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Thursday, July 18, 2024

Time for Malaysia to keep its edge in global chips

 

The government’s new National Semiconductor Strategy provides a clear roadmap for the country’s move up the global technology value chain.

Penang’s Bayan Lepas Free Industrial Zone, home to hundreds of multinational companies, has succeeded because it offers everything these businesses need in one convenient location.

MALAYSIA’S semiconductor industry has been a source of national pride since Intel opened its first overseas assembly plant in Penang in 1972.

Since then, Malaysia has captured a 13% share of global testing and packaging, building a semiconductor industry that now accounts for 25% of gross domestic product.

The vibrant state of Penang is again at the top of the list for semiconductor investments, with dozens of major expansion projects underway.

There is a sense, though, that we are only scratching the surface.

With semiconductors only becoming more important to modern life, Malaysia’s chip sector is not just a business opportunity; it is an opportunity to put the country firmly at the centre of future supply chains in South-East Asia and around the world.

The government’s new National Semiconductor Strategy aims to do just that.

Backed by an initial RM25bil of public funding, the plan provides a clear roadmap for the country’s move up the global technology value chain.

The ambitious targets are a sign that Malaysia understands what’s at stake.

The government aims to attract RM500bil of investment into the sector, train 60,000 chip engineers and establish at least 10 Malaysian companies in design and advanced packaging.

None of this will be easy.

Chip factories and research hubs do not appear overnight.

Just putting a new chip design into production can take up to four months, involving hundreds of steps, including oxidation, photolithography, and etching.

Major new fabs or testing facilities can cost billions of dollars.

But while the new strategy will take time to show results, the stars are aligned in Malaysia’s favour. Businesses must look to seize this moment.

Building on strong foundations

For the best chance of meeting its semiconductor goals, Malaysia can call on a number of tried and tested ingredients.

The first is to acknowledge the power of free trade.

While semiconductor technology is in the geopolitical spotlight, Malaysia’s neutral position on global tariffs is a key part of its appeal to international businesses.

The country’s chip sector has a distinct advantage of being able to attract investment from both the United States and China – as well as many other countries.

Free trade zones are also a powerful pull for semiconductor companies that focus on re-exporting to overseas markets, such as in the outsourced assembly and test segment.

The concentration of skilled labour, specialised logistics and raw materials create an attractive ecosystem for new entrants.

Penang’s Bayan Lepas Free Industrial Zone, home to hundreds of multinational companies, has succeeded because it offers everything these businesses need in one convenient location.

Consistent policies

Consistent and coordinated policies are also critical in giving businesses the confidence they need to make long-term investment decisions.

The new semiconductor strategy ties in with Malaysia’s New Industrial Master Plan 2030, which emphasises the country’s digital infrastructure.

And, of course, sustainability will be a powerful enabler.

International technology companies demand access to clean energy to meet their own emissions objectives, so additional investment in renewable capacity and upgrades to the electricity grid will be needed to sustain the country’s competitiveness.

Collaboration between industry, government and utilities has produced encouraging signs: Intel’s rooftop solar installation in Malaysia is its biggest outside the United States.

Micron’s Malaysian facilities were the first in its global network to be powered by 100% renewable energy.

A historic opportunity

Demand for more advanced processing is also transforming the chip sector, as customers look for specialised hardware to support new technology, including artificial intelligence.

We see across the wider region that high-tech ecosystems generate valuable ancillary business opportunities – such as data centres, services, and advanced materials.

In Penang, a new crop of advanced semiconductor facilities from the likes of Infineon, Intel and ASE Tech will require new materials, new workers and new services.

The new semiconductor strategy recognises the historic opportunity ahead.

We must also acknowledge that it is a complex, globally connected industry, and that international competition for a share of higher-value front-end processes is more intense than ever.

That said, the success of hi-tech hubs like Penang – where HSBC opened its first office in Malaysia in 1884 – is a great example of how a diverse community, strong logistics and a supportive policy framework can facilitate the growth of a multi-billion-dollar industry.

The rewards of getting this right are tantalising.

In the new area of digital technology, semiconductors are only becoming more essential for businesses.

