GEORGE TOWN: Penang’s investment promotion agency today told local industries to seek out business ties with US and Chinese companies as punitive tariffs in the ongoing trade war could push tech companies to look to Malaysia and other countries in the region to meet supply needs.
Lee Kah Choon, who is investPenang director, said with Malaysia, especially Penang, already making a significant number of chips for mobile phones and tech equipment, local companies are set to benefit vastly.
Reports indicate that as of October 2017, smartphone components made up more than 16% of Malaysia’s total exports.
US firms stand to lose US$10 billion a year in licensing revenue from chips and components, The Economist had reported.
It said much of China’s hardware-manufacturing industry depended on US components.
Lee said in the light of the ban on telco companies Huawei and ZTE by the US, Chinese telco companies can tap into the Penang market to get their wares, since they are by and large prevented from buying chips from American companies.
He said the reverse was also true. American companies, which wanted to avoid Chinese trade tariffs, could come to Penang to shop in the Silicon Valley of the east.
Lee said with many established tech companies operating in Penang over the past 40-odd years, the electronic industry here had spawned many local companies who could readily supply world demand.
He said the trade diversion to Malaysia or Penang meant there would be more outsourcing jobs for local companies, with some likely to have joint venture partnerships.
Lee said with Malaysia’s electrical and electronic sector performing better in the global semiconductor sales growth over the past few months, the country is primed to take on the trade war by its horns.
“But these companies must be ready to diversify to meet new American and Chinese demands. You must find your way into the global supply chain.
“Or else, the effects of the global economy, resulting from this US-China trade war, is going to be painful.
“We are excited, wary and cautious at the same time.
“We feel that the trade war will not affect Penang, but we just need to be ready so as not to become collateral damage as a result of this trade war,” he said at a press conference today.
He said this collateral damage would result in “fewer orders and less business”.
Lee said investPenang, taking cognisance of the trade war, had signed a memorandum with the China Chamber of International Commerce (CCOIC) in Shenzen on May 16 to woo more Chinese investors to Penang.
CCOIC is China’s national foreign trade and investment promotion agency.
Lee said as for the American cooperation, Malaysia has always been an ally of the US and recently strengthened cooperation in the 1MDB case, through the repatriation of money and other trade initiatives.
“The US is our friend and the US regards Malaysia as a friendly state. We expect them to look to us for parts they can’t source out from China,” he said.
Lee said on the home front, Penang was ready to help budding businesses to grow through seed funds of RM50,000 to RM250,000.
He said to reduce cost of doing business of small and medium enterprises (SMEs), Penang offers a subsidised rental rate scheme at the Bayan Lepas Industrial Park.
Lee said the Penang government, via the Penang Development Corporation, also offers a micro-financing option called Skim Pinjaman Harapan to help small businesses.
For green-related tech startups, he said the Malaysia Debt Ventures (MDV) has RM750 million in funds for 2019 for those interested in starting companies on digitalising government services, connectivity, green tech and renewable energy areas.
MDV, a Minister of Finance Inc company set up in 2002, was mandated by the government to facilitate the development of the high impact and technology-driven sectors of the economy by providing accessible and innovative project financing for the technology-based SME sector. Lee is MDV chairman.