Business

Wednesday August 12, 2009

Medical, electronics demand recovering

By DAVID TAN


It will peak in Q3 next year, says business group

GEORGE TOWN: The demand for medical and electronics products has started to recover and will peak in the third quarter of 2010, according to Penang Foundry & Engineering Industries Association (Penfeia).

Penfeia president Datuk Ng Chai Eng told StarBiz that business for its 200 members had picked by about 20% so far in the third quarter, compared with the first and second quarters of 2009.

“We are seeing demand coming from new companies involved in the medical devices and drug testing business on the island and at the Bukit Minyak Science Park,” Ng said.

»The MNCs should be replenishing their stocks soon« DATUK NG CHAI ENG

Medical companies in Penang, such as Symmetry Medical Malaysia, Alpha Biologics and St Jude Medical are expected to drive up demand for products made by Penfeia members. St Jude Medical is expected to begin operations next year.

Over 10% of Penfeia members are involved in the manufacture of automated and laboratory equipment and precision tooling components for the medical industry.

“Demand from medical companies is expected to increase after the second quarter of 2010,” he said.

The association also sees demand from multinational corporations (MNCs) involved in the electronics sector peaking in the third quarter next year.

“The MNCs should be replenishing their stocks soon. The demand should be for products such as carbide tooling components, precision enclosures, jigs and fixture, test equipment, and automated equipment.

“The business for Penfeia members would not only come from MNCs in Penang,” Ng said, as “Penfeia members have also received visits from overseas customers from the United States and Europe, seeking to outsource their manufacturing.”

The Federation of Malaysian Manufacturers (FMM) northern branch chairman Datuk O. K. Lee said FMM members had started receiving orders from customers in the second quarter.

“How fast these customers will be able to sell their new stock, however, is another issue.

“Especially in the United States, consumers are now tightening their spending. Even if they save 10%, it will have a large impact on global demand.

“For this reason, the growth of future demand will depend on the economic conditions in China and India.

Precision turning parts made by Penfeia members

Lee said it would take some years before demand could go back to the pre-crisis level as in 2007.

OCBC Retail Commercial Banking head Wong Chee Seng said there were a few indications that the economy had improved.

“We have seen more letters of credit (LCs) issued in the second quarter compared with the first quarter of the year,” he said, noting that quarter-on-quarter, the number of LCs issued increased by about 20%.

“We hope the government’s stimulus packages would ultimately boost economic activities so that the requirement for working capital consequently increases,” he added.

Meanwhile, to widen the exposure of Penfeia members, Ng said it was working with investPenang, Penang Hardware and Machinery Merchants Association, and the Malaysian Plastics Manufacturers Association (northern branch) to produce a directory containing essential information on Penfeia members.

“The directory will provide a platform for all our members to expand their businesses overseas,” he said.

The 400 to 500-page directory was expected to be ready next year and would be distributed by the state government during overseas trade missions, he added.

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