While the prize is significant, achieving it will require a deep partnership between industry and policymakers – underpinned by strategic planning, investment in skills and a commitment to free trade.

With all that in mind, Malaysia’s chip strategy could not have come at a better time.

Noor Adhami is HSBC’s international banking global head and Karel Doshi is HSBC Malaysia’s commercial banking head. The views expressed here are their own.

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Tuesday, July 16, 2024

China’s GDP expands 5% in H1; Understanding the force running deep in Chinese economy

 


China's GDP expanded 5 percent to reach 61.68 trillion yuan ($8.49 trillion) in the first half of 2024, data from the National Bureau of Statistics (NBS) showed on Monday, indicating the world's second-largest economy has sustained the momentum of post-pandemic recovery, thanks to a continuous improvement in overseas demand, a pick-up in home consumption, and stepped-up government policy support, despite facing internal and external uncertainties.

In the second quarter, the GDP grew by 4.7 percent year-on-year, slightly down from the 5.3-percent growth recorded in the first quarter. 

Observers said that the reading signaled that China is on a firm track to hit the annual economic growth target of around 5 percent in 2024. They also expected the tone-setting third plenary session of the 20th Communist Party of China (CPC) Central Committee to inject new impetus into second-half economic development and decisively lead the country to overcome rising headwinds to march toward Chinese modernization.

The 5-percent GDP increase in the first six months shows that economic growth is "stable" and that the economic operation in the second quarter has been keeping pace, Chinese analysts said.

"Though the GDP growth in the second quarter is lower than the first quarter, it's still a relatively fast growth among major economies, which builds a sound foundation for the achievement of the annual GDP target," Chen Fengying, an economist and former director of the Institute of World Economic Studies at the China Institutes of Contemporary International Relations, told the Global Times.

Factory activity remains a main engine for the economy, partly fueled by resilient demand overseas. The value added of industrial enterprises above a designated size jumped 6 percent year-on-year in the first six months, with the development of new quality productive forces showing more palpable drives.

Meanwhile, retail sales of consumer goods in the first six months were up 3.7 percent, and fixed-asset investment edged up by 3.9 percent, NBS data showed.

"The gaps between the supply and demand sides are narrowing, though the mismatch still persists. The domestic demand side shows a conspicuous rebound in the first half," said Zhang Jun, chief economist at China Galaxy Securities.

Chinese authorities have already put in place a bunch of measures to stimulate market demand, including the issuance of 1 trillion yuan ($138 billion) worth of ultra-long special treasury bonds as well as driving large-scale equipment renewal and trade-ins of consumer goods.

Analysts said that the fundamentals of China's economic recovery are anticipated to further stabilize and improve in the second half following the convening of the reform-themed Third Plenum that will map out a blueprint for the country's long-term development.

According to a Xinhua News Agency report, the plenum will primarily examine issues related to further comprehensively deepening reform and advancing Chinese-style modernization

In order to achieve the national target of basically achieving socialist modernization by 2035, China should continue to boost related reforms and innovations through developing new quality productive forces in order to enhance enterprises' innovation vitality and achieve high-quality development, Chen said.

Economists also took note of the sustained consumer spending recovery throughout the year. "Especially, the country's tourism industry reported robust growth over recent months, which will play an increasingly remarkable role in expanding domestic demand," Chen noted.

Though the Chinese economy faces internal and external challenges, such as the property sector correction and the increasingly volatile global geopolitical situation, Chen expresses confidence in the country's long-term economic prospects. "More efforts are needed to boost social confidence and unleash effective demand. To this purpose, we need more investment," she noted.

The implementation of more pro-growth measures and the bottoming-out of the property sector will also bolster the economic prospect.

Zhang suggested the authorities accelerate the issuance of special government bonds and further strengthen counter-cyclical adjustments to lower the overall financing costs for the real economy.

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Understanding the force running deep in Chinese economy
Photo: VCG

Photo: VCG

China's gross domestic product (GDP) reached around 61.68 trillion yuan (about $8.65 trillion), and grew 5 percent year on year in the first half of 2024, data from the National Bureau of Statistics showed Monday. In the second quarter, the country's GDP expanded by 4.7 percent year on year. These achievements are in line with the annual growth target of "5 percent" for the year, and are broadly consistent with the International Monetary Fund's expectation of 5 percent growth for China this year. It is expected that China's economic growth rate will continue to lead globally in the first half of the year.

