Major US electronics firms in Malaysia forecast export sales to surge 15 percent this year and grow even faster in 2004 amid an upturn in the global semiconductor sector, an industry group said today.

The Malaysian American Electronics Industry (MAEI) said total sales of its 18 members were expected to increase to RM59 billion in 2003 after growth of 15.5 percent last year to RM51.3 billion.

It attributed this to a consolidation of some key semiconductor operations into Malaysia, the US economic recovery, a new cycle of computer spending, new markets and innovations.

Semiconductor and non-semiconductor sales were forecast to jump 17.7 and 13.3 percent respectively according to a recent survey, said MAEI interim chairman Teh Chin Bin.

"We forecast a sales growth of another 15 percent this year," he told a news conference.

"(The general feeling) in the industry is that 2004 will be a good year. As business confidence improves, sales in 2004 should be better than 2003."

Excess capacity

The MAEI, which includes world top chip-maker Intel Technology, Motorola, Western Digital, Dell and Seagate Industries, accounted for nearly a quarter of Malaysia's electronics exports and 14.5 percent of total manufactured exports last year.

But the survey said capital investment by MAEI firms was expected to dip another 13 percent to RM1.4 billion this year, after shrinking 30 percent in 2002 to RM1.6 billion.

The investment this year would mainly be in maintaining and upgrading manufacturing facilities to boost productivity, it said.

This would take total accumulative investment by MAEI members here to RM28 billion, or an annual average investment of one billion ringgit in the past three decades.

Teh attributed the investment slowdown to excess capacity from large investments made during the late 1990s, and said it would pick up when plant utilization, which improved to 70 percent this year, hit 75 percent.

He said the total MAEI workforce was expected to remain at around 50,000 this year as companies pin their hopes on higher productivity to drive sales.

Remaining competitive

Tim Garland, president of the American Malaysian Chamber of Commerce, the umbrella body for MAEI, said the lower investment was in line with shrinking foreign investment worldwide.

Despite competition from China, he said Malaysia had continued to see investment in higher value-added products with some MAEI members bringing in new lines and products here.

"We are not seeing a hollowing out in the industry here. I don't think we will see Malaysia lose out but it has to transform and focus more on services and supporting industries that are going to China," he told AFP .

The survey said members were concerned productivity had not risen in tandem with labor costs, that there was limited skilled manpower and laboratory and testing facilities, and over rising waste management costs.

To be more competitive, they urged Malaysia to keep utility rates low, develop its research and development capabilities, and build more local supporting industries as it had ceased to be a cheap manufacturing destination.

As an Islamic country, Malaysia must also continue to promote itself as progressive and forward-looking to calm any investors' jitters, and boost economic policies towards more international trade and labor standards, they added. - AFP