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Author: savemalaysia   |   Latest post: Sun, 17 Nov 2019, 4:44 PM

 

Malaysian beneficiaries of US-China trade war

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GEORGE TOWN: Northern region-based plastic, tissue paper, fastener, radio frequency chip and semiconductor test-equipment manufacturers are among the beneficiaries of the United States-China trade conflict.

Not all Malaysian electronic manufacturers will automatically gain from the conflict.

The trade war has prompted multinational corporations (MNCs) in China to outsource production activities to South-East Asia.

However, the type of industry in which a local company is involved and its financial capability to invest determine its opportunities to gain from the trade war.

Globetronics Technology Bhd chief executive officer Datuk Heng Huck Lee said the cost of fresh investments for a joint-venture (JV) project could be high, and the processing time to conclude any JV deal would take a while to complete.

“By that time, if there’s a change of leadership in the US next year, the tariff war may enter an uncertain phase.

“For us, we prefer leasing our clean-room facility to an MNC that is planning to relocate to Malaysia.

“We are now in advance stages of finalising a deal to lease our clean-room facility in Kuala Lumpur to a China company that manufactures for a major US customer, “ said Heng.

Trade war uncertainties have prompted Globetronics customers to take a wait-and-see attitude and hold back on placing long-term orders, Heng added.

“This has affected business performance, created uncertainty in new investment decisions, and delayed production loading for some of our product lines, ” he said.

Mini-Circuits Technologies (Malaysia), a subsidiary of the New York-based Scientific Componentz, said the group’s Penang facility is now manufacturing about 30% of the radio frequency chips (RF) for the worldwide market.

President and chief executive officer Datuk Seri Kelvin Kiew said the group has relocated its RF production activities from China to Penang.

“We have spent RM20mil over the past one year to expand to enable the Penang plant to take on the RF production from China.

“Our expansion here has also benefited the small and medium enterprises supporting us.

“We have, for example, spent about RM4mil this year to acquire locally made test equipment from a Penang-based company, ” he added.

Pentamaster Corp Bhd is another beneficiary. Group chairman C B Chuah said since March 31, the electronic group has secured orders for around 100 semiconductor test equipment, of which about 40% is for Chinese MNCs producing for the US market.

“Because of the US-China trade war, it does not make sense for the companies to make the machines and ship from China.

“They will have to pay the high duties imposed on China-made products, ” he said.

The equipment, priced between US$150,000 and US$500,000, will be used for checking 3D sensors used for the facial recognition features of smartphones.

The US-China trade war impacts the plastic-making industry positively because the top resin producers in the US will have a new supply of 12 million tonnes for the period of 2020-2021.

SLP RESOURCES BHD managing director Kelvin Khaw said from 2022 to 2024, an additional 4.5 million tonnes of resin supply would kick in.

“The MNCs in Texas started expanding their production capacity in 2015.

“The expansion is almost completed, and the new supply is expected to come in next year.

“Because of the trade war, China is now cut off from the US resin supply.

“So, the US resin producers will look to South-East Asia to sell, triggering resin prices to spiral downwards.

“We expect polyethylene (PE) price to shrink further by 5% to 10% in the short to medium term, ” he said.

The resin price is now US$850 versus US$1,050 per tonne in January 2019.

Khaw said the lower resin prices enable the group to produce more cost-effectively.

“Our production technology reduces further the production cost, allows us to price our flexible packaging materials even more competitively in the market, and cushion the group against the anticipated slowdown in Japan and the domestic market, ” Khaw added.

US resin importers are also looking for alternatives besides China.

THONG GUAN INDUSTRIES BHD managing director Datuk Ang Poon Chuan said some of them are talking to Thong Guan to source plastic packaging materials.

“We have recently set up a manufacturing facility with a Hong Kong-based company to produce courier bags in Sungai Petani. We expect the business to contribute positively to our 2019 revenue.

“Chinese manufacturers are investing here because Chinese plastic products entering the US face a 25% import duty, ” he said.

Fastener manufacturers with the capability of making bolts and nuts according to US standards and specifications have the upper hand over rivals as US companies source from South-East Asia.

Chin Well Holdings Bhd executive director Tsai Chia-ling said the US still used the imperial system that measures in feet and inches.‌

“Chinese companies are among the few in the world with the capacity to produce fasteners according to US standards and specifications.

“US importers of steel hardware products have reduced sourcing from China because of the 25% duty they have to pay for China-made goods.

“They are now turning to South-East Asia, ” she said.

Chin Well is able to tap into the opportunities because it is capable of making fasteners that conform to US standards and specifications.

So, there is a need for Chin Well to raise production.

“Smaller competitors in the region that are unable to invest in the moulds, which cost between RM2mil and RM3mil to produce fasteners suitable for the US market, would lose out, ”‌ she added.

Tsai said steel hardware product wholesalers and distributors in the US have reduced sourcing from China by 30% to 70%.

“However, they won’t place all their orders with us, as the preference is to source from a few manufacturers to ensure there is no disruption in the supply.

“This means they would still source from China and a few other Asian suppliers, ” she said, adding that the group is looking at exporting 20% of its targeted output to the US market in 2020.

“We also want the do-it-yourself (DIY) fasteners to contribute to 20% of group revenue in 2020, from about 10% currently.

“For example, we will be exporting at least 50 containers of DIY screws per month to the US in 2020, compared to 30 previously, ”‌ she added.

NTPM HOLDINGS BHD also sees new opportunities.

It is expanding its overseas business which will help improve its top and bottom lines for the financial year ending April 30,2020.

Group chairman and managing director Lee See Jin said it would supply semi-finished paper and finished paper products to a Chinese maker of decorative papers and napkins who would be operational in the northern region early next year.

“We have locked in orders from the Chinese company relocating here because of the US-China trade conflict, ” Lee said.

 
 
https://www.thestar.com.my/business/business-news/2019/10/21/malaysian-beneficiaries-of-us-china-trade-war
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enning22 gtronic's worry is unfounded,and wrong completely ;the China-US trade war would last for long long time, this is not a simple trade dispute, it is a hegemonic struggle between the big powers.Taiwanse businesses expect that atleast would last for next 30 years.
22/10/2019 10:36 AM
qqq3 no trade war...we supply to China
got trade war....we replace china....
22/10/2019 10:45 AM
enning22 mahathir's policy spells disaster for malaysia,as always.
22/10/2019 10:59 AM
DreamKentut Post removed. Why?
22/10/2019 11:01 AM
qqq3 enning...mahathir eat salt more than u eat rice..........94 still flexible, still improving, still healthy...where to find?
22/10/2019 11:02 AM
enning22 that is what you understand, as you did, as always , taking info and believed fully in communist china propaganda. what a low IQ bias.
22/10/2019 11:18 AM
enning22 look, everybody knows ,only qqq3 prefered "salted senile fool, rather then fresh, new rice".
22/10/2019 12:04 PM


 

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