With a more uncertain, complex, and severe external environment and new challenges from deepening structural adjustment domestically, the growth was "hard-won," fully demonstrating the strong resilience and great potential and vitality of the Chinese economy, while the fundamentals of its long-term sound growth remain unchanged. The Chinese economy is still a key engine for global growth and stability. In the global context, it is expected that China's economic growth rate in the first half of the year will still be faster than that of major economies such as the US, the Eurozone, and Japan. The keyword "stable" is prominent in the economic data for the first half of the year. China has stabilized growth, prices, and imports and exports, playing a stabilizing role in the turbulent global economy.

Another key word in the first half of the year's economic data is "progress," which refers to structural adjustment, transformation of development modes, improvement of quality, and enhancement of efficiency. The highlight of the first half of the year's economy is the transformation of industries toward "new" and "green": investment in high-tech industries grew fast, intelligent and green new products performed well, new consumption models continued to emerge, energy consumption per unit of GDP continued to decrease, and the resilience of energy security and industrial supply chains was enhanced. China's industrial upgrading and high-quality development are proceeding in an orderly manner. Some achievements are not directly reflected in GDP data, and some investments are yet to yield profits and returns, but they contribute to improving the "quality" and sustainability of China's economic development, enhancing the resilience of economic risk prevention, and these are important indicators behind the GDP.

The highlight of the economic data in the first half of the year is, to a certain extent, due to the precise efforts of policies. Whether it is the proactive measures of fiscal policy, such as tax cuts and increased public spending, or the flexible and moderate monetary policy, such as multiple reserve requirement ratio cuts and targeted support for small and micro enterprises, they have effectively promoted the stable recovery of the economy. In addition, the increase in support for key areas and weak links, the promotion of equipment renewal, and the exchange of old for new consumer goods not only directly stimulate demand, but also accumulate momentum for long-term development. Whether it is China's economic development or economic policies, they are filled with a long-term vision and a commitment to practice.

The Chinese economy is at a critical moment of transformation and upgrading, and determination is particularly required to eliminate any external interference. Interestingly, as China focuses on high-quality development, Western public opinion has been fixated solely on GDP when assessing the Chinese economy. Some Western media outlets have made a big deal about the slowdown in China's GDP growth in the second quarter, echoing the rise of trade protectionism and anti-globalization, attempting to deny China's latest achievements and suppress the positive momentum of China's economic transformation and upgrading. To some extent, in the first half of this year, the US' imposition of 100 percent tariffs on Chinese-made electric vehicles is actually the best proof of China's international competitiveness in the "new track" industry.

Commenting on the economic performance in the second quarter, the spokesperson of the National Bureau of Statistics said that the ups and downs in the economy may have formed the shape of a curving wave, but the underlying trend remains positive. This assessment is fair and objective. China's economy has entered a critical stage once again, and we are fully aware of the difficulties and challenges ahead. Since the beginning of this year, global economic growth momentum has been weak, inflation has been sticky, and issues such as geopolitical conflicts and international trade frictions have been frequent. The external environment facing China's development remains challenging. Domestically, there are also increasing challenges in economic operation, with the problem of insufficient effective demand being particularly prominent, and the domestic circulation not smooth enough. However, the fundamentals underpinning a stable Chinese economy have not changed, the momentum of high-quality development has not changed, and the positive factors driving economic transformation, upgrading, and high-quality development continue to accumulate.

China, as the world's second largest economy, has established a solid foundation for long-term development and continues to strengthen the internal driving force for sustainable economic growth. The Third Plenary Session of the 20th Communist Party of China Central Committee is currently being held to plan for further comprehensive deepening of reforms. The institutional dividends of China's economic growth will continue to be released, and its growth potential will be continuously stimulated. We are confident in the future of the Chinese economy, and our perspective on the Chinese economy should also be more forward-looking.

