Malaysia
Equipment & Machinery

This is a best prospect industry sector for this country. Includes a market overview and trade data.

Last published date: 2020-08-18

Overview

Over the decades, Malaysia has consolidated and improved its Electrical and Electronics (E&E) sector, but the country has not been able to evolve into a manufacturer of complete equipment.  Instead, industry stakeholders have niche themselves as either manufacturer of components or as Original Equipment Manufacturers (OEM).

The following groups of export products represent the highest dollar value in Malaysian global shipments during 2019. Also shown is the percentage share each export category represents in terms of overall exports from Malaysia.

 

DESCRIPTION

VALUE

(US$ B)

TOTAL EXPORT (%)

1

Electrical machinery and equipment

82.0

34.4

2.

Mineral fuels including oil

34.5

14.5

3.

Machinery including computer

21.8

9.1

4.

Animal/vegetable fats oils waxes

11.5

4.8

5.

Optical technical medical apparatus

10.1

4.2

6.

Plastic and plastic articles

9.6

4.0

7.

Rubber and rubber products

7.1

3.0

8.

Iron and steel

4.4

1.8

9.

Other chemical goods

4.1

1.7

10.

Organic chemical

4.0

1.7

Table1: Top 10 Exports of Malaysia

Source: MATRADE

Malaysia's top 10 exports accounted for almost 80 percent of the overall value of its global shipments.

This data highlights the opportunity for the Machinery & Equipment (M&E) industry as an area for growth and development, with a focus on high value-added M&E.

Target Subsectors: 

  • Specialized process machinery or equipment for specific industry
  • Metalworking machinery
  • Power generating machinery and equipment
  • General industrial machinery & equipment, components, and parts

There are currently 1,418 companies of all sizes in the M&E industry across multiple fields, including power generation, metalworking, specialized-process M&E for specific industries, general industrial M&E, modules, and industrial parts, and remanufacturing of M&E. These fields include 197 companies involved in the production of semiconductor M&E and 143 companies involved in robotics and factory automation systems. Malaysia is the leading manufacturer of specialized-process machinery for the E&E industry and automation equipment in the Southeast Asia region. 

Malaysian M&E companies are capable of providing a full range of services, including design & development, test simulation, software programming, structure fabrication, module assembly and integration, as well as automation solutions.  They can produce advanced machinery with full automation and robotics handling systems, and can easily integrate themselves into global supply chains. Notable companies in the industry include Advantest, SRM, Vitrox, Muehlbauer, Pentamaster, UMS, and Multitest. 

Driven by industry trends, including Industry 4.0 and the Industrial Internet of Things (IIoT), M&E companies are currently revolutionizing their production processes.  These companies are adopting vital Industry 4.0 technologies to increase the level of automation, connectivity, and Big Data Analytics (BDA) required in a smart factory environment.  This trend includes connecting cyber and physical systems via an Enterprise Resource Planning (ERP) system, as well as employing remote monitoring, machine-to-machine (M2M) communication, and fully robotic, automated assembly lines in their production floors.. 

Opportunities

In 2019, Malaysian importers purchased the following ten subcategories of machinery, including computers:

DESCRIPTION

VALUE

(US$ Million)

CHANGE

(%)

Computers, optical readers

2,800

-13.78

Computer parts, accessories

2,000

-18.7%

Miscellaneous machinery

1,300

-15.9

Machinery for making semi-conductors:

1,200

-2.1

Turbojets

1,000

+17.4

Printing machinery

924

-9.1

Centrifuges, filters and purifiers

894

+3.3

Taps, valves, similar appliances

879

-8.5

Air or vacuum pumps

758

-2.0

Machinery parts

638

+12.4

Table2: Top 10 Imports of Malaysia

Source: MATRADE

 

Products of interest and classifications by the Malaysian Harmonized System Tariff Codes are as follows:

HSTC

DESCRIPTION

8411.91

Of turbo-jets or turbo-propellers

8419.39

 

Machinery for the treatment of materials by a process involving heating, for the manufacture of printed circuit boards, printed wiring boards or printed circuit assemblies

8419.89

Machinery for the treatment of material by a process involving heating, for the manufacture of printed circuit boards, printed wiring boards or printed circuit assemblies

8419.90

Parts of machinery for the treatment of materials by a process involving heating, for the manufacture of printed circuit boards, printed wiring boards or printed circuit assemblies

8443

Printing machinery used for printing by means of plates, cylinders and other printing components of heading 84.42; other printers, copying machines and facsimile machines, whether or not combined; parts and accessories thereof.

8471

Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included.

