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By Julian Matthews

Malaysia's Chip Exports Down For Second Year

November 4, 1998, Kuala Lumpur -- Malaysia's exports of semiconductors in the first seven months of 1998 shrunk by 4 percent according to the latest annual economic report released by the Finance Ministry.

Exports of semiconductors declined to US$8.07 bilion from about US$8.4 billion in the same period in 1997. This is the second year exports are down, signalling the heady days of double-digit export growth rates are over.

Exports contracted by 0.8 percent in the same period last year, a significant fall from rises of 24.9 percent in 1996, 25.6 percent in 1995 and 29 percent in 1994.

The report suggested the drop in exports was mainly because of the deepening financial crisis which stifled demand from East Asian countries, and dried up sales of computers in the region.

Combined exports to Singapore, Japan, Taiwan and Hong Kong SAR dipped significantly by24 percent to US$3.33 billion. However, there was a 17 percent rise in combined exports to the US, Germany, United Kingdom and Netherlands, amounting to about US$3.68 billion.

The US, in particular, bounced back by 27 percent to US$2.56 billion, a marked rise from the negative growth rate of 17.6 percent in 1997.

The US is Malaysia's largest chip export market with 31.7 percent share of total exports in 1998. The report stated the higher exports may be attributed to the 38 percent depreciation of ringgit against the US dollar since 1997.

Malaysia's exports are largely traded in US dollars. US manufacturers such as Intel Corp, AMD Inc, Motorola Inc, Texas Instruments Inc, National Semiconductor Corp and Harris Corp have long-established operations in the country, making it among the largest producers of semiconductors in the world.

Manufacturing output for semiconductors and other components declined by 0.4 percent in the first seven months of 1998, compared to a 23.7 percent rise in 1997.

"The slowdown in production was related to global excess capacity, especially for Dynamic Random Access Memory (DRAM) chips, which was plagued by declining prices, and a lack of new product applications," the report stated.

Monthly surveys conducted by the Department of Statistics also cited that production of integrated circuits fell by 2 percent from 6.94 billion units for January to July 1997 to 6.8 billion units in the same period in 1998.

This compares to a 26.4 percent rise in integrated circuits output in1997.

The semiconductor industry is a key indicator of country's economic well-being as it accounts for 24 percent of total manufactured exports in 1998.

The economy is projected to contract by 4.8 percent this year, a 12.5-percentage point plunge from the 7.7 percent growth rate in 1997, sinking the country into its first recession in 13 years.

Malaysia's envied growth rates of 8 percent annually for the past decade, mainly driven by manufactured exports, has ended as the ongoing Asian financial crisis enters its second year.

The economic report suggests that external demand for Malaysia's goods and services will remain weak in 1999.

"With the unsettling intermational financial environment and prospective sluggish growth of major trading partners, the Malaysian economy is expected to recover only mildly in 1999," it stated. The economy is projected to grow a modest 1 percent next year.

(Published in AsiaBizTech, Nov 10,1998)

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