{"id":40612,"date":"2020-10-21T08:30:48","date_gmt":"2020-10-21T00:30:48","guid":{"rendered":"https:\/\/investpenang.gov.my\/special-report-medical-devices-industry-is-penangs-hidden-gem\/"},"modified":"2025-12-02T16:24:14","modified_gmt":"2025-12-02T08:24:14","slug":"special-report-medical-devices-industry-is-penangs-hidden-gem","status":"publish","type":"post","link":"https:\/\/investpenang.gov.my\/zh-hans\/special-report-medical-devices-industry-is-penangs-hidden-gem\/","title":{"rendered":"Special Report: Medical Devices Industry is Penang\u2019s Hidden Gem"},"content":{"rendered":"<div class=\"wpb-content-wrapper\"><p>[vc_row css_animation=&#8221;&#8221; row_type=&#8221;row&#8221; use_row_as_full_screen_section=&#8221;no&#8221; type=&#8221;full_width&#8221; angled_section=&#8221;no&#8221; text_align=&#8221;left&#8221; background_image_as_pattern=&#8221;without_pattern&#8221; el_class=&#8221;sec-inner-banner&#8221; css=&#8221;.vc_custom_1703741584745{background-image: url(https:\/\/investpenang.gov.my\/wp-content\/uploads\/2023\/12\/contact-banner-bg.jpg?id=20253) !important;}&#8221; z_index=&#8221;&#8221;][vc_column][vc_row_inner row_type=&#8221;row&#8221; type=&#8221;grid&#8221; text_align=&#8221;left&#8221; css_animation=&#8221;&#8221; el_class=&#8221;inner-banner-row&#8221;][vc_column_inner][vc_column_text]<\/p>\n<h1 style=\"text-align: center;\">Special Report: Medical Devices Industry is Penang\u2019s Hidden Gem<\/h1>\n<p>[\/vc_column_text][vc_separator type=&#8221;normal&#8221; el_class=&#8221;red-separator&#8221; color=&#8221;#ee4023&#8243; transparency=&#8221;1&#8243; thickness=&#8221;2&#8243; up=&#8221;15&#8243; down=&#8221;15&#8243;][vc_column_text css=&#8221;&#8221; el_class=&#8221;white-text&#8221;]<\/p>\n<p style=\"text-align: center;\">20 October 2020<\/p>\n<p>[\/vc_column_text][\/vc_column_inner][\/vc_row_inner][\/vc_column][\/vc_row][vc_row css_animation=&#8221;&#8221; row_type=&#8221;row&#8221; use_row_as_full_screen_section=&#8221;no&#8221; type=&#8221;grid&#8221; angled_section=&#8221;no&#8221; text_align=&#8221;left&#8221; background_image_as_pattern=&#8221;without_pattern&#8221; css=&#8221;.vc_custom_1703764846254{background-color: #f3f5f8 !important;}&#8221; z_index=&#8221;&#8221;][vc_column el_class=&#8221;fade-in animate&#8221;][vc_empty_space height=&#8221;120px&#8221; el_class=&#8221;height-x120&#8243;][vc_row_inner row_type=&#8221;row&#8221; type=&#8221;grid&#8221; text_align=&#8221;left&#8221; css_animation=&#8221;&#8221;][vc_column_inner][vc_single_image image=&#8221;29641&#8243; img_size=&#8221;full&#8221; qode_css_animation=&#8221;&#8221; el_class=&#8221;single-featured-image&#8221;][\/vc_column_inner][\/vc_row_inner][vc_empty_space height=&#8221;60px&#8221; el_class=&#8221;height-x60&#8243;][vc_row_inner row_type=&#8221;row&#8221; type=&#8221;grid&#8221; text_align=&#8221;left&#8221; css_animation=&#8221;&#8221; el_class=&#8221;content-row&#8221;][vc_column_inner][vc_column_text]Oct 20 &#8211; IT is not a widely known fact that Penang, famous for its thriving electrical and electronics (E&amp;E) industry, also has a burgeoning medical device industry. The state is slowly gaining a reputation as a medical device manufacturing hub among world-class manufacturers.<\/p>\n<p>Its most recent investments include US company DexCom Inc, a global leader in\u00a0 continuous glucose monitoring, and Switzerland-based electrical measurement company LEM.<\/p>\n<p>Malaysia is seen as the leading medical device manufacturing hub in the East, competing against the likes of mature hubs such as Puerto Rico, Costa Rica and Ireland.<\/p>\n<p>While central Malaysia attracts latex-related medical device companies such as those in glove and condom manufacturing because of its proximity to raw materials, Penang is making a name for itself in non-glove medical device manufacturing or, more specifically, medical technology (medtech).<\/p>\n<p>Unlike industries with low barriers to entry, medical device producers usually stay put once they have decided on a location for their manufacturing base.