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[VAT Media Release] Expanding Production Capacity in Penang, Malaysia

20 December 2021 | by |
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[VAT Media Release] Expanding Production Capacity in Penang, Malaysia

17 December 2021

Dec 17 – VAT, the global leader in high-vacuum technology for the semiconductor, digital display and other high-precision industries, today announced its biggest-ever capital investment program to strengthen the foundation for sustainable future growth.

As part of its annual strategic review and in expectation of continued sustainable growth, VAT intends to invest approximately CHF 160 million from 2022 to 2024 to build a new innovation center in Haag, Switzerland, expand its production facilities in Penang, Malaysia while also making investments into production capacity increases in Haag. Once completed, the investments are expected to create over 600 new jobs globally and will further strengthen VAT’s business continuity efforts.

 

New innovation center in Haag, Switzerland

To further strengthen its technology lead in high-precision vacuum valves and develop future adjacent products and solutions, VAT will build an innovation center at its headquarters and production location in Haag, Switzerland.

The new state-of-the-art research laboratories will host VAT’s global R&D function and bring all of its Switzerland-based R&D activities under one roof. It will act as the foundation of the VAT campus and as such include meeting areas, modern catering facilities for all VAT employees and our visitors. In addition, it will offer additional office space for the business units and certain support functions.

The total investment in the innovation center will amount to approximately CHF 40 million. The center is expected to be inaugurated in the second quarter of 2024. Once completed, VAT expects to add over a 100 scientists and R&D engineers to our innovation team in Switzerland.

“This new center will allow us to significantly improve our innovation capabilities and further expand our technology leadership, one of our most important competitive advantages,” said Michael Zickar, VAT’s Head of Core Technologies. “Together with our particle lab in California and expanding engineering capabilities in Malaysia, we’re creating a more powerful and efficient global R&D network to better serve our customers.”

 

Production extension in Penang, Malaysia

The growth outlook for VAT’s end markets, especially semiconductors, remains very positive. To capture the ongoing growth opportunities in this environment, VAT is going to further expand production capacity in Penang, Malaysia.

The project is expected to start during the first half of 2022, with initial production scheduled to begin in 2024. The investment in land, buildings and the initial production equipment is around CHF 70 million over the period 2022 to 2024. This production extension is located nearby the existing site and close to our central warehouse within the Batu Kawan Industrial Park. When completed, the new facility will cover an area of about 39’200 m2, employ some 500 people and, at full capacity, will more than double the production capacity of VAT’s Malaysia operations to over CHF 1 billion.

“After thoroughly assessing a number of options for expanding our production capacity, we concluded that Penang was the best location for a number of reasons,” explained Mike Allison, VAT’s CEO. “Our team in Penang has already done a great job ramping up production in recent years to meet the needs of our fast-growing market, and our decision to expand further in Penang is acknowledgment of their outstanding efforts. In addition, several of our largest OEM customers have operations in the region and boosting our production there will enhance our ability to collaborate with them more effectively and deliver value faster and more efficiently.”

Paraveen Singham, VAT’s General Manager in Malaysia added the positive support of local authorities in Malaysia also played a role in the decision. “All the local authorities, InvestPenang, the Penang Development Corporation and the Malaysian Investment Development Authority MIDA have provided us with excellent support over the last several years and we look forward to working with them during this next expansion step.”

 

Additional production capacity planned for Haag, Switzerland

In addition to the innovation center in Haag and the new factory in Penang, VAT will further expand capacity in its main Haag facility with incremental investments in the next years of close to CHF 50 million to further improve productivity by optimizing material and production flows. With these measures, VAT expects to increase its factory output in Haag by over 25% by 2025.

“Haag will always remain a core lead production site for VAT,” emphasized Thomas Berden, VAT’s Chief Operating Officer. “Our production employees here are highly qualified and experienced, the logistics setup is ideal, and we can rely on a high-quality supplier base in the region. We also have strong support from the local authorities in the community of Sennwald and the canton of St Gallen. These are significant advantages for us and solid reasons to continually invest in our operations in Switzerland.”

 

The right time to invest – capex covered by strong cash flow generation

The company said its decision to proceed with the investment program now reflects the positive long-term growth outlook for VAT’s main end markets, driven by megatrends such as the Internet of Things, cloud computing and artificial intelligence. Pandemic-related developments, such as the shift to home office and the sharp increase in E-commerce, have further improved the demand outlook. As the clear market and technology leader, VAT is well positioned to benefit from these trends and continue its track record of strong profitable growth, which is further supported by the Advanced Industrials and Display & Solar business units and the Global Service business segment.

“When putting together our initial strategic assessment for the years 2022 to 2026, we saw many of our existing growth drivers confirmed and we identified additional adjacent business opportunities that will allow us to continue our profitable growth path,” said Fabian Chiozza, the company’s CFO. “This will allow us to finance the entire investment program from our strong cash flow generation.”

The total initial investment will amount to about CHF 160 million over the period 2022 – 2024. Because of the increased capital expenditures, the capex-to-sales ratio will temporarily increase to between 5.5 – 6.5% for the years 2022 – 2023 before returning to the guidance of 4-5% of sales.

Source: VAT