By NG MIN SHEN
Malaysia’s manufacturing sector must move quickly to adopt new technologies or risk losing out on foreign direct investments (FDIs) in its services, as multinational companies (MNCs) seek leaner and quicker digitalised processes.
SME Association of Malaysia national deputy president Ong Chee Tat said many MNCs have already moved their manufacturing operations out of Malaysia to other developing countries that utilise automation and other Fourth Industrial Revolution (Industry 4.0) technologies.
He said German MNC Adidas AG, which previously relied heavily on foreign labour particularly in third world countries to make its products, has already begun using Industry 4.0 technology to manufacture its shoes in Germany.
“What happens to these countries and their workers then? Malaysia was not affected so much by Adidas moving its operations out, but many bigger manufacturers have already moved out of Malaysia,” Ong told The Malaysian Reserve when met at the launch of the Industry 4.0 and Digitalisation Conference in Kuala Lumpur recently.
He said FDIs are good as they provide jobs. However, they move from country to country, according to the better pioneer status and facilities that are offered.
“It’s good and bad for the economy, depending on how you look at it. But we must upskill our locals and move with the times,” he added.
Industry 4.0 is the name given to the digital transformation of mainly the manufacturing sector, through the nine pillars of autonomous robots, the industrial Internet of Things, cybersecurity, cloud computing, additive manufacturing, supply chain, simulated and augmented reality, horizontal and vertical system integration and big data analytics.
Global consultancy firm McKinsey & Co has named Industry 4.0 as the next stage of digitising the manufacturing industry, set to increase productivity, lower costs and grow customer bases, while providing a means of staying ahead of competition.
Manufacturers that adopt these technologies gain benefits such as greater accuracy and faster production through automation, which also eliminates the need for manual — and in Malaysia, foreign — labour.
The local manufacturing sector has been a key factor in the country’s economic growth this year, having boosted the country’s gross domestic product to a 5.6% expansion during the first three months of 2017.
Most countries will eventually move towards Industry 4.0 in line with the pace of digital evolution, thus it is imperative for Malaysia to adapt to the rising tide — not just to attract MNCs looking to set up shop here, but also for production of homegrown brands that can be exported overseas.
Yet, Malaysia’s status hovers mainly at the 2.0 stage, while neighbouring countries such as Thailand and Vietnam have made greater advances, with the former in particular already having a 4.0 policy framework in place.
Ong said many local small and medium enterprises (SMEs) have cited the cost of adopting Industry 4.0 as a reason behind their hesitation towards the transformation.
“For example, Malaysia has been in the printing industry for many years. But China has entered the fray and is way ahead, and our local SMEs said they cannot afford to transform because they don’t know what will happen to their old machinery,” he said.
In response, some parties within the industry have taken steps to providing services to upgrade existing machinery to become Industry 4.0-compatible.
“The SMEs ask what will happen to their existing machines, but there are some who are providing these 4.0 upgrade services. And China is taking in all these people who can do the converting to make their machinery compatible,” Ong said.
He said the International Trade and Industry Ministry has been spearheading domestic Industry 4.0 efforts.
The ministry said in June this year that the government is currently working with industry players on the National Industry 4.0 Blueprint, expected to be ready by year-end.
China — also Malaysia’s largest trading partner — in May this year released the guidelines for its “Made in China 2025” strategy, with emphasis on revamping its manufacturing segment through innovation-based production.
The bid to add value to China’s economy is widely seen as a rival to Germany’s “Industrie 4.0” programme, a strategic initiative aimed at making Germany a pioneer in industrial digitisation from which Industry 4.0 takes its name.