Malaysia

Also, a network of companies providing support goods and services, like CMC Engineering, aid in making Malaysia an intelligent choice of foreign direct investment (FDI) in the semiconductor sector. It is no surprise that Japanese companies such as Toshiba, NEC and recently-created Renesas, are reaping the benefits of this ideal location.

Celebrating three decades of success

Toshiba Electronics (TEM) has plenty of reason to celebrate. It is the global giant's largest semiconductor assembly facility in the world and 2003 marks its 30th year of operations. Established in 1973, it now boasts a staff of 1,350 and has achieved a monthly output of up to 130 million units.

Doing business on a global scale, TEM has customers ranging from multinational companies to medium and small-scale local manufacturers. The company saw double-digit growth last year with the notable increase in its audio, DVD and disk drive sectors.

Outgoing managing director, Jiro Maeda related that the greatest challenge TEM encountered in its early years was making the transition from a labor intensive industry to an automated manufacturing facility. It took time to orient the employees in the new direction.

Today, it has become the company's practice to introduce new technology and equipment to enhance the expertise of the local workforce. "With new technology transfers we can accelerate the localization of material, parts and equipment which can create more supporting industries in Malaysia," said Maeda.

Jiro Maeda (left), outgoing managing director of Toshiba Electronics, and Hiroshi Harada (right), the company's incoming managing director

The establishment of strong supporting industries in the country has strongly aided Toshiba's continued expansion of its Malaysian operations thus far. In turn, the company takes it upon itself to assist in the creation of more of the same supporting industries into the future.

Not unlike many of the manufacturing and assembly related businesses in the region, TEM is expecting some effects from increased competition in the region, particularly from China. "We expect to see some set-makers moving to China for lower production costs," he explained. "On the other hand, a few set-makers are transferring HQ functions such as R&D to Malaysia. By optimizing this opportunity, we can continue to expand our business in this region."

Hiroshi Harada, who took over as managing director of TEM earlier this year, believes that the company is prepared for the possibility of having to give up its lower-end products in face of the greater competition from China. The company has already initiated a shift in its business strategy, moving more towards the manufacture of value-added products.

For his part, Maeda believes TEM will operate successfully in Malaysia and contribute to its development for years to come. "As a major semiconductor company, TEM has a responsibility to the community," he concluded, "especially regarding employment, environmental preservation and enhancement and creating more supporting industries. Not only for the present but for future generations."

A semiconductor renaissance

Meanwhile, just over two months ago, global semiconductor giants Hitachi and Mitsubishi Electric formed the joint venture Renesas Technology. With a combined capital of about 420 million dollars (50 billion yen) in capital and a global workforce of 27,200, two leading names in the industry created one of the world's largest semiconductor companies.

Renesas, which stands for Renaissance Semiconductor for Advanced Solutions and operates under the slogan "Everywhere you imagine," plans to establish itself as the world's leading Integrated Device Manufacturer (IDM).

Aside from offering advanced research and development and manufacturing expertise, Renesas also provides highly integrated semiconductor system solutions to its clients in the mobile, automotive, networking and digital home electronics markets.

In line with the company's establishment, Renesas integrated its operations in North America and Europe. It also incorporated 13 Japanese affiliate companies, including its sales arm Renesas Technology Sales and its applications engineering arm Renesas Solutions, along with eight other overseas affiliate companies.

A vital component of this global network is Renesas Semiconductor Malaysia (RSM), the company's largest semiconductor assembly and testing facility, located in the western state of Penang.

RSM's role within the company's global framework is to contribute to Renesas' worldwide business expansion strategy through its core products: analog and discrete semiconductors.

At the head of these efforts is managing director Tokumasa Yasui, who has been capitalizing on the strengths of the two giant mother companies to make RSM "a global ASEAN company."

Tokumasa Yasui, managing director of Renesas Semiconductor

Asked about his most pressing plans for recently-hatched RSM, Yasui identified three main objectives. The first is to build a facility with the lowest total cost production. RSM kicked off operations from Hitachi Semiconductor Malaysia's former plant at the Bayan Lepas Free Industrial Zone, the country's oldest industrial park located on Penang, which is dubbed "Malaysia's Silicon Island".

Yasui's second goal is to enhance the company's design and development capabilities, as well as its know-how in application technology. His target is to double RSM's sales revenue with originally manufactured products and boost sales of self-designed goods to more than half of total earnings.

Lastly, he intends to exploit existing local infrastructure to cut down RSM's total turnaround time. By September, less than half a year into operations, RSM expects to manufacture some of Mitsubishi Electric's products.

Yasui steps up to the plate as Hitoshi Ishimori, corporate adviser and former general manager of Hitachi Semiconductor Malaysia, relinquishes his post. Ishimori describes Malaysia and Penang in particular as an ideal place for Hitachi in the past and an ideal site for RSM from now on.

"As the market is now growing in the Asia Pacific region, our location enables us to provide better service to our market in the surrounding areas" commented Ishimori. "As far as assembly and testing are concerned, companies such as ours remain here because the infrastructure for semiconductor testing and assembly is superior to neighboring countries in the region. For example, about 90 percent of our material and parts are sourced from this area."

The road to total solutions

NEC Sales Malaysia commenced operations on March 1998 following the Malaysian government's move to revive the country by enhancing its attractiveness to international high-tech industry.

Tomohiro, Yagi, managing director of NEC Malaysia

At the onset, the company focused on personal computers (PCs) and communication products. A few years after a successful penetration of the market, NEC created a niche for itself in the mobile phone and PC segments.

As more and more competitors eventually saturated the market, NEC headed in a new direction - becoming a "Total Solutions Provider" with an emphasis on systems integration.

In March 2000, the change in mission not only resulted in a new direction but also in a new name. NEC Malaysia unveiled a new motto, "Empowered by Innovation," and the company started to specialize in innovative solutions for its sector.

Managing director Tomohiro Yagi came in to oversee this shift in vision and execute the plan NEC Japan had set in motion. The Malaysian government's development of the Multimedia Super Corridor (MSC) - a project designed to attract high-tech foreign direct investment through world-class office facilities, tax incentives and other perks - also assisted the company in realizing its new vision.

NEC Malaysia first targeted Japanese manufacturers for its systems integration business. Today, while it maintains its Japanese client base, the company also profits from opportunities afforded to it by the Malaysian government and local businesses - specifically in the retail sector.

"We have seen an increase in information technology (IT) spending across several industries to further enhance business capabilities," says Yagi. "Malaysia can truly become an IT hub in the Asian region, and NEC will definitely benefit from this."

"We measure success in many ways, whether through an increase in turnover or obtaining a larger market share," he adds, "but most important to us is the feedback we receive from our customers about the quality of service we provide."

TOP