<\/p>\n<p>Devices manufactured in Penang tend to be on the higher end of the value scale, such as cardiovascular products or orthopaedic implants and tools.<\/p>\n<p>Invest-in-Penang Bhd (InvestPenang) CEO Datuk Loo Lee Lian says the sector is actually an offshoot of the state\u2019s E&amp;E sector. Part of the credit for its growth should be given to B Braun, she adds. It was the first foreign medical devices company to set up operations in Penang in 1972, around the same time the \u201c8 samurais\u201d of the E&amp;E sector arrived here.<\/p>\n<p>\u201cB. Braun was the training ground that started the medical devices industry in Malaysia. A lot of the CEOs in the medical device industry today are alumni of B. Braun.<\/p>\n<p>\u201cThey did for the medical devices industry what companies like Intel did for the semiconductor industry. B. Braun helped create the ecosystem for the medical device industry in Penang,\u201d she explains.<\/p>\n<p>The rapidly growing E&amp;E sector in Penang created opportunities for some companies in the industry to transition into medical device manufacturing.<\/p>\n<p>\u201cWe realised in 2005 that it is easier for the existing E&amp;E and manufacturing industrial players in Penang to transition into medical device manufacturing by leveraging similar manufacturing skillsets in the E&amp;E industry.<\/p>\n<p>\u201cSince then, the Penang state government has been focusing on growing the medical device cluster by working closely with the captains of the industry,\u201d says Ching Choon Siong, executive director of the Association of Malaysian Medical Industries (AMMI).<\/p>\n<div class=\"mt-3 imgw-300 embed-right\"><a class=\"mobx embedimg-icon\" href=\"https:\/\/assets.theedgemarkets.com\/pictures\/SR_cht2_TEM1340_theedgemarkets.jpg\" data-rel=\"ceolightbox\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" data-src=\"https:\/\/assets.theedgemarkets.com\/pictures\/SR_cht2_TEM1340_theedgemarkets.jpg\" alt=\"\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" class=\"lazyload\" \/><noscript><img decoding=\"async\" src=\"https:\/\/assets.theedgemarkets.com\/pictures\/SR_cht2_TEM1340_theedgemarkets.jpg\" alt=\"\" \/><\/noscript><\/a><\/div>\n<h3><\/h3>\n<p>&nbsp;<\/p>\n<h3>Penang\u2019s advantages<\/h3>\n<p>Ching says Penang\u2019s success at attracting foreign investments is due to its competitive costs and established infrastructure. But equally important is the talent pool available, which is partly the result of the clustering effect of the medical device supply base.<\/p>\n<p>T H Su, CEO of home-grown Straits Orthopaedics Manufacturing Sdn Bhd, says Penang is considered as the best-cost manufacturing hub these days, not a low-cost base like before. He explains that other factors, such as a skilled workforce and logistics infrastructure, have made up for the lower costs offered by other hubs.<\/p>\n<p>Dave Mitchell, Boston Scientific vice-president and general manager for manufacturing and distribution in Malaysia, shares similar sentiments. The strong collaboration among the industries that he experienced here helped cement the company\u2019s decision that Penang was a good place to do business.<\/p>\n<p>\u201cInvestPenang was specifically helpful in helping us network with other companies. They connected us with other companies, both in the medical devices and other high tech industries, when we were here looking. That really helped us understand how we would fit and how our needs could be met,\u201d he says.<\/p>\n<p>Boston Scientific set up a massive 375,000 sq ft manufacturing plant in Batu Kawan in 2017, its first factory in Asia.<\/p>\n<p>\u201cBesides the usual aspects of site selection like economics, the availability of talent, labour, infrastructure and also intellectual property protection \u2014 which is very important to a medtech company like us \u2014 Malaysia also has the advantage of English fluency, which helps a lot because most of our R&amp;D teams are English-speaking,\u201d says Mitchell.