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Monday, July 15, 2024

Govt incentives also behind EV boost; Are EV sales increasing in Malaysia? Here's the data from ...



 

Power up: People walking past two EVs near a charging station at Publika, Kuala Lumpur. — IZZRAFIQ ALIAS/The Star

PETALING JAYA: Sales of electric vehicles (EVs) in the country have more than doubled in the first six months of this year to over 10,000 units, compared with the same period last year.

Based on figures by the Statistics Department, 10,663 EVs were sold as of June 30, compared with 4,409 EVs in the same period last year. A total of 13,301 EVs were sold in all of last year.Among the reasons for the increase were the competitive prices offered by certain EV manufacturers recently, along with several incentives announced by the government.

Based on the data, BYD continues to dominate the EV market here with the number of registered EVs increasing from 1,836 units last year to 4,368 units in the first six months of this year, or a 137.9% jump.

ALSO READ: Parking fees may be waived for EVs in cities to encourage use, says Nga

While Tesla may be lagging behind BYD, sales of Tesla EVs skyrocketed by nearly 17 times, from 174 units for 2023 to 3,079 units in the first six months of 2024.

Sales of other brands in the six months of this year include BMW (807), Chery (406), Roewe (216), Hyundai (147), Great Wall (272), Mercedes-Benz (323), Smart (282) and Neta (100).Housing and Local Government Minister Nga Kor MingHousing and Local Government Minister Nga Kor Ming

The increase in the sales of certain EV models was noted by Housing and Local Government Minister Nga Kor Ming, who said this may be due to manufacturers slashing prices of certain models by as much as RM8,000, along with government incentives such as lower road tax and special plates for EVs.


“Almost 3,000 EV charging bays will be set up by the end of this year.

ALSO READ: ‘Better charging facilities could speed up EV transition’

“As such, I welcome private and foreign investors to set up more charging stations in the country,” he said when met recently.

Based on the Malaysia Electric Vehicle Charging Network (MEVnet) online map and dashboard, there are currently 2,585 EV charging stations nationwide.

CLICK TO ENLARGECLICK TO ENLARGE

Of these, 1,069 are indoor charging stations and 1,516 are outdoor charging stations, comprising 1,976 AC (alternating current) charging stations and 609 DC (direct current or rapid) charging stations.

ALSO READ: Chinese firms keen to set up EV plant in Johor

Based on the MEVnet map, most of the existing EV charging stations are located in the Klang Valley, Penang, Ipoh and Johor Baru, with an additional 4,019 charging stations proposed for this year.

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Are EV sales increasing in Malaysia? Here's the data from ...


Malay Mail

KUALA LUMPUR, May 27 — It was recently reported that Malaysia’s Electric Vehicle (EV) sales have stagnated as consumers are struggling with the high prices of such vehicles. At the moment, all fully imported (CBU) EVs are exempted from import and excise duties until the end of 2025. However, you won’t find any imported EVs under RM100,000 due to the current policy which is seen as a move to protect the local automotive industry.

So the question is, are fewer people buying EVs in Malaysia? Recently, the Malaysian government’s official open data portal (data.gov.my) has updated its vehicle registration database from the Land Transport Department (LTD) and the actual data provides a different picture. We also get a clearer picture of the most registered EV models and the current trend of EV registrations against other vehicle types in Malaysia.

The latest published dataset for vehicle registrations in Malaysia covers the period from 1st January 2020 until 30th April 2024.Top 15 EVs in Malaysia. — Picture via X/Thevesh

Top 15 EVs in Malaysia. — Picture via X/Thevesh

Top 15 EVs in Malaysia. — Picture via X/Thevesh

Top 15 EV models registered in Malaysia

As illustrated by Thevesh with data obtained from the portal, BYD, Tesla and BMW currently dominate the top 3 spots for the most popular electric vehicles registered in Malaysia between January 2020 to April 2024. BYD Atto 3 takes the top spot with 4,308 vehicles registered (18.7 per cent) followed by the Tesla Model 3 with 2,740 units (11.9 per cent) and BMW iX with 2,543 units (11.0 per cent).

Do note that the registration data covers all vehicles registered with JPJ in Malaysia including grey imported EVs.

