Penang economic indicators

Penang
Economic
Indicators
an extract from Penang Monthly
April 2015 Issue 4.15
APRIL 2015 |
1
By Ong Wooi Leng
Penang Economic Outlook
Penang’s economy in 2015:
Growth continues,
but more slowly
Penang’s GDP has been growing over
the last five years. Following the recent
release of data on Malaysia’s GDP growth
for 2014 by Bank Negara Malaysia, the
state GDP has improved to 5.9%, posting
a 0.2 percentage point higher than that
of the previous projection made in
January 2015 (Figure 1)1. In view of the
adjustment made for Malaysia’s 2015 GDP
growth projection, the 2015 state GDP
is also altered. The state GDP growth is
expected to slow down by one percentage
point to 4.9% in 2015. This is a drop of
0.5 percentage points from the previous
forecast made by Penang Institute.
On the supply side, all economic sectors
were estimated to grow at positive rates
in 2014. Table 1 estimates that although
Penang’s mining and quarrying sector
registered the highest growth of 14.5%
in 2014, the sector’s share in Penang
constituted merely less than one per cent
of Penang’s total GDP.
In 2015, all economic sectors will
experience slower expansion compared
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Figure 1: GDP annual growth rate in Malaysia and Penang, 2006-2015*
% Growth rate,
constant 2005 prices
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
Malaysia
Penang
2006
5.6%
10.8%
2007
6.3%
6.5%
2008
4.8%
5.5%
2009 2010
-1.5% 7.4%
-10.5% 10.4%
2011
5.2%
3.9%
2012
5.6%
5.0%
2013
4.7%
4.6%
2014* 2015*
6.0%
5.0%
5.9%
4.9%
Source: Department of Statistics Malaysia, Economic Report 2014/2015 and Penang
Institute.
*forecast for Malaysian GDP growth has been adjusted based on the revised Budget
2015 made on January 20, 2015. Mid-point of the projected Malaysia’s GDP growth
is used for illustration purposes (2015: 4.5%-5.5%) while forecast for Penang’s GDP
growth is calculated by the Penang Institute 2 .
1
2
Refer to Ong, W. L. (2015), “Ripples from global events threaten local economy” in Penang
Economic Outlook 2015, Penang Monthly, January 2015.
The projection of GDP growth rate is calculated using the shift-share analysis, developed by David
Creamer in early 1940s. The shift-share identity is presented as follows:- (r i-r)+(r ij-r i )=(r ij-r) where r =
growth rate; i = national sector; and j = sector in state.
Having contributed about 14% of its
manufacturing output at the national
level, Penang’s services sector is
projected to marginally surpass its
manufacturing share by less than one per
cent in 2015, while its shares for other
economic sectors are anticipated to
relatively plateau (Table 1). This trend
could be an encouraging sign, and it can
perhaps be attributed to greater support
services activities, such as business
processing outsourcing (BPO), flowing
into Penang.
Stable capital inflow despite
smaller domestic investment
A total of 169 projects were approved
in Penang for 2014. Being ranked as the
third highest investment recipient in
Malaysia, Penang contributed about 11.4%
of total investment in 2014 – four per cent
more than 2013. Total capital investment
reached RM8.16bil. Of this, domestic and
foreign investments respectively made up
RM3.05bil and RM5.11bil.
On average, total capital investment
registered at RM48.3mil for a project in
2014, compared to RM32.9mil in 2013.
Soaring high. Keysight Technologies,
one of Penang’s “Eight Samurai”,
expanded its business processes worth
RM500mil in Penang.
Table 1: Malaysia’s and Penang’s GDP growth and share, 2014 and 2015
Economic activity
Agriculture
Mining
Construction
Manufacturing
Services
GDP growth/share
% growth
2014
2.6
3.1
11.6
6.2
6.3
6.0
Malaysia
2015*
3.1
2.8
10.7
% share
2014
7.1
4.1
% share
2015*
2014*
2015*
7.6
14.5
13.5
0.1
0.1
4.8
3.8
47.8
47.4
4.9
7.0
7.0
4.3
25.0
25.1
4.5-5.5
100.0
100.0
56.0
Penang
2014*
5.5
5.6
% growth
2015*
6.9
7.8
56.1
4.5
0.8
7.1
5.9
3.5
-0.2
6.1
1.9
2.3
48.0
1.8
2.2
48.6
Source: Bank Negara Malaysia and Penang Institute.
*Projected by Penang Institute.
The share of foreign investment has
grown from about 15% in 2010 to over
60% in 2014 (Figure 2), while the share of
domestic investments halved from about
85% in 2010 to nearly 40% in 2014.
Although the breakdown of the industry
for domestic and foreign investments
has not been made available by the
Malaysia Investment Development
Authority (Mida), a generic observation
seems to suggest that the E&E industry
experienced an upward trend. A number
of MNCs had either planned to expand
their existing plants or build new
plants in Penang – one of them being
Keysight Technologies (formerly Agilent
Electronic Measurement Group), one of
Penang’s “Eight Samurai”. It expanded
its business processes worth RM500mil
in Penang and hired about 500 new
employees, especially R&D engineers3.
(Keysight focuses on 5G communication,
solutions for new Internet devices and
Ivan Lim
to the previous year. The construction
sector may experience a negative growth
as miniscule as 0.2%; however, this will
not give any adverse impact for the
industry. It is believed that property
developers may stay cautious with the
arrival of GST in April 2015, which is
likely to change consumer spending
patterns.
sensor technology.) US-based MNC
Seagate, on the other hand, bought
another 30 acres of land in Batu Kawan
and invested a sum of RM1.05bil to
manufacture hard drives and provide
data storage solutions4. Furthermore,
SanDisk Corp is also setting up its flashmemory product manufacturing facility
in Batu Kawan5.
