Business Prospects in Malaysia Manufacturing Industry

Overview

Executive Summary 

The Malaysian economy is among the strongest, most diversified and open in Southeast Asia. Due to the outbreak of the virus Malaysian GDP contracted by 5.6%, the biggest fall since the 1998 Asian Financial Crisis. In 2021, the economic performance showed a recovery momentum recording a growth of 3.1% further the nation’s economy is projected to further accelerate to about 5.75% by 2022, mainly driven by the widespread vaccine rollout and implementation of various economic policy support measures. 

Performance of Malaysia Manufacturing Industry
With a contribution of 22.3% to the GDP in 2020, the economy’s manufacturing sector was the only economic sector that recorded positive growth (+3% y-o-y), in contrast to all other sectors that registered a negative growth rate. In order to ensure the competitiveness of this sector, in 2020, it was allotted the largest portion of approved investments. This further accelerated the approved private investments by domestic and foreign entities by 22.6% and 3.9%, respectively. 

Despite the pandemic’s effects, growth in Electrical and Electronics (E&E), the leading industry in Malaysia’s manufacturing sector, is projected to be positive. Moreover, tariffs on China’s exports have led to Malaysian industries’ continued expansion to fulfill demand from the US. More than 5,000 multinational corporations from over 50 countries have adopted Malaysia as their location for manufacturing and related operations.

One of the primary factors propelling the manufacturing business in the region is that many importers and manufacturers are looking to Malaysia for sourcing products and diversifying their production units away from China and toward Malaysia, as part of the China+1 strategy.

Impact of Covid-19
Malaysia witnessed a steep surge in COVID-19 cases in mid-2021. The government initially imposed a nationwide containment measure, MCO 3.0, which was followed by a complete lockdown in later months. Factory operations and businesses, including those of electronics, semiconductors, and medical equipment, came to a halt.

Malaysia is a major player in global chip assembly testing and packaging, accounting for more than a tenth of global trade, due to that Electrical & Electronics product had a negative impact. Moreover, the palm oil industry in Malaysia is primarily reliant on foreign labor with the implication of restricted borders were closed which resulted in a declining labor force and it hampered the production yield.

Malaysia Manufacturing Industry Performance by Sectors

Palm Oil Industry
In 2020, Malaysia accounted for 25.8% of global palm oil output, but the industry faced significant downturns like declining CPO output, production land, palm oil stock, etc. during the year. But despite declining palm oil export volumes in 2020, total export revenue rose by 7.0% due to higher crude palm oil prices, particularly in the second half of the year.

Malaysia will continue to establish and dominate the markets as the primary supplier of palm oil to many leading economies in APAC region such as China, India, Japan and South Korea. On the other hand, Malaysia presently holds more than 90% share of the Turkish palm oil market, which is expected to increase demand for Malaysian Palm oil in MENA region.

Electrical & Electronics Industry
Malaysia's electrical and electronics (E&E) sector is vital to the country's economy. It is expected that E&E will continue to be a key driver of industrial development and that its preeminence will be emphasized in the coming years as Malaysia strives to achieve high-income national standards. E&E grew at a rate of 5.4% per year on average from 2016 to 2020, outperforming not only headline GDP, but also the overall manufacturing sector. 

On the other hand, Malaysia is currently a vital global center in the semiconductor supply chain, with around 7% of global semiconductor trade passing through the country and accounting for more than 30% of Malaysia’s total exports.

Chemical and Petrochemical Industry
Malaysia is currently a vital global center in the semiconductor supply chain, with around 7% of global semiconductor trade passing through the country. The chemical industry contributes around more than 6% of GDP.

Automotive Industry
Malaysia strives to be a prime location for global automakers. Honda, Toyota, Nissan, Mercedes-Benz, and BMW are among the global automakers that have established operations in the country. Moreover, the industry continues to be an important and strategic part of the country's manufacturing sector, contributing 4% of Malaysia's GDP and ranking third in ASEAN. As of now, Malaysia has 28 manufacturing and assembly plants for passenger cars, commercial vehicles, motorcycles and scooters, and automotive parts and components.

The emergence of Lithium-ion Batteries across the region
Malaysia is preparing to join the lithium-ion battery industry, with intentions to produce 18650 cells in the near future.

Scope of the Study
The following synopsis is based on the report published by Makreo Research and Consulting Firm, titled" Business Prospects in Malaysia Manufacturing Industry". The report delves deeply into various parameters such as manufacturing market overview, segmentation, value chain analysis, and industry cause and effect analysis. The study includes market dynamics that provide an understanding of industry opportunities, driving forces, major challenges impeding growth, and an analysis of future opportunities that may help market players capitalize on untapped business potential in the specific geography.

High Potential Sectors in Malaysia Manufacturing Industry

•     Electronics (Semiconductors, Photovoltaics)
•     Chemicals and Petrochemicals
•     Automotive
•     Palm Oil
•     Petroleum Products’

The report helps the reader to gain information on the following areas:

•     How Malaysian economy is performing and supporting the industries?
•     What are the key contributing industries to the economy?
•     What are the key driving forces helping the Malaysian economy to sustain itself even after a virus attack?
•     What are the business prospects in Malaysia?
•     How palm oil sector is contributing to the Malaysian economy?
•     How electrical and electronics industry is performing in Malaysia?
•     How automotive industry is performing in Malaysia?