<\/p>\n<div class=\"mt-3 imgw-300 embed-right\"><a class=\"mobx embedimg-icon\" href=\"https:\/\/assets.theedgemarkets.com\/pictures\/SR_cht1_TEM1340_theedgemarkets.jpg\" data-rel=\"ceolightbox\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" data-src=\"https:\/\/assets.theedgemarkets.com\/pictures\/SR_cht1_TEM1340_theedgemarkets.jpg\" alt=\"\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" class=\"lazyload\" \/><noscript><img decoding=\"async\" src=\"https:\/\/assets.theedgemarkets.com\/pictures\/SR_cht1_TEM1340_theedgemarkets.jpg\" alt=\"\" \/><\/noscript><\/a><\/div>\n<p>The sector\u2019s growth story in Penang is remarkable. Loo relates that between 2011 and 2015, annual approved investments from scientific and measuring equipment, under which medtech is categorised, was below the RM600 million mark.<\/p>\n<p>In 2016, it started to see a pick-up in investments, with the number reaching RM983 million. By 2019, of the RM2.52 billion of approved investments in the scientific and measuring equipment segment in Malaysia, RM2.45 billion was from Penang.<\/p>\n<p>Malaysian Investment Development Authority (MIDA) statistics show that in 1Q2020, Penang recorded RM1.85 billion out of the RM1.92 billion total approved investments for the segment.<\/p>\n<p>Notably, more than 95% of the investments for this sector are foreign direct investment, evidence that the medical device industry in the country is dominated by multinational corporations (MNC).<\/p>\n<h3>MNC presence unmissable<\/h3>\n<p>Depending on how one looks at it, having multinational corporations in an industry is an advantage. In Ching\u2019s opinion, when an MNC sets up a manufacturing site, it creates opportunities for local suppliers of raw materials, services and value-added outsourcing. In the process, these local companies can gain skills and knowledge of the sector, possibly enabling them to venture into the manufacturing business.<\/p>\n<p>He likens MNCs\u2019 presence in Penang to the concept of an anchor tenant in a shopping mall, which naturally draws others to the mall.<\/p>\n<p>\u201cThe strategy makes sense for us because without them, we find ourselves unable to go into a new sector sometimes. So, we might as well bring them in here and create more business opportunities for local business suppliers. There is also a chance that those working at these MNCs will themselves become entrepreneurs eventually,\u201d says Ching.<\/p>\n<p>Based on a survey by AMMI, Ching says MNCs that are members of AMMI have sourced RM550 million worth of local materials from local suppliers, RM1.74 billion of services from local small and medium-size enterprises and RM1.92 billion worth of contract manufacturing opportunities.<\/p>\n<p>Nevertheless, InvestPenang\u2019s Loo believes that more improvements can be made to localise the supply chain but admits the process will take time. InvestPenang has been pushing the MNCs to do so but the amount of localisation has been lower when compared with the E&amp;E sector.<\/p>\n<p>\u201cThe reason for the slow progress is because of the stringent [United States Food and Drug Association] requirements and lengthy qualification process. They don\u2019t want to have to requalify their suppliers. The parts from suppliers are small in size and since they have gross margins of 70% to 80%, they are not cost sensitive and would rather fly in their parts from existing qualified suppliers wherever they are in the world,\u201d she explains.<\/p>\n<p>Loo points out that a cluster is key for the development of the sector. The medical device industry, like the E&amp;E industry, tends to cluster.<\/p>\n<p>\u201cWhen you have a cluster, you attract talent. If you build the ecosystem, the supporting industries (will grow) as well. We are growing that cluster slowly but surely.\u201d<\/p>\n<p>While MNCs dominate, there are a few home-grown companies in the space.<\/p>\n<p>A notable one is Straits Orthopaedics, which is a contract manufacturer for orthopaedic implants. It is also an associate company of listed healthcare group Apex Healthcare Bhd.