Moderating external demand
due to global events
Penang’s trading environment seems
to portray a moderating trend in 2014
due to its timely pickup in exports in
the last two months of 2014. Figure 3
shows the trade balance of Penang over
the last two years; it is evident that trade
balance fluctuated in the second half of
20146, experiencing double troughs in
August and October 2014 compared to
January-December 2013. This is mainly
attributed to growth in import value of
about 23% from January-August 2014,
turning trade into deficit for the first
www.investpenang.gov.my/newsdetail.php?group=2014&sub_
group=November&pid=17
4
www.thestar.com.my/Business/BusinessNews/2014/10/09/HP-to-invest-RM1b-inPenang-Its-expected-to-sign-land-deal-withstate-govt-soon/?style=biz
5
www.thestar.com.my/Business/BusinessNews/2014/06/09/SanDisk-sets-up-Penangplant-RM12bil-manufacturing-facility-to-beoperational-in-March-2015/?style=biz
6
According to the Department of Statistics,
the export and import values are gathered at
the entry and exit points of Penang Port and
Penang International Airport via the Royal
Customs Department of Malaysia. Therefore,
the data is unable to track the origin/departure
destination of commodities being transported
to the Penang Port and Penang International
Airport.
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Ivan Lim
 Seagate's facility on the island. The US-based MNC bought another
30 acres of land in Batu Kawan and invested a sum of RM1.05bil.
time after the global financial crisis
in 2009. The deficit dipped further in
October 2014 due to an increase of
about 25% month-on-month (m-o-m)
basis in import value from RM2.3bil in
September 2014.
Figure 2: Capital investment in Penang (RM bil), 2009-2014
100%
1.79
90%
1.96
80%
1.13
70%
1.79
1.45
60%
50%
5.11
10.45
40%
7.15
30%
1.34
20%
2.12
3.05
0.72
10%
0%
2009 20102011 20122013 2014
Domestic investment
Foreign investment
Source: Malaysia Investment Development Authority (Mida).
Figure 3: Double troughs in Penang’s balance of trade (RM mil), 2013 and 2014
4,000.00
3,000.00
2,000.00
1,000.00
0.00
JanFebMarAprMayJun Jul AugSepOctNovDec
-1,000.00
-2,000.00
2013
-3,000.00
-4,000.00
Source: Department of Statistics Malaysia.
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2014
Nevertheless, the value of commodity
being imported softened in the last two
months of 2014, dropping by 30.4%
m-o-m basis from RM17.2bil in October
2014 to about RM12bil in November
2014, resulting in a surprisingly large
trade surplus. This seems to suggest that
the external demand could be in the
midst of adjusting its trading activities
to global economic events such as
the fall in oil price and rise in the US
interest rate (and hence a weakening
Ringgit). A similar trend is predicted
in the first half of 2015; it is interesting
to note that the total commodity being
traded (the sum of exports and imports)
in Penang recorded an upward trend,
constituting an increase of 9.2% in 2014
compared to 2013.
Unlike the fall in oil price, Penang’s
external trade may be moderately
affected by the plunging Ringgit.
Theoretically, the fall in Ringgit favours
the export of goods and services but it
accelerates the price of imported goods,
with the assumption that the volume
of imported goods and services to be
used as raw materials remains constant.
This will eventually result in lower trade
surplus. Furthermore, this scenario is
likely seen to have a vicious cycle where
Figure 4a: Total export of Penang, 2014
Food
1.7%
Figure 4b: Total import of Penang, 2014
Others
2.0%
Crude materials,
inedible
1.4%
Chemicals
3.8%
Manufactured
goods
5.1%
Miscellaneous
transactions and
commodities
4.4%
Others
12.0%
Mineral fuels,
lubricants, etc.
4.7%
Chemicals
4.8%
Total export:
RM172.56bil
Miscellaneous
manufactured
articles
14.7%
Machinery and
transport
equipment
71.1%
Source: Department of Statistics Malaysia.
Miscellaneous
manufactured
articles
5.8%
Source: Department of Statistics Malaysia.
Total export: RM157.97bil
6.5%
Hong Kong
10.6%
11.6%
Euro Zone
15.6%
US
19.6%
China
0.0% 5.0% 10.0%15.0%20.0% 25.0%
Source: Department of Statistics Malaysia.
Figure 5b: Major import countries to Penang, January-November 2014
Total import: RM141.79bil
Taiwan
Japan
6.2%
7.8%
Singapore
US
China
8.2%
13.0%
18.6%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0%12.0% 14.0%16.0%18.0% 20.0%
Source: Department of Statistics Malaysia.
Machinery and
transport
equipment
61.3%
Manufactured
goods
7.0%
Figure 5a: Major export countries from Penang, January-November 2014
Japan
Total import:
RM154.46bil
the volume of export goods may then
deteriorate if raw materials being used
to produce final goods and services
become expensive.
Commodity-wise, machinery and
transport equipment remained the
largest exported commodity in Penang;
out of RM172.6bil, it contributed about
71% of total export in 2014, growing
at 8.6% compared to 2013 (Figure 4a).
The commodity’s import expanded
considerably by 33.1% m-o-m basis while
its export contracted by 12.3% m-o-m
basis in October 2014. However, its
exports made a significant turnaround
of 10.4% and experienced a substantial
slump in its import of about 40% m-o-m
basis in November 2014. Meanwhile,
miscellaneous manufactured articles and
manufactured goods accounted for 14.7%
and 5.1% respectively (Figure 4a).
The structure of exported and imported
commodities also suggests that
over 90% of Penang’s commodities
being exported comprise E&Erelated products, including electrical
machinery, apparatus and appliances;
professional and scientific instrument;
and telecommunication, sound
recording and apparatus. Likewise,
Penang imported these commodities
the most (Figure 4b).
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 AirAsia's counters at the Penang International Airport. Penang has been attracting a number of SSO companies to set up their business activities
here, including AirAsia.
Amid a stiff and competitive trading
environment and the Ringgit’s
depreciation, the full realisation of an
Asean Economic Community (AEC)
is foreseen to play an important role in
pushing for greater trading activities
but, at the same time, diverting business
activities to a more profitable destination.
