Trade war rejuvenates ‘Silicon Valley’ firms in Malaysia

    The Penang skyline, Malaysia, Sept. 20, 2019.
    The Penang skyline, Malaysia, Sept. 20, 2019.

    PENANG, Malaysia- Years after resisting pressure to move to China, Lee Hung Lung says his bet has paid off. Sales at his Malaysia-based Hotayi Electronic are surging, it’s hiring more workers, considering an expansion, and picking and choosing orders.

    Lee is the founder and CEO of Hotayi, whose two factories manufacture and assemble circuit boards and other electronics products. The plants are located in the coastal state of Penang, once called the “Silicon Valley of the East” for its massive 47-year-old electrical and electronics (E&E) industry before it lost its shine to China.

    Then came the trade war between the world’s biggest two economies, pushing mostly US companies to look for factories outside China to escape retaliatory tariffs, and leading to Penang’s resurgence after what a fund manager described as “a decade of sleepiness”.
    Penang is just one of the areas across Asia competing for supply chains seeking a new location and lower tariffs.

    But its two industrial zones have the advantage of a long-established ecosystem of suppliers and customers in one place and cheaper labour than regional rival Singapore. The two zones are connected by a 24 km (14.9-mile) bridge over the Malacca Strait.

    The other factor going for Penang is that many semiconductor and other electronics products from Malaysia do not attract US tariffs, unlike the 25 percent rate for China.

    In June, Hotayi opened its second plant – which at 350,000 square feet is five times the first one. On a visit this month, employees were testing equipment that will help build products for clients that include Samsung, LG and Sharp.

    “Around 2007, I was facing big pressure even from my management because China was cheaper than Malaysia – up to 30 percent in labor costs,” said Taiwan-born Lee, taking off his striped white factory suit as he settled down for an interview in a conference room still smelling of paint. – Reuters