<\/p>\n<p>Currently, more than 50% of Straits Orthopaedics\u2019 products are supplied to medical technology company Smith &amp; Nephew plc, which focuses on orthopaedics, sports medicine and ENT as well as advanced wound management.<\/p>\n<p>Straits Orthopaedics has been a contract manufacturer for Smith &amp; Nephew for the last 17 years.<\/p>\n<p>Smith &amp; Nephew recently started construction of a 250,000 sq ft manufacturing facility in Batu Kawan Industrial Park to support its orthopaedics franchise, which has been growing strongly in Asia Pacific.<\/p>\n<p>Encouragingly, Ching notes that there has been growth within the domestic industries. Between 2013 and 2019, a total of RM8 billion in domestic direct investment (DDI) was approved compared with RM11.8 billion in FDI, according to MIDA statistics.<\/p>\n<p>\u201cDDI\u2019s share of 40% cumulative investment over this period is very encouraging,\u201d states Ching.<\/p>\n<p>The handful of local companies in the industry believe that there is room for more local players but they say more needs to be done to encourage this.<\/p>\n<p>Michael Hng, managing director of Allen Healthcare Products (M) Sdn Bhd, a Malaysian company pioneering Rapid Diagnostics Test kits in Malaysia, says one of the main challenges for entry is the high investment cost.<\/p>\n<p>\u201cSome of the main factors that hinder local players from setting up a full-scale medical device manufacturing plant in Malaysia is the high investment capital, incomplete supply chain of supportive materials, regulatory requirements and compliance cost and a long seeding time before a product becomes marketable,\u201d he adds.<\/p>\n<p>Hng hopes to see more collaboration between the Ministry of Health and local medical devices manufacturers as the ministry is the biggest customer for these products.<\/p>\n<p>Malaysia is the largest medical device market in Southeast Asia, with a market worth US$1.55 billion (RM6.44 billion). Public sector procurement accounts for about 50% of that, notes AMMI\u2019s Ching.<\/p>\n<p>Hng also believes that there needs to be a paradigm shift in mindset for both the government and private sector to move from merely \u201crepackaging\u201d to becoming full manufacturing set-ups.<\/p>\n<h3>Propelling the industry further<\/h3>\n<p>While lots of hard work and money has been invested to make Penang the medical device hub it is today, the industry believes much more can be done to keep Malaysia, specifically Penang, as the choice for world-class medical device companies.<\/p>\n<p>One of the industry\u2019s main concerns is that the types of incentives provided do not necessarily meet its needs. It is calling for incentives that are tailored for them.<\/p>\n<p>Boston Scientific\u2019s Mitchell, for one, says there needs to be improvement in the investment incentives programme, particularly in the area of reinvestments.<\/p>\n<p>\u201cFor example, if, in five years, we are going to go into another significant investment, we find that other countries are better in reinvestment support. A new product can be made in any of our other 29 plants around the world. So, it is about how the country attracts reinvestment for new products,\u201d says Mitchell.<\/p>\n<p>AMMI\u2019s Ching too believes that while the government has been very generous with grants and money for businesses, the incentives are outdated.<\/p>\n<p>\u201cCurrent incentives for R&amp;D given to companies are for buying equipment. For R&amp;D, we actually need to spend money on human capital. There is a lack of holistic incentives right now to support the R&amp;D of medical devices,\u201d he says.<\/p>\n<p>He points out that Singapore, which emphasises R&amp;D, is offering to pay 50% of the salaries of companies\u2019 R&amp;D engineers.<\/p>\n<p>\u201cThe government co-invests. It is a good strategy and a better commercialisation than our current strategy here,\u201d Ching says.<\/p>\n<p>However, the local players see things a little differently.