Steady growth in the tourism
sector
Ever since George Town was recognised
as a Unesco World Heritage Site in
Since the Department of Statistics Malaysia
does not provide the breakdown of exports
and imports at country level beginning from
December 2014, we are unable to report this
data for the whole year of 2014.
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Figure 6: International visitors in Penang via Penang International Airport,
2013 and 2014
75,000
2013
70,000
Number of visitors
Based on the percentage share of total
trade, Penang’s five major trading
partners are China (including Hong
Kong), the US, Japan, the Euro zone and
Singapore. These countries accounted
for nearly 51% of Penang’s total trade in
the first 11 months of 20147. Out of the
five countries, while Penang recorded
trade deficit with Japan and Singapore,
the other three countries registered trade
surpluses. Trailing behind Singapore,
Thailand and Vietnam are Penang’s major
trading partners within Asean.
2014
35.0%
% growth y-o-y
30.0%
25.0%
20.0%
65,000
15.0%
60,000
10.0%
55,000
5.0%
50,000
-5.0%
0.0%
-10.0%
45,000
40,000
-15.0%
Jan FebMar Apr MayJun Jul Aug SepOctNov Dec
-20.0%
Source: Penang Global Tourism.
Figure 7: Major countries of origin of Penang’s international visitors via Penang
International Airport, 2014
US
Japan
China
3.4%
4.9%
10.3%
Singapore
Indonesia
22.5%
45.2%
0.0%10.0%20.0%30.0%40.0%50.0%
Source: Penang Global Tourism.
Table 2: Labour statistics in Penang ('000), Q1-Q3 2014
2014
Labour force
Employed
persons
Unemployed
persons
Labour force
participation
rate
Unemployment
rate
Outside
labour force
Q1
824.0
811.7
12.4
70.5
1.5
344.8
Q2
817.6
800.0
17.6
70.0
2.1
350.9
Q3
823.1
810.8
12.4
70.2
1.5
349.8
Source: Labour Force Survey, Department of Statistics Malaysia.
Table 3: Employment share in services sub-sectors in Penang (%), Q1-Q3 2014
Services sub-sectors
Wholesale and retail trade; repair of motor vehicles and motorcycles
Q1 ‘14
Q2 ‘14
Q3 ‘14
16.8
17.1
13.8
4.2
4.3
4.8
12.2
Transportation and storage
11.3
9.7
Information and communication
Accommodation; food and beverage service activities
0.4
0.7
1.2
Financial and insurance/Takaful activities
1.6
2.4
2.5
Real estate activities
0.8
0.7
0.9
Professional, scientific and technical activities
2.4
3.1
2.1
5.7
Administrative and support service activities
4.6
2.9
Public administration and defence; compulsory social security
4.7
3.9
2.8
Education
5.4
5.5
5.2
Human health and social work activities
3.3
4.8
5.0
Arts, entertainment and recreation
0.8
0.5
0.3
1.9
Other service activities
2.0
1.5
Activities of households as employers
0.3
0.6
1.4
58.6
57.7
59.7
Total
Source: Labour Force Survey, Department of Statistics Malaysia.
Ivan Lim
 Bon voyage. Penang’s international visitors expanded by 7.5% annually from 2008-2014.
2008, Penang’s tourism sector has been
experiencing a growing trend. Penang’s
international visitors expanded by 7.5%
annually from 2008-2014, accounting
for about 720,000 visitors arriving at
Penang International Airport in 2014.
This pattern varies seasonally, as depicted
in Figure 6. Unlike 2013, foreign visitors
exhibited three seasonal growth paths
in 2014: first, the trend boomed from
January-April 2014, followed by a smaller
wave of growth from May-August 2014,
and it is estimated to have grown from
September-December 2014.
On a year-on-year (y-o-y) basis,
international visitors increased in all
months except June, September and
December 2014, compared to 2013 –
likely due to the fact that Penang and
Malaysia at large were badly hit by haze
from forest fires in Sumatra, Indonesia,
which usually happens in June.
Figure 6 also indicates that Penang
seems to have steady arrivals from
abroad during the George Town Festival
(GTF) in August every year. Based on
Penang Global Tourism’s statistics, a
total of about 220,000 visitors attended
all types of events organised by GTF
with a surge of 6.4% in 2014 compared
to 20138.
In relation to the rise in foreign
arrivals for the last month of 2014, the
Penang Island Jazz Festival (PIJF) is
another popular two-day event held
in early December every year. It has
been continuously well received by
international visitors: “When it started in
2004, the percentage share of attendees
from Penang and outside Penang
in the first few years was about 50%
respectively,” says Paul Augustin, director
of PIJF. However, a shift occurred in
2008: attendees from outside Penang
went up to 60% and local Penang
attendance dropped to 40%. The crowd
in 2014 was estimated to reach over
5,000; attendees from outside Penang
rose to 65%, while local Penang attendees
shrank to 35%.
George Town Festival features a series of arts
and cultural events in the month of August.
This includes world-class performances, crosscultural creative collaborations, experimental
art, traditional and contemporary performing
arts, as well as local community initiatives.
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Ivan Lim
 The SanDisk Batu Kawan site.
Labour market stays robust
Figure 9: Number of retrenched workers in Penang, 2010-2014
3,000
Male
Female
2,500
2,000
1,062
1,044
1,500
472
1,000
435
500
492
0
457
1,464
646
1,026
1,317
20102011 2012 20132014
Source: Jobs Malaysia, Ministry of Human Resources.
By destination, the three major countries
of origin of Penang’s international
visitors are Indonesia, Singapore and
China, making up 78% of Penang’s
total international visitors, as shown in
Figure 7. Indonesia constituted over
40% of total international visitors. This
result is somewhat consistent with
statistics provided by the Penang Health
Department, whereby nearly 97% of
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Penang’s total health tourists were
recorded to be Indonesian in JanuarySeptember 2014. Meanwhile, the number
of visitors from China was found to
have increased the most – about 21%
in 2014 compared to 2013, despite the
disappearance of flight MH370 in March
2014. In summary, we will still see a
buoyant growth in the tourism sector in
2015.