8479.89

Machinery for assembling central processing unit (CPU) daughter boards in plastic cases or housings; apparatus for the regeneration of chemical solutions used in the manufacture of printed circuit boards or printed wiring boards; equipment for mechanically cleaning the surfaces of printed circuit boards or printed wiring boards during manufacturing; automated machines for the placement or the removal of components or contact elements on printed circuit boards or printed wiring boards or other substrates; registration equipment for the alignment of printed circuit boards or printed wiring boards or printed circuit assemblies in the manufacturing process

Table3: Product description with corresponding HS Coding

Source: Royal Custom & Excise Department of Malaysia

Challenges for U.S. Products in the Malaysian Market 

For the M&E sector, the production for new manufacturing equipment is dependent on the global demand of these manufactured products.  New capital investments decisions are often made during times that require incrased productivity. In the past, Malaysia supplied low-value products, and an increase in demand was met by an increase in labor.  This dynamic is no longer the case in the production of precision goods and products.  The factors that create challenges for U.S. products include:

  • Price Sensitivity -

Malaysia is a price-sensitive market.  Usually, if it's a one-off purchase, they will look for the best value for money.

  • Adopt & Adapt

Malaysia needs to adopt new production technology.  With a population of 33 million people and a small industry footprint, Malaysia must export to achieve economies of scale to compete globally.  To achieve this objective, the government had launched in late 2019 the Industry4WRD.  This is a national blueprint to push SMEs in Malaysia into the new Industrial Revolution 4.0 (IR4.0). There are still deficiencies that Malaysia must address such as the lack of technology innovation due to a shortage of workers skilled in science, technology, engineering, and mathematics (STEM) and insufficient focus on digital literacy and innovation.  

  • Soft Global Market

The current soft global market makes it challenging for Malaysian exporters to sell more.  The buyer’s market makes price-sensitivity even more critical. To increase productivity, Malaysian manufacturers must decide to increase investment in either long-term (capital) or short-term (labor). A long term strategy would require substantial initial financial outlay which must be justified by a viable return on investment.  Foreign labor will not be favorable in the long-run in this current global economic and pandemic conditions,  SMEs must find a way to get their organizations IR4.0 ready just  to survive and compete.  The government has already provided incentives and grants for those that are able, willing and ready to adopt IR4.0.  It is now not a matter of question why but to do or die.

  • Uncertainty in the Political Landscape

In the last two years, Malaysia went through two government changes.  In May 2018, Barisan Nasional (BN), the coalition that ruled Malaysia for 62 years, lost to Pakatan Harapan (PH). In March 2020, PM Mahathir resigned and left the PH government in turmoil.  The Minister of Home Affairs, through a “sleight of hand,” ousted PH and was nominated by the King as the eighth Prime Minister.  He formed the Perikatan Nasional (PN), a loose alliance with the opposition, and appointed his cabinet. 

Best Prospective U.S. Products for the Malaysian Market

Malaysia has become the hub of excellence for the semi-conductor sector, and it is replicating their success for other sectors such as:

  • Specialized M&E

This sub-sector refers to M&E, which is specially designed and customized for use in a specific sector or process. Industries targeted include electrical & electronics, solar/photovoltaic, semiconductor, oil and gas, automotive, packaging, plastic extrusion & injection, agriculture, etc. In the electrical & electronics sector, Malaysia is a production base for the world's top electronics companies such as Intel, Freescale, Renesas, Agilent, Hitachi, lnfineon, Texas Instrument, National Semiconductor, and X-Fab. Also, the world's top solar companies, i.e., First Solar, Hanwha Q-Cell, and Sunpower have set up their operations in Malaysia.  To qualify as a supplier to these MNCs, Malaysian companies need to update and upgrade their manufacturing processes to meet the stringent requirements set by these MNCs.

  • Oil, Gas & Energy

With the increasing growth of deep-water activities in the South China Sea and off North-West Australia, the market for subsea oil and gas production equipment and technology is expected to increase.  The Government of Malaysia is trying to make Malaysia the O&G hub in the Southeast Asian region, and to achieve this objective it is encouraging Malaysian companies to get involved in the manufacturing and supply chain of O&G types of machinery and equipment via PETRONAS.  Not many companies in Malaysia have the capacity to invent new machinery or equipment for the O&G industry, and the long, tedious, and stringent requirements of the O&G discourages entry to the market.  However, Malaysia has been building itself as a center of excellence for the OEM of such machinery and equipment.  There exist opportunities to supply precision equipment for the manufacturing of these OEM products.

  • Aerospace – Maintenance, Repair & Overhaul (MRO)

Malaysia enjoys five percent of the global MRO market, and aims to become a MRO hub in the region.  Malaysia is already a supplier of aerospace components for Airbus SE, Boeing, Rolls-Royce, Safran, Honeywell, and Thales.  However, it is only manufacturing non-critical parts such as fan cowling and casing, thrust reverser, forward leading edge, aircraft door, avionics equipment, galley equipment, seats, and carbon brakes.  The Government of Malaysia is trying to move local players up the supply chain, and in its 2nd Aerospace Industry Blueprint 2016-2030, the government is strengthening the coordination between all related agencies to promote the country's aerospace ecosystem.  For Malaysia to move up the supply chain to include critical aerospace parts, it must invest and upgrade its human capital and production capabilities to include more sophisticated items in its product range.

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