MTUC secretary-general Abdul Halim Mansor said the proposed National Wages Consultatives Council Bill, which was awaiting approval of the Parliament, did not meet trade unions' expectations. He said the wages council, to be set up under the new Act, would be powerless and ineffective while the Human Resources Minister would wield absolute power to accept or reject any recommendation made by the council. The minister can continue to frustrate millions of lowly-paid workers by refusing to accept the council's advice and delay the implementation of a decent minimum wage, he said, adding that the ministry can also arbitrarily reduce the rates. He said based on the Human Resources Minister's proposal, workers' representation in the wages council would be less than 20%. In appointing the members of the council, the minister is not obliged to consult MTUC or organisation of employers and he is empowered to remove any member of the council, he said. Abdul Halim said despite studying the various wages council models in other countries, the proposed bill was not aimed at implementing a

national minimum wage but instead, wages would be determined by sector, category and region. (Source: The Star, 30 June 2011)

Members News
New Collectibles in Pewter This years Royal Selangor Spring Collection reflects a cheerful tone with something for everybody, from fairy-tale inspirations to themes related to the five elements of feng shui. The merchandise ranges from ingeniously crafted Jack And The Beanstalk bubble blower, Pied Piper Of Hamelin music carousel, Hanzel And Gretel coin box, Cinderella bookends and Chinese five-element incense burner and scent holder, to mens accessories such as a humidor, bottle stopper, bottle opener and hip flask. This collection is also exciting as it features the latest works of designers such as Hong Kong Freeman Lau and his Danish counterpart, Erik Magnussen. Pewter is malleable and shiny, both features accentuated with a touch of class in the collection, like in its amazing smooth curves that carry a fine tone of sleekness, whether they are the ancient symbols of the five elements or a smooth hip flask carrying a minimalist theme. Magnussen focused on a range of accessories mostly for use at the wine bar. The most appealing are the hip flask, foil cutter and bottle opener, all fine embodiments of the delicate contours and lines that pewter creates. These will definitely find a friend among collectors of pewter. The hip flask and foil cutter in particular, are so well smoothened out that you can feel every inch the elegance of pewter, compact and a privilege to hold. Prices start at RM130. Laus range of table top and home accessories, Five Elements, is a treasure for those who believe in energy regeneration through the elements of wood, metal, water, fire and earth. Some are accented with nyatoh wood, giving them the allure of the geometric blend of wood and pewter. The intricate characters Sheng Sheng Bu Xi, which mean perpetual regeneration, are carved on the scent holder, incense box, incense burner, seal and desk caddy. These characters run in a maze of symbols representing the five elements. As Laus creations are in sync with current trends, they should find favour with those who have a weakness for spa treatments such as aromatherapy. Prices are from RM220. Also not to be missed are tea caddies inspired by the Japanese inro, a portable container for seals and medicine. Royal Selangor general manager (manufacturing) Yong Yoon Li counts these as his favourites because of their nature imprints such as the pine and crane, lotus, dragonfly and bamboo as well as orchid and magpie. These designs are reflective of how the ancient literati enjoyed tea and nature at the same time. (In China, Taiwan and Hong Kong, tea enthusiasts are known to have their own caddies carrying their favourite tea.) They are so beautiful that they can be used as decorative items. Prices are from RM380. Details at royalselangor.com. (Source: New Straits Times, 16 April 2011)

Royal Selangor Centre in Penang

The elegant Straits Quay, Penangs first retail marina enclave, is the latest home of the Royal Selangor Visitor Centre. Officially opened last March, it is the second centre in the country (the first is in Setapak) and the third worldwide after Singapore. It covers a builtup area of 354.5 sq metres over two floors a showroom on the lower floor and a gallery above. The store boasts a new identity that blends traditional and modern elements, drawing inspiration from the source of pewter tin mines. The ambience is peaceful, thanks to the use of different materials and neutral colour tones that also create a visual impact on visitors. Like its counterpart in Setapak, the centre has all the key features to make it a top tourist destination. Visitors will enjoy free guided tours to the gallery and a look at how pewter items are made at the demo areas. But the most exciting attraction is the crowd favourite The School Of Hard Knocks where visitors can make their own pewter bowls using traditional tools similar to those used more than a 100 years ago. Royal Selangor is Malaysias iconic pewtersmith and has a history that dates back 125 years. Lesson in Hard Knocks Royal Selangor School of Hard Knocks means exactly what it says. No hidden meaning, no metaphor. The school, available at the Royal Selangor Visitor Centres in Kuala Lumpur, Penang and Singapore, simply teaches how hard knocks can turn a pewter plate into a polished bowl. For RM50, the students not only get to do that for 30 minutes but they also get to keep their masterpieces and are given a certificate. The School Of Hard Knocks is a hit with foreign tourists and schoolchildren. It is open between 9am and 5pm daily. Advance booking for large groups is recommended. (Source: New Straits Times, 2 June 2011)