Penang’s labour force had been lingering
at a stable growth, except in Q2 2014
(Table 2). In Q3 2014, the total labour
force (defined as working age citizens
ranging from 15-64 years) was recorded at
823,100. Of this, 810,800 were employed
and only 12,400 were unemployed.
Those outside the labour force remained
at about 350,000 for the same quarter.
These include students, housewives and
prisoners.
It is interesting to note that while the
unemployment rate in Q2 2014 was
marginally higher, the labour force
participation rate stayed at about 70%
from Q1-Q3 2014. We may deduce that
a frictional unemployment is observed
in the second quarter of 2014; most job
vacancies opened during this quarter
to cater to new graduates as well as the
existing workforce looking for career
advancement opportunities.
By industry, the services sector
made up the largest proportion of
Penang’s total employment in Q3 2014,
registering an increase of 1.1% of its
share in the previous quarter (Figure 8).
Manufacturing came second (30.6%)
with a decline of about three per cent
compared to the previous quarter.
Turning to employment in the
services sub-sectors, not surprisingly,
employment in wholesale and retail
trade was found to form the greatest
proportion of Penang’s services sector
in Q3 2014 (Table 3). 59.7% persons
worked in the services sector; about
24% of Penang’s total employed
persons work as services and sales
persons, recorded to be the largest
workforce in Penang. It is anticipated
that the employment market will
keep flourishing in services sector,
particularly in administrative and
support service activities; Penang has
been attracting a number of shared
services outsourcing (SSO) companies
to set up their business activities here,
including AirAsia, IHS, Wilmar and
Citigroup.
Figure 9 shows that the number of
retrenched persons being reported to
the Labour Department oscillated over
five years. As can be seen, the number
of retrenched workers rose drastically
two years after the global financial crisis
of 2009. While total retrenched workers
significantly increased in 2014, Penang’s
labour market remained resilient. As
can be observed in Table 2, Penang’s
unemployment rate stood at below two
per cent from Q1-Q3 2014 (which is half
of the full employment rate of four per
cent), denoting that Penang continued
to enjoy the state of full employment
in 2014.
One of the reasons for having a high
number of retrenched workers but a low
unemployment rate is the employability
of retrenched workers. Although data
provided by Jobs Malaysia does not
trace the employment status of these
retrenched workers, the likelihood
of job placement opportunities
could be high. For example, Fairchild
Semiconductor International closed
down several ageing plants in a few
locations including Penang, as reported
in August last year 9. Some 15% of its
9,000 workforce in the world were
affected. However, InvestPenang, which
assisted in offering job placement
options to the affected staff, revealed
that the employees’ relevant skill-sets
could certainly be absorbed by other
semiconductor companies in Penang.
Hence, a full employment situation is
predicted to persist in the first quarter
of 2015.
Conclusion
Output is expected to expand at a
slower rate in 2015 compared to last
year, and the manufacturing and
services sectors are estimated to
equally contribute an important share
to Penang’s output growth. The value
of external trade relies very much on
external factors such as the price of
crude oil and value of the Ringgit. A
fall in the price of crude oil might not
profoundly affect Penang’s economy;
depreciation of Ringgit, however,
might change the production chain of
the industry. The employment market
will remain resilient in 2015, wherein
only a very small proportion of the
labour force will be unemployed;
workers might be looking for bright
opportunities during the transition
period.
9
www.themalaymailonline.com/malaysia/
article/penang-job-market-resilient-despitemajor-plant-closure-soon-says-state-inv; www.
thesundaily.my/news/1151961
Ong Wooi Leng is a senior analyst
at Penang Institute. Her interest lies
in industrial economics, consumer
behaviour and public finance.
APRIL 2015 |
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By Ong Wooi Leng
Ivan Lim
Penang Economic Outlook
Penang’s semiconductor industry
moves from assembly to R&D
From low-skilled labour-intensive activities to highskilled product development, Penang’s semiconductor
scene has transformed itself – and with great success.
Since the opening of Malaysia’s first Free
Industrial Zone in the 1970s, Penang’s
economy has been thriving, based
on export-oriented labour-intensive
manufacturing activities. Since then,
a row of mostly American, Japanese
and Taiwanese E&E MNCs has been
established here – Intel, Motorola, Altera
and ASE electronics, to name a few.
example, scaled down its operations by
shifting relatively more labour-intensive
segments in the production process to
other low cost locations1. Motorola and
Intel, on the other hand, set up their
R&D centres in Penang to undertake
product development activities.
It is noteworthy that almost all these
MNCs are still operating, and many of
them have reshuffled or intensified their
traditional manufacturing activities to
higher value-added activities, including
the employment of high-skilled workers
and the domestic outsourcing of noncore activities. This is in line with the fact
that some low-skilled labour-intensive
assembly activities have gradually
shifted away from Penang. Dell, for
The semiconductor industry, together
with solar and LED, makes up the
three major ecosystems of the E&E
sector. According to the Malaysian
Investment Development Authority
(Mida), the semiconductor industry
has been continuously driving the
growth of the E&E sector in Penang
and Malaysia at large, aided by the
increase of global demand in mobile
devices (smartphones, tablets), storage
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The E&E factor
devices (cloud computing, data centres),
optoelectronics (photonics, fibre optics,
LEDs) and embedded technology
(integrated circuits, PCBs, LEDs)2.
Electronic components are the largest
contributors in exports for the E&E
industry, accounting for RM111.19bil
(or 47%) in 20132. In 2014, more than
50 companies – largely MNCs – were
producing semiconductor devices in
Malaysia.
