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May 24, 2023 – Penang remains unfazed by the flow of semiconductor capital to other countries in the region as the state has developed its own niche in the electrical and electronics (E&E) manufacturing sector.

The state, now a top-ten player in the global supply chain for E&E, would complement rather than compete with its neighbours for a slice of the semiconductor industry’s capital exiting China following the tech trade war between the US and the world’s second biggest economy.

Datuk Seri Lee Kah Choon, who is the special adviser to the chief minister on economic affairs, said that, over the decades, Penang has developed a niche in areas of testing and assembly, but it is also upscaling its manufacturing capabilities.

“Industries here are now moving into integrated circuit testing and new areas of Industrial Revolution 4.0 which allow the state to expand its niche in E&E,” Lee said at the sidelines of the annual Semicon Southeast Asia conference at the Setia Spice Convention Centre here.

“I think the keyword here is Penang wants to complement, not compete. We want to capitalise on our strengths and competencies and not attempt to do things which we are not strong in. We are moving up the value chain with our emphasis on skills learning.”

Lee also said that Penang is in the position to tap into new technology such as artificial intelligence and smart chips, which will power the next generation in the information communications field.

“Out of the 10 Asean member countries, the semiconductor capital is flowing into countries such as Vietnam, Singapore, Thailand, Indonesia and to a degree in Philippines but Malaysia continues to register strong interest from investors.

“The role of Penang as an export destination through E&E has grown in importance to the country’s export quantum, and now the manufacturing sector has displaced commodities such as palm oil as the main export for the country,” Lee stressed.

Penang accounts for 38% of the total E&E exports in the country while it contributes 5% to the global supply chain of semiconductors, which by 2030 would be valued at US$1 trillion (RM4.58 trillion).

Penang also contributed 7% to the national gross domestic product in 2021, at RM99 billion.

“The industries here are also now integrating by combining embedding software into hardware devices to drive the Internet of Things, made swifter and smarter by AI.

“There is optimism ahead, but Penang needs to be ready for the next phase by emphasising more on skills acquisition through technical vocational education training and to coax students to take science, technology, engineering and mathematics (STEM) subjects.

“There is a shortfall in STEM expertise in the country. We need to regain the youth’s interest in such subjects to power the manufacturing sector,” said Lee.

Yesterday, Deputy Prime Minister Datuk Seri Ahmad Zahid Hamidi also spoke about positioning Malaysia to complement rather than compete for the capital exodus out of China following the latter’s tech trade dispute with the US.

However, former Jelutong MP Jeff Ooi Chuan Aik said that Penang’s transformation into a highly skilled manufacturing hub is slow and the state is paying the price for its unclear direction in manufacturing for the past decade.

Ooi said that there is a need to fast-track the reforms to ensure that Penang’s position as a top E&E producer is enhanced and brings more value to the economy.

“We cannot be producing chips only. We need to go into areas with higher value and income while recognising that our workforce is smaller compared to others but if we are more skilful and agile, we would still be on top of our game,” said Ooi.

Source: The Vibes