<\/p>\n<p>\u201cTo me, the grants or the incentives aren\u2019t the main things. The main thing is for regulators and authorities to assist companies in every way they can. But I feel that they don\u2019t understand how steep the competition is like outside of Malaysia.<\/p>\n<p>\u201cEmerging countries like Vietnam have a very aggressive investment board and they have a hungry workforce of both skilled and unskilled workers. They have a huge talent pool of engineers and they also have a relatively younger population.<\/p>\n<p>\u201cThey may not be \u2018there\u2019 yet, but with time, they will build up their infrastructure and they will soon close the gap,\u201d says Straits Orthopaedics\u2019 Su.<\/p>\n<p>Says AHP\u2019s Hng: \u201cI don\u2019t need the money or grants. What I would like is for regulators to support the local industry in terms of sales. We produce world-class products too.\u201d<\/p>\n<p>Besides incentives and support, B. Braun says improvement can be made with greater emphasis on the training and development of highly skilled talents in the country.<\/p>\n<p>\u201c[One way] of doing this is to instil great interest in the STEM (Science, Technology, Engineering and Mathematics) subjects while students are still in primary and secondary school. Introduce medtech content as an elective engineering course in local universities or give prominence to the medical device industry at career fairs as an industry of choice for graduates and job seekers,\u201d says B Braun Asia Pacific president Lam Chee Hong.<\/p>\n<p>AMMI\u2019s Ching hopes that in the next five to 10 years, Malaysia will be able dominate certain sub-sectors of the medical device industry, like orthopaedics, high-value electronic-based medical products or even plastic-based products.<\/p>\n<p>\u201cIn order for that to happen, we have to be good in certain products, [and] we focus our attention in these areas. Today, we are doing well in rubber glove manufacturing. In the future, we hope to see Malaysia doing well in other sectors.<\/p>\n<p>\u201cI believe the metal-related industries can do as well as the plastic-based products. So, our vision is to leverage our skill sets to do well in areas that we are strong in.\u201d<\/p>\n<p>Read more: <a href=\"https:\/\/www.theedgemarkets.com\/article\/special-report-medical-devices-industry-penangs-hidden-gem\" target=\"_blank\" rel=\"noopener\">The Edge<\/a>[\/vc_column_text][\/vc_column_inner][\/vc_row_inner][vc_empty_space height=&#8221;120px&#8221; el_class=&#8221;height-x120&#8243;][\/vc_column][\/vc_row]<\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"<div class=\"events-time-box\">\n<h2>21<\/h2>\n<div>\n<p>Wed<\/p>\n<p>October \u201820<\/p>\n<\/p><\/div>\n<\/p><\/div>\n","protected":false},"author":5119,"featured_media":29641,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[316],"tags":[],"news_year":[274],"news_month":[228],"local_insights_alphabet":[],"acf":[],"_links":{"self":[{"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/posts\/40612"}],"collection":[{"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/users\/5119"}],"replies":[{"embeddable":true,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/comments?post=40612"}],"version-history":[{"count":2,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/posts\/40612\/revisions"}],"predecessor-version":[{"id":40633,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/posts\/40612\/revisions\/40633"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/media\/29641"}],"wp:attachment":[{"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/media?parent=40612"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/categories?post=40612"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/tags?post=40612"},{"taxonomy":"news_year","embeddable":true,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/news_year?post=40612"},{"taxonomy":"news_month","embeddable":true,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/news_month?post=40612"},{"taxonomy":"local_insights_alphabet","embeddable":true,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/local_insights_alphabet?post=40612"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}