The presence of major MNCs such
as Intel, AMD, ASE, Motorola,
STMicroelectronics, Texas Instruments,
Renesas and Seagate, along with major
Malaysian-owned companies such as
Globetronics, Inari and Vitrox, has
steadily contributed to the growth of
www.intracen.org/BB-2012-03-05-Growingwith-global-production-sharing-in-MalaysiaPart-IV/; www.whatsonpenang.com/index.
php/news-views-penang/853-malaysias-ledmanufacturers-expand-production-to-meetglobal-demand
2
www.mida.gov.my/home/electrical-andelectronic/posts/
1
the semiconductor industry in Penang.
While Malaysia is responsible for 12%
of the global back-end support for the
semiconductor industry in 2013, Penang
alone accounted for eight per cent that
year3. About RM11bil of Malaysia’s total
capital investment, involving a total of 96
projects, was attributed to E&E products
in 20144.
Table 1: E&E sub-sectors in Malaysia
Sub-sector
Description
1. Consumer
electronics
LED television receivers
Audio visual products such as
Blu-ray disc players/recorders
Digital home theatre systems
Electronics games consoles
Digital cameras
2. Electronic
components
Semiconductor devices
Printed circuits
Media
Substrates
Connectors
3. Industrial
electronics
Computers
Computer peripherals
Telecommunication products
Office equipment
4. Electrical
Lightings
Solar-related products
Household appliances such as
air-conditioners, refrigerators,
washing machines and
vacuum cleaners
Connecting Penang with the
worldwide semiconductor
industry
and will present market opportunities at
several levels, such as communications
infrastructure and computing platforms5.
In Penang, many local companies are
perceived to have the capabilities to
Global demand for semiconductor
tap into the design and production of
gadgets has been steadily growing;
sensors, actuators and other components
within the past decade, gadgets such as
related to IoT. For instance, Globetronics,
smartphones and tablets have become
a Penang-based company, received orders
indispensable. According to Semi, a
for its sensors from customers in the EU
non-profit global trade association for
and the US during the second half of
the semiconductor industry, North
2014. It was therefore investing between
American-based manufacturers of
RM55mil and RM60mil to develop and
semiconductor equipment report the
book-to-bill ratio every month, indicating manufacture sensors for wearable smart
devices and smart mobile electronic
average global trends of bookings and
products in May 20146.
billings in the semiconductor industry.
As can be seen in Figure 1, the book-tobill ratio recorded a stable oscillation
before 2012; the industry underwent
the highest book-to-bill ratio in March,
and the lowest in September. This trend
changed in 2013 and 2014; the ratio
lingered above one for most months,
showing that the semiconductor
equipment market possessed strong
demand in the first seven months of 2014,
but weakened in August, September and
December 2014. The book-to-bill ratio
of 0.98, as can be observed in December
2014, implies that US$98 worth of
orders was received for every US$100 of
products billed for the month.
At present, the global semiconductor
industry is shifting towards the Internet
of Things (IoT). It is a strategic market
Source: Malaysian Investment Development opportunity for semiconductor vendors,
Authority (Mida).
and growth will occur over many years
To meet the rising demand for
wearable technologies, Penang’s local
semiconductor manufacturers should
soon be venturing into IoT. It is believed
that IoT can convert Penang into a smart
city via safer security, intelligent traffic
management and smart homes. It can
elevate the industries’ value chain in
Penang, and enhance the talent pool
with higher income brackets such as data
scientists and R&D researchers. It will
ultimately turn Penang into an intelligent
city in the not-too-distant future.
www.investpenang.gov.my/opportunities.
php?cid=4
4
www.mida.gov.my/home/facts-and-figures/
posts/
5
Penang Institute (2014), “Kajian untuk
Mengenalpasti dan Meramal Penentu
Pertumbuhan Ekonomi Negeri Pulau Pinang”.
6
www.thestar.com.my/Business/BusinessNews/2014/05/03/Globetronics-upbeat-aboutnextgen-sensors/?style=biz
3
Figure 1: Global book-to-bill ratio
1.20
1.10
1.00
Source: Semi, February
2015.
0.90
0.80
Nov-14
Jul-14
Sep-14
May-14
Jan-14
Mar-14
Nov-13
Jul-13
Sep-13
May-13
Jan-13
Mar-13
Nov-12
Jul-12
Sep-12
May-12
Jan-12
Mar-12
Nov-11
Jul-11
Sep-11
Mar-11
May-11
0.60
Jan-11
0.70
Note: One denotes the
benchmark as follows:
a ratio of above one
indicates strong demand,
while a ratio of below one
represents weak demand.
APRIL 2015 |
11
By Ong Wooi Leng
Semicon Southeast Asia
Penang Economic Outlook
 At Semicon Singapore 2014. Semicon Singapore has
revamped itself into Semicon South-East Asia.
The annual Semicon Singapore event, a
regional exposition of the semiconductor
industry, has been taking place for the
last 21 years. However, this time around,
Semicon Singapore has revamped itself
into Semicon South-East Asia (Semicon
SEA), and will now rotate between being
held in Singapore and other locations
within the region – beginning with
Penang.
InvestPenang is the supporting partner
of Semi in organising this year’s Semicon
SEA 2015, which will be held at sPICE
Arena from April 22 to 24 and will be the
region's largest microelectronics event.
12
| APRIL 2015
In conjunction with the exposition,
InvestPenang will be hosting a
networking event and site visit to the
Batu Kawan Industrial Park and factories
to showcase Penang’s semiconductor
ecosystem to potential investors.
On top of that, InvestPenang is also
working closely with Semi to organise
its Supplier Search Program during the
Semicon SEA Show to match suitable
capabilities and streamline the supplier
chain ecosystem with two major OEMs,
one of which ranks among the top 5 for
front-end equipment manufacturing,
while the other is a formidable back-end
equipment supplier.
Penang Institute
Soldering a regional
platform for semiconductors
 Ng Kai Fai, president of Semi SEA.
Penang Monthly meets up with Ng
Kai Fai, president of Semi SEA – the
regional branch of Semi – to chat about
the roles Semi plays, the mission of the
tradeshow and his take on the industry
in Malaysia and South-East Asia.
Ivan Lim
fact, we have oversold the exhibition
booths and are still figuring out how to
accommodate additional requests!
