Local SMEs stuck in Industry 4.0 wave

Local SMEs have the desire for innovation, but opex remains their priority, says CEO


Local small and medium enterprises (SMEs) are trapped in between embracing the fourth industrial revolution (Industry 4.0) wave and maintaining their operational cost.

According to Steinbeis Malaysia Foundation (STMY), local SMEs have the desire for innovation, but operational expenditure (opex) remains their priority instead of spending money on innovation.

“They have to use the money on something else such as salaries and marketing. Capital has always been their biggest obstacle for innovation,” STMY CEO Dr Abdul Reezal Abdul Latif told The Malaysian Reserve recently.

“They do not have the time. There are a lot of problems that they have to solve every day and hardly have time to sit down with the team to explore innovations. Again, it’s time and money,” he added.

With the looming prospect of automation and usage of technology, SMEs are facing another hurdle where they are at risk of losing out on major projects from big multinational companies (MNCs) if they take too long to adopt the Industry 4.0 initiative, said a local training firm.

Knowledgecom Corp Sdn Bhd CEO ST Rubaneswaran said SMEs that mainly secure sub-contractor works are going to be disregarded by MNCs or prime contractors due to a lack of expertise in technology.

“Within the next period, if our SMEs failed to adhere to the technological standard set by major entities, particularly the MNCs, local businesses are going to be left behind,” he said at the media briefing of the National Empowerment in Certification and Training Industry 4.0 Report in Kuala Lumpur recently.

Rubaneswaran said one of the risks that Malaysia will be facing is the failure for SMEs to alter their services based on current demand, that may result to MNCs seeking services in other countries.

“Most MNCs established in Malaysia have already implemented the Industry 4.0 technology in their home countries. Thus, they need the workforce here to meet with the standards that they have set.

“They are left with no choice but to seek the expertise or the workforce outside of Malaysia, if the local SMEs do not adapt to the technology and are not providing the required services,” he said.

Rubaneswaran said the companies are also expected to reduce dependency on low-skilled workers as they will be replaced by automation.

“In 2015, we have eight million people being employed and it is expected to reach nine million in the next two to three years, of which 61.9% are semi-skilled workers.

“The best way for the companies to adapt to the changes is through imposing additional skillsets according to the current market’s requirement and invest in getting the employees equipped with the Industry 4.0 knowledge,” he said.

On a larger context, he added that the fundamental infrastructure of Industry 4.0 has to be first put in place before the whole ecosystem can be put to work.

“Under the government’s blueprint, one of the most important aspects in surviving Industry 4.0 is infrastructure, which is the bandwidth of the Internet, to enhance the connectivity.

“It is important for our broadband capacity to be upgraded because the current capacity that Telekom Malaysia Bhd provides is insufficient to handle Industry 4.0.

“You will need a high volume and speed broadband service for it to work because there is a possibility that a high data transmission would fracture the system,” he said.