Top EV models registered in the first four months of 2024

If we look at 2024 alone (1st January until 30th April), the Tesla Model Y is the most popular EV in Malaysia with 1,138 units registered, while BYD Atto 3 takes the #2 spot with 1,118 units. This is followed closely by their sedan models, the Tesla Model 3 at #3 with 862 units and BYD Seal at #4 with 840 units. Taking fifth place is the BYD Dolphin which is currently the best value for money EV priced from just RM100,000.

Based on sheer numbers alone, more BYD EVs were registered – 2,563 units (Seal, Dolphin and Atto 3) which accounts to 40 per cent of total EVs registered in Malaysia within the first four months of the year. Meanwhile, 2,000 Tesla EVs (Model 3 and Model Y) have been registered which is equivalent to 32 per cent of total EVs registered.

Taking the #6 spot is the Chery Omoda E5 with 244 units registered, followed by Smart #1 with 202 units, GWM Ora (presumably Ora Goodcat) with 145 units, BMW i7 with 121 units and the Porsche Taycan with 112 units. EV registration (BYD vs BMW vs Tesla) trend in Malaysia. — Picture via X/Thevesh

EV registration (BYD vs BMW vs Tesla) trend in Malaysia. — Picture via X/Thevesh

EV registration (BYD vs BMW vs Tesla) trend in Malaysia. — Picture via X/Thevesh

Tesla to overtake BMW in total EV registrations this year?

In 2023, BYD was the best-selling EV brand in Malaysia with 4,470 registered, followed closely by BMW with 3,237 units registered. Looking at the trend, it appears that Tesla is growing rapidly in Malaysia with the release of its Model 3 and Model Y that are priced from less than RM200,000.

BMW has started to show slower growth for EV registrations this year. Unlike Tesla and BYD where electric SUV models are doing better, BMW’s electrified sedans such as the BMW i7 and i5 are the more popular choice compared to their SUV models such as the BMW iX, iX3 and iX1. Breakdown of vehicles registered in Malaysia by fuel type. — Picture via X/Thevesh

Breakdown of vehicles registered in Malaysia by fuel type. — Picture via X/Thevesh

Breakdown of vehicles registered in Malaysia by fuel type. — Picture via X/Thevesh

Less than 3 per cent of vehicles registered are EVs but it is growing

If we compare the total volume of EVs registered in Malaysia, EVs only represent a mere 1.2 per cent for the period between January 2022 to April 2024. The majority of cars registered in Malaysia are powered by petrol at 88.3 per cent, followed by Green Diesel at 7.4 per cent and Hybrid at 2.5 per cent.

However, if we look at the breakdown on a year-by-year basis, you’ll notice that EV adoption is still increasing steadily. 

In 2023, a total of 13,301 out of 832,340 vehicles registered in Malaysia are electric (1.60 per cent). And from 1st January until 30th April 2024, a total of 6,298 out of 275,712 vehicles registered are electric (2.28 per cent).

It is worth highlighting that these total figures also include commercial vehicles and we are also seeing more adoption of EVs for commercial fleets. This includes IKEA, POS Malaysia, DHL and even Maxis.

Malaysia targets EVs to take up 15 per cent TIV by 2030

Malaysia has an ambitious goal for EVs to take up 15 per cent of the total industry volume (TIV) by 2030, 40 per cent by 2040 and 80 per cent by 2050. There are several matters which the government has to look into if they want to drive mass adoptions of EVs and this includes the new road tax structure which has been long overdue. At the moment, road tax for EVs is exempted until 31st December 2025 but potential buyers are wary if the cost of road tax would greatly increase the cost of EV ownership.

In addition, the deployment of EV infrastructure also plays a role in building range confidence among buyers. The government aims to have 10,000 EV charge points by 2025 and they have recently announced that it aims to have 1,500 DC charge points by 2025.

Access to affordable EVs especially the sub-RM100,000 segment is also important to drive EV adoption in Malaysia. The two national carmakers Proton and Perodua have pledged to deliver their first EV by 2025. Proton is expected to launch two EV models soon and they have recently teased a possible new sub-brand for its EV lineup.

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