Semi acts as a platform to connect the
industry in the region with other regions
in the world, and Semicon SEA 2015 will
be a good start. Collaboration between
regions is important to complement the
needs of the industry in other emerging
countries.
 Many electronics foundry companies can be found in Malaysia, such as Altera in Penang's Bayan
Lepas Free Industrial Zone.
Apart from organising conferences
and technical workshops, we are also
involved in government advocacy;
this trade exhibition is realised with
the collaboration of the Economic
Development Board of Singapore
(EDB), Malaysia Industry Development
Authority (Mida) and InvestPenang.
Why hold the trade exhibition in
Penang?
Penang is considered a silicon hub, and
the state has a complete ecosystem for
the semiconductor industry. There are
more than 200 semiconductor companies
in Malaysia’s Free Industrial Zones;
South-East Asia’s microelectronics
manufacturing ownership accounts for
almost 27% of the world’s assembly,
packaging and test production, and of
this, Malaysia alone takes about 11% of
the global square footage.
What can we expect from the
exhibition?
Semicon is a place where businesses are
made. The exhibition involves companies
from various sub-sectors, namely
equipment/materials, packaging, test
assembly, fabrication and foundry. It is
a platform where suppliers can leverage
their outreach to their potential clients
within the region.
Apart from Malaysia and Singapore,
there will be 13 other countries from
around the world congregating at the
Penang show; we are trying to enhance
and develop the South-East Asian
ecosystem, but we are not limiting
ourselves to the region. As a matter of
In order to compete well in the industry,
technological innovation is an important
component to make a device cheaper
and, at the same time, faster. In this
regard, innovation very much relies on
the governance of a corporation.
Productivity is another dominant
factor which investors look at – the
productivity of skilled workers. Penang
and Malaysia as a whole have a fairly
large educated and English-proficient
talent pool. This bodes well with the
industry and is a great start. The next
challenge is obviously a continuous focus
on training to enhance the added value of
that workforce.
 Semicon is a place where businesses are made.
Semicon Southeast Asia
Tell us more about Semi. What is its
mission?
Ng Kai Fai: Semi is a non-profit global
trade association for the semiconductor
industry. We facilitate the growth and
development of the industry through
working with partners, and help
members to grow their businesses and
networks in the region.
How about investors? Are there any
specific elements that will be referred
to by investors when it comes to
making decisions?
There are probably, in my mind, four
main areas.
Besides, many electronics foundry
companies can be found in Malaysia,
such as Altera, Silterra and X-Fab.
Comparing the situation among SouthEast Asian countries, Malaysia – and
Penang in particular – becomes a viable
choice for having the event.
APRIL 2015 |
13
Ivan Lim
back-end equipment in the South-East
Asian region, and another US$14bil
on materials including US$11bil on
packaging-related materials. This is a
significant market!
China is leading in the packaging
industry due to its investments, and it
has a huge market. The key question
is: how do we compete effectively, as
well as complement them? Malaysia
went through a phase of moving up
the value chain in the semiconductor
industry. Penang, specifically, began
with a human capital intensive industry
and shifted to automation in the early
1980s. Based on that, Malaysia is veering
towards design and development, and
I think it adds significant value to the
ecosystem.
Would Semi be able to facilitate the
transfer of knowledge and technology
from MNCs to
Another thing is the right cost structure
Semi SEA
our local SMEs,
The semiconductor industry
and infrastructure. These are the two key supports a
thus assisting
in Malaysia and Singapore
components for our industry to consider. policy where
in improving
and probably within SouthInfrastructure must be easily available
collaboration
their level of
and accessible; it is fundamental to the
between R&D
innovation?
East Asia is lacking an
building of a foundry. However, building activities in
This is an issue
environment for creative
the facilities around the foundry is a
universities and
faced in Malaysia
undertakings. This is primarily as well as in
key concern, and there have been many
the industry can
examples in neighbouring countries of
be enhanced.
Singapore. SMEs
because the environment
how oversights can doom the foundry.
In the case of
always play a
to encourage creative and
Singapore, we do
supporting role to
innovative risk-taking startMaintaining a cost structure that is
see more active
the bigger players
ups is scarce.
viable is also a factor, and utilities are
collaboration
in the industry.
one of the key factors to consider. While between
When MNCs or
utilities and land in Singapore are getting universities and the private industry
OEMs move up the value chain, most
expensive, Malaysia and Vietnam have
taking off. You should note that
SMEs are not sufficiently forwardfairer advantages.
such collaboration has benefitted
looking enough in making technological
Taiwan, which is one of the major
investments.
All these boil down to the last factor:
semiconductor hubs, greatly. This is
government policy. Government
what we require.
SMEs are encouraged to take part in
stability and policies have to be right to
our Supplier Search Program; the two
give confidence to investors; tax break
With rising challenges and
major OEMs are major players that
incentives are a common policy in most competition from China and
look for suppliers in the region via the
countries.
India, how can South-East Asia
programme.
and especially Penang position
What other incentives can entice
themselves?
The Semicon SEA tradeshow can assist
investors?
Malaysia is largely a back-end centric
SMEs in two ways. By participating in
Apart from tax holidays and other
operation in the manufacturing industry the Supplier Search Program, SMEs
government policies, creating a vibrant
and in fact, as I had earlier pointed
can understand the operating standards
innovation environment between the
out, South-East Asia is very much
that are required in the semiconductor
private and public sector is essential. The gravitated towards the back end of the
ecosystem. Secondly, as OEMs enhance
government should play a role to link
industry’s line manufacturing. For 2015
their capabilities, SMEs will need to
students in schools and universities with and 2016, Semi estimates a spending
upgrade their capabilities if they wish to
the industry.
of almost US$5bil on front-end and
stay in the industry.
 Starting them young. Semi suggests that governments should play a role to link students in
schools and universities with the industry.
14
| APRIL 2015
Semi endeavours to address both issues.
