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NE Asia APR 2006 Issue
Industry & Market

Kuala Lumpur
Foreign Investment Surges to US$4.8 Billion in 2005

Foreign direct investment into the manufacturing industry in Malaysia has surged to a four-year high, due to plans to expand electronics manufacturing plants in 2005, according to the latest statistics. International Trade and Industry Minister Rafidah Aziz said the amount of investment reached US$4.8 billion, up 36.6% from 2004.

The investments are mainly from US companies such as Intel Corp, Dell Inc and Solecton Corp, while other sources include companies from Japan, Singapore, the Netherlands and Korea.

In the manufacturing performance report released by Rafidah, Japanese investments in Malaysia in 2005 were at a five-year high, recording close to US$1 billion in approved projects. Some of the major Japanese projects include connector manufacturer JST Manufacturing Co Ltd's US$102 million investment in an R&D center for telecommunication and automotive connectors, Sanyo PT (M) Sdn Bhd's US$222 million investment in a plant to manufacture third-generation code division multiple access (3G CDMA) mobile phones, and Taiyo Yuden Co Ltd's US$42 million expansion project for the production of multilayer ceramic chip capacitors (MLCC) using nanomaterials.

Competitive Positioning
According to Rafidah, Malaysia expects to maintain its average annual total investments from 1996 to 2005 at US$6.7 billion, despite intense competition from countries like China and India.

Rafidah dismissed the idea that Malaysia should streamline its investment strategy to compete only with these two countries. She noted that China records about US$60 billion in annual foreign investments alone, which is more than the 10 Southeast Asia nations combined. She believes that Malaysia should instead position itself to compete with all countries across the globe.

Shifting Focus
Rafidah claimed that there were also clear indicators of a shift towards the establishment of more capital-intensive and higher added value projects in the country. "Many companies proposed to relocate critical manufacturing support activities such as R&D centers, engineering centers and product design centers, from their home countries to Malaysia," she said.
Singapore-based electronic manufacturing services provider Flextronics International Ltd, for example, plans to set up a US$270 million vertically integrated industrial campus at Pelepas Free Zone in Johore. The facility is expected to bring together the company's R&D, engineering, printed circuit board assembly, plastics injection molding, logistics, procurement and training services.

Another project approved in 2005 was Avago Technologies Pte's plans to set up a US$102 million plant to manufacture semiconductor devices employing micro-electro mechanical systems (MEMS) technology. Avago will also be undertaking R&D activities on optoelectronics, motion control products, navigation products and imaging system products in the new plant.

by Julian Matthews

Accton Technology:
Flextronics International:
Jabil Circuit:

(April 2006 Issue, Nikkei Electronics Asia)

China Update 2005
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