P'Y' Lai

1
Opportunities Challenges for Malaysia
P.Y. Lai Senior Vice
President, Motorola Inc.
2
Economy Evolution
information
Internet
capital
Industrial
Land
Agriculture
Before 19th century
19th century
21st century
3
First Wave of Globalization

Economic Features
1960s-1970s Labor intensive Low
technology Export-oriented
1980s Capital intensive Knowledge-based Export-ori
ented
Industrial shift to Asia
Japan, S.Korea, Malaysia, HK, Singapore, Taiwan
Europe America
4
Four Dragons
Singapore
Hong Kong
Taiwan
South Korea
5
New Wave of Globalization
Transformation of industries
Global outsourcing
E-commerce
6
De-Integration of Value Chain
PC
Mercer Management Consulting
7
Outsourcing

• Ericsson outsourced handset production in Feb.
  2001
• Ericsson Sony set up handset JV
• Motorola outsources gt30 of semiconductor
  business
• Philip outsources handset production to Shenzhen
  Sangda
• under CEC
• Japanese and European companies follow suit

8
Internet and E-business

• Internet will sweep across the world within two
  or three years, becoming one of the fastest
  growing media and a new lifestyle. Therefore, the
  greatest industry in the next five years will be
  E-business and Digital Money.
• -- Inventec/Chairman Wen

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Impacts of E-Commerce

• Break-through restriction of space and time
• Direct connection between supplier and customer
• Customer choice from Limited to Limitless
• Consumer to Consumer trade
• Telecom service fee will be a major revenue pool
  of national and local governments
• Urgent need for new laws and game rules

(Source Invented Chairman Wen)
10
China Economy Growth
(Annual GDP Growth )
Global
3.3
3.6
2.3
3.0
4.4
2.2
3.1
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Strengths of Chinese Economy

• GDP growth rate stays at 7-8 in next 5 years
• More spending is expected in real estate,
  automobiles, durable goods and telecommunication
  
• Consumer spending spurs business investment
• After WTO entry, China expects US 60B FDI by
  2003
• Average inflation rate will fall below 2.9 in
  the next 5 years
• Favorable trade balance would decrease to 10
  billion
• RMB will remain stable within 5 years

sourceCitibank,June, 2001
12
Most favorable investment Environment
The following 10 countries/regions are assessed
as most attractive for mid-term investment by
Japanese corporations
China
U.S.
Thailand
Indonesia
Malaysia
Taiwan
India
Vietnam
South Korea
Philippine
Source Japan Bank for International
Co-operation
13
Foreign Investment into China
China becomes most favorable place for venture
capital after 9-11
14
Chinese Telecom Market

• Average growth rate of 20 per year
• No. 1 handset market with 134 million subscribers
  by 2001
• More investments into infrastructure
• Foreign capital into the telecom service sector
• 2008 Beijing Olympic Games
• New revenue pools
• 3 in 1 broadband solution (telephone,TV,
  Internet)
• digital trunking system ( Tetra/iDEN)
• growth of semiconductor and software industry
• Stock market A/B market merge
• foreign enterprises could be listed on Chinese
  stock market

15
Mobile Phone Market
Source the Yankee Group, 2001
16
Expanding Internet Users
17
New Business Opportunities In China

• AREAS
• Fast development of IT industry
• Development of West China
• WTO entry
• 2008 Beijing Olympic Games

• PRODUCTS
• Semiconductor
• Software
• Broadband
• Wireless digital trunking system
• Bio-tech

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Challenges to Malaysia

• Multinational companies slow down investments
• Labor intensive and OEM enterprises are moving
• out of Malaysia into China
• Growth of hi-tech industry is slow
• Shortage of RD and software engineers
• Malaysia may miss 2nd wave of globalization
• in electronics sector

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Strategy China One (Malaysia)
Conducive Political Environment

• Build a modern, democratic and peaceful Islamic
  country
• Join force in anti-terrorism movement

• Strengthen cooperation with Singapore government

20
Conducive Business Environment
Strategy China One (Malaysia)

• Re-visit tax and financial incentives for
  targeted industries
• Incentives for fully integrated manufacturing
  (production, RD and distribution)
• Formulate policy to attract talents, e.g, loosen
  immigration policies
• Focus hi-tech industry in 3 industrial parks
• -- Penang
• -- Kulim
• -- Kuala Lumpur Multi-Media Super Corridor
• HQ attract more foreign companies to set up
  regional HQs in Malaysia after BMW

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Conducive Business Environment (2)
Strategy China One (Malaysia)

• Center of Excellence for manufacturing
• -- contract manufacturing
• -- OEM
• -- ODM
• Center of Excellence for software and IC design
• Buy foreign companies while stocks are sliding to
  the bottom
• Actively pursue business growth opportunities in
  China
• Partner with Singaporean enterprises for growth

22
Singapores Semicon Industry

• 1st wafer fab and IC design center set up in 1984
  by SGS-Thomson (now ST Microelectronics)
• Today, there are 32 IC design centers, 14 wafer
  fabs and 18 IC assembly and test facilities.
• 4 wafer fab parks in Singapore
• 17B in 2001 and will reach 30B in 2005 Gartner
• Contribute 4.9 to GDP and provide 40 skilled
  job
• 3 new projects for advanced 12-inch wafers.

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THANK YOU !