First, in terms of talent development, we
organise workshops and seminars, for
example, technical symposiums include
the sharing of technical challenges and
the sharing of know-how.
Second, how to encourage continuous
talent in the sector; right now, Singapore
and Malaysia are facing the similar
problem of fewer students being
interested in technical programmes.
Semi is working with industrial partners
and members to alleviate and hopefully
reverse this trend. During the Semicon
SEA tradeshow, we are holding a
programme called Semicon U, similar to
Hi-tech U in the US.
Before secondary school students,
sixth form (or Junior College) students
and polytechnic students pick their
universities, they are invited to join
a half-day event where CEOs of the
industry share their experiences. Last
year, we invited 3M (formerly known as
Minnesota Mining and Manufacturing
In my view, the biggest challenge is how
to encourage start-ups and technical
entrepreneurs in the region. In my humble
opinion, the semiconductor industry in
Malaysia and Singapore and probably
within South-East Asia is lacking an
environment for creative undertakings.
This is primarily because the environment
to encourage creative and innovative risktaking start-ups is scarce.
Semi SEA is planning to set up a
podium called the innovation discovery
hub in future shows where we would
like to encourage start-ups to come
free-of-charge as outreach to the
microelectronics industry, using the
tradeshow as a platform to promote their
ideas.
What is your forecast for the industry
for the next three years?
In general, 2015 is going to be a significant
year for the semiconductor industry; we
forecast a growth of about 15% this year.
Semicon Southeast Asia
Company) to speak about touch
technology. We try to excite students
that this is a great industry to work in
and inculcate the passion for engineering
among students.
chips. That era drove us for about 20
years. The next era is about mobility and
the Internet of Things (IoT), followed by
cloud computing and big data analysis.
This is an exciting era, whereby IoT will
drive our industry further. Semi very
much encourages this new exciting
development. I am confident that the
industry will accelerate because of IoT,
cloud computing and big data analysis.
It is interesting to note that previously
the semiconductor industry was fuelled
by the adoption of PCs and smaller sized
Semicon Southeast Asia
What are the challenges that the
semiconductor industry is facing in
Malaysia and South-East Asia at large?
Two key challenges: how do we retain
the talent pool in the industry, and how
do we direct potential candidates towards
engineering?
APRIL 2015 |
15
STATISTICS
Penang’s aviation and maritime
sectors by the numbers
As a supplement to this month’s cover story on economic indicators, we examine
Penang’s aviation and maritime industries which contribute significantly toward the
state’s performance in tourism and trade.
Penang International Airport
Table 1: Passenger volume at the top five Malaysian airports, 2009-2013
Rank
Airport name
State
City served
2009
2010
2011
2012
2013
1
Kuala Lumpur
International Airport
Selangor
KL
29,682,093
34,087,636
37,704,510
39,887,866
47,498,157
2
Kota Kinabalu
International Airport
Sabah
Kota Kinabalu
4,868,526
5,223,454
5,808,639
5,848,135
6,935,797
3
Penang International
Airport
Penang
George Town
3,235,423
4,166,969
4,600,274
4,767,815
5,487,751
4
Kuching International
Airport
Sarawak
Kuching
3,574,632
3,684,517
4,286,722
4,186,523
4,871,036
5
Miri Airport
Sarawak
Miri
1,620,345
1,694,915
1,856,626
2,018,415
2,223,172
Source: 2013 Annual Report, Malaysia Airports Holdings Berhad.
Table 2: Passenger movements at Penang International Airport
(domestic and international), January-December 2013 and 2014
No. of passengers for 2013
Month
Jan
International
Total
Domestic
International
Total
199,975
183,554
383,529
272,494
196,836
469,330
Feb
206,674
180,443
387,117
268,643
198,175
466,818
Mar
246,364
194,705
441,069
280,105
218,510
498,615
Apr
227,648
180,785
408,433
268,187
205,873
474,060
May
244,700
191,491
436,191
280,738
201,967
482,705
Jun
267,116
219,024
486,140
299,911
231,654
531,565
Jul
240,851
195,977
436,828
255,111
210,452
465,563
Aug
282,634
213,324
495,958
286,753
210,175
496,928
Sep
266,947
195,511
462,458
280,163
199,259
479,422
Oct
275,551
194,426
469,977
304,548
209,173
513,721
Nov
286,370
222,897
509,267
318,002
223,253
541,255
Dec
319,121
250,527
569,648
355,701
265,900
621,601
Source: Malaysia Airports Holdings Berhad.
16
No. of passengers for 2014
Domestic
| APRIL 2015
Penang International Airport is the country’s third busiest airport in terms of
passenger traffic, behind Kuala Lumpur International Airport (KLIA) and Kota
Kinabalu International Airport (Table 1). It has experienced rapid growth over
the past six years, from having processed 3,235,423 passengers in 2009 to 5,487,751
passengers in 2013. Despite last year being a turbulent time for the passenger airline
industry due to the disappearance of flight MH370 and the downing of flight MH17
over Ukraine, the data for 2014 continued to show growth for Penang in this area
with passenger travel trends consistent to that of the previous year.
When compared to the data for 2013, the number of passengers arriving at and
departing from Penang by flight increased for each month last year (Table 2). Based
on the strong numbers over these 12 months, Penang International Airport posted
a stellar year, having exceeded the six million passenger milestone for the first time.
Overall, domestic passengers made up an increased majority of passengers travelling
through the Penang International Airport, growing marginally from 55% in 2013 to
57% in 2014.
Table 3: Cargo volume at the top three busiest Malaysian airports by cargo traffic, 2012-2013
Rank
Airport name
State
City served
2012
(tonnes)
2013
(tonnes)
1
Kuala Lumpur International Airport
Selangor
KL
673,107
680,983
2
Penang International Airport
Penang
George Town
123,246
153,703
3
Sultan Abdul Aziz Shah Airport
Selangor
KL
22,680
26,443
Source: Malaysia Airports Holdings Berhad.
In terms of cargo traffic, Penang International Airport ranks second nationally.
