As the 4th Industrial Revolution gathers momentum in the global landscape, Malaysia’s competitiveness hinges on its ability to transform by responding to market shifts and technology trends. We see that the key players from various sectors  eg gloves, semiconductor, healthcare and ports - are moving towards digital transformation. However, there are challenges that need to be addressed in ensuring that Malaysia remains on the forefront regionally.

WHAT’S NEW

• Building digital enterprises. Digitalisation is revolutionising various sectors as it has made information a top value driver for companies, resulting in data-driven business models becoming the key element to success. While the idea of Industry 4.0 generally refers to manufacturing-based industries’ digitalisation transformation, the border concept of the 4th Industrial Revolution is also applicable to service providers, such as healthcare, finance, logistics and energy. Governments worldwide have been unveiling strategies to modernise their countries’ industries in recent years via Industry 4.0 efforts but use different terms for their respective roadmaps. Examples include “Made in China 2025” for China, “Manufacturing Innovation 3.0” for South Korea, “Industrial Value Chain Initiative” for Japan, “Smart Manufacturing” in the US and “Smart Nation Programme” in Singapore.
• Convergence of technologies. The core of Industry 4.0 is a set of rapidly evolving and converging technologies that include big data analytics, autonomous robots, artificial intelligence (AI), cloud computing, Internet of Things (IoT), additive manufacturing (3D printing), system integration, cybersecurity, augmented reality and simulation. Many of these technologies have been around or under development for several years but the convergence of these technologies is creating an unprecedented pace and impact. The definite number of technologies that will disrupt industries evolves in accordance with the emergence of new technologies.
• How competitive is Malaysia? Focusing on manufacturing activities, World Economic Forum’s 2018 report on Readiness for the Future of Production assessed that Malaysia is one of the 25 leading countries (out of 100) that exhibit a high level of readiness for the 4th Industrial Revolution. The report says that although there are early leaders, no country has achieved full readiness for such a revolution. Areas where Malaysia was among the top 25 included global trade and investment (7th), Scale - manufacturing value added (7th), demand environment (17th), human capital (21st), and technology and innovation (23rd). Despite the relatively decent ranking, we see that low digital adoption (~20%) and limited use of automation among SMEs, shortage of talents in related technologies (such as IoT, robotics, AI), a lack of understanding of the impact and ROI of Industry 4.0 and lack of a centralised information platform could be the key challenges for Malaysia.

ACTION

• Gloves, semiconductor, healthcare and ports are among the key sectors advocating the 4th Industrial Revolution. The key players in various industries in Malaysia are in the progress of digitising the essential functions within their internal vertical operational processes, as well as with their horizontal partners along the value chain (see overleaf). Serba Dinamik is the only BUY call among the companies to be featured in our upcoming Industry 4.0 conference, but we acknowledge the featured companies are among the key players emphasising on digital transformation in their respective sectors. Separately, we have a BUY call on Singapore-listed e-commence player, Y Ventures Group.

Source: UOB Kay Hian Research - 19 Jul 2018