However, last year on average saw less cargo being transported by plane as shown in
Figure 1. The trend in total cargo volume is still largely dictated by international cargo
transport given that the domestic market share is relatively smaller.
Figure 1: Cargo handled at Penang International Airport, 2013-2014
16,000,000
Cargo handled in kg
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
Cargo handled (in kg) - domestic
Cargo handled (in kg) - international
Dec '14
Nov '14
Oct '14
Sep '14
Jul '14
Aug '14
Jun '14
May '14
Apr '14
Mar '14
Jan '14
Feb '14
Dec '13
Nov '13
Oct '13
Sep '13
Aug '13
Jul '13
Jun '13
Apr '13
May '13
Feb '13
Mar '13
0
Jan '13
2,000,000
Cargo handled (in kg) - total
Source: Malaysia Airports Holdings Berhad.
APRIL 2015 |
17
Penang Port
Penang Port is the oldest and longest continuously operating port in Malaysia1. The
port serves as the main gateway for shippers in the northern states of Malaysia and
also the southern provinces of Thailand.
2014 saw a decrease in the overall number of ship calls into the port. This was mainly
due to a 14% drop in the number of international ship calls compared to 2013. On
the other hand, the 10.8% increase in the number of domestic ships calling when
compared to 2013 saw domestic ships outnumbering international ships at the Penang
Port last year. Nonetheless, the reduction in overall ship calls translated to a fall in
gross registered tonnage passing through the port (Table 5). From the breakdown of
the types of cargo handled as shown in Table 6, it is noteworthy that although there
was a rise in the number of general cargo handled, the drop in the mass of the dry and
liquid bulk contained resulted in a lower gross registered tonnage for 2014.
Table 4: Number of ship calls at Penang Port, 2013-2014
2013
Month
Domestic
Foreign
Total
Domestic
Foreign
Total
Jan
251
424
675
261
265
526
Feb
222
303
525
257
270
527
Mar
223
267
490
260
262
522
Apr
232
310
542
238
261
499
May
233
259
492
254
259
513
Jun
199
257
456
260
243
503
Jul
228
303
531
263
286
549
Aug
214
252
466
250
166
416
Sep
206
267
473
314
200
514
Oct
265
264
529
265
266
531
Nov
264
272
536
260
218
478
Dec
325
269
594
290
269
559
Y.T.D
2,862
3,447
6,309
3,172
2,965
6,137
Source: Penang Port Sdn Bhd.
Penang Port Sdn Bhd.
1
18
2014
| APRIL 2015
Table 5: Gross registered tonnage (domestic and foreign) at Penang Port, 2013-2014
2013
2014
Month
Domestic
Foreign
Total
Domestic
Foreign
Total
Jan
2,075,063
4,286,130
6,361,193
1,853,520
3,886,794
5,740,314
Feb
1,816,218
3,648,530
5,464,748
1,722,059
3,359,309
5,081,368
Mar
1,719,971
3,368,949
5,088,920
1,765,978
3,330,964
5,096,942
Apr
1,981,871
3,979,621
5,961,492
1,723,419
3,214,547
4,937,966
May
1,902,352
3,378,033
5,280,385
1,815,169
3,118,120
4,933,289
Jun
1,681,287
3,442,720
5,124,007
1,722,086
2,863,527
4,585,613
Jul
1,917,410
3,281,111
5,198,521
1,621,317
3,352,117
4,973,434
Aug
1,800,147
2,523,173
4,323,320
1,689,048
1,695,071
3,384,119
Sep
1,753,608
3,215,657
4,969,265
1,896,406
2,745,915
4,642,321
Oct
2,080,130
3,254,378
5,334,508
1,810,175
3,363,926
5,174,101
Nov
1,837,549
3,517,443
5,354,992
1,726,104
2,936,419
4,662,523
Dec
1,940,671
3,553,479
5,494,150
1,946,717
4,230,591
6,177,308
Y.T.D
22,506,277
41,449,224
63,955,501
21,291,998
38,097,300
59,389,298
Source: Penang Port Sdn Bhd.
Table 6: Type of cargo handled at Penang Port, 2013-2014
(million freight tonnes)
Year
General cargo
Dry bulk
Liquid bulk
Containerised
Container (TEUs)
2013
1,259,446
4,374,050
4,904,646
19,500,507
1,237,714
2014
1,393,129
4,151,694
4,609,974
19,891,863
1,265,712
Source: Penang Port Sdn Bhd.
APRIL 2015 |
19
Invest-in-Penang Berhad (671697-P)
PSDC Building,
1, Jalan Sultan Azlan Shah,
Bayan Lepas, 11900,
Penang, Malaysia
Tel : +604 646 8833
Fax : +604 646 8811
Email: [email protected]
Established on November 5, 2004,
investPenang is a non-profit entity of the
Penang state government with the primary
purpose of promoting investments within
Penang. As the principal investment
promotion agency of the state, its objectives
are to sustain and rejuvenate Penang’s
economy by enhancing and continuously
injecting business activities in the state
through the promotion of foreign and local
investments including the spawning of
viable new growth centres. Invest-in-Penang
Berhad is a one-stop agency which provides
comprehensive information on Penang’s
investment opportunities and facilitates the
running of a business at every stage including
the setting up of a new investment.
Website: www.investpenang.gov.my
20
| APRIL 2015
Penang Institute (423660-A)
10, Jalan Brown,
10350 Penang,
Malaysia.
Tel : +604 228 3306
Fax : +604 226 7042
Email: [email protected]
Penang Institute is the public policy think tank
of the state government of Penang. As a policy
advisory body to the state government, the
Penang Institute seeks to spur bold thinking
in the key areas of economics, socio-politics
and sustainable development. Besides
working closely with the state government,
we collaborate with other international
organisations such as the United Nations
Development Programme and other nongovernmental organisations. We also engage
the public by promoting and highlighting
various local, national and regional issues
through facilitating conferences, lectures,
workshops and public seminars.
Website: penanginstitute.org