WorldCity, Annual Report: No. 10 Malaysia - Southeast Asia's tech hub | Connecting Local Business Leaders To The Global Economy

Annual Report: No. 10 Malaysia - Southeast Asia's tech hub

June 29th, 2006

The world’s largest economy has a $23.3 billion deficit with a Southeast Asian nation the size of the state of New Mexico. What’s behind the billion-dollar trade? Technology.

Malaysia is a technology-manufacturing hub with facilities for companies such as Dell, Motorola and Intel. As such, it is benefiting from growing global demand for tech products. Apple Computer’s iPods, for example, are made in factories in Southeast Asia’s third-largest economy. And Intel has invested $1.9 billion in its operations in Malaysia and now employs 8,000 workers in Penang and Kedah.

Malaysia’s manufacturing sector accounts for nearly a third of the country’s GDP. Manufactured goods make up more than 78 percent of the country’s total exports.

In 2005, the United States and Malaysia exchanged more than $44 billion in goods, an increase of almost 13 percent from the year before. Nearly $34 billion consisted of U.S. imports from the Southeast Asian country.

Malaysia’s trade office in New York said close to 75 percent of those imports come from the technology sector. Computers, for example, accounted for almost $9.7 billion of the trade in 2005, a 15 percent increase from 2004. Among other things, Dell’s notebook computers are produced there.

There was also a 9 percent gain in U.S. imports of computer parts. They ended the year at almost $3 billion, up from $2.7 billion.

The United States also imported $532 million in semiconductors, up from $513 million in 2004. Motorola has a semiconductor plant in Selangor. Trade in televisions and computer monitors was also on the rise, climbing nearly 7 percent to $901 million. Imports of computer chips, however, fell 6 percent to $2.9 billion.

But it wasn’t all about computers. U.S.-bound shipments of cell-phone parts rose nearly 24 percent, to $263 million. High-tech equipment for hospitals also saw gains in 2005, climbing 8 percent to $408 million.

Global tech manufacturers produce DVDs, flat screen television sets and audio products in Malaysia. Sony has even set up an international procurement office there to provide parts to its companies worldwide. Prakas Nair, Malaysia’s trade commissioner in New York, said the country is capitalizing on its skilled English-speaking workforce and good infrastructure. UNESCO puts the country’s literacy rate at 91 percent.

To supply its manufacturing facilities, Malaysia needs tech components – and that’s where U.S. exports play a key role. The United States shipped $10.5 billion-worth of goods to the Asian nation last year, a 4 percent drop from 2004, led by $4.7 billion in computer chips and $572 million in other components.

U.S. computer shipments to Malaysia rose nearly 9 percent, closing 2005 at $383 million. Transmission devices for cell phones were up 97 percent to $52 million

Overall, however, U.S. exports to Malaysia dipped last year. Much of that had to do with the drop in aircraft sales. Planes were the second most important export to the country in 2004 but fell to No. 26 last year, with only $31 million in sales. That compares to $425 million-worth of aircraft a year earlier. Malaysia Airlines System uses Boeing aircraft and it had received deliveries of several jets in 2004.

Although U.S. exports of jets were down, shipments of aircraft parts rose 38 percent to $414 million. Separately, parts for regional jets rose 3 percent and parts for larger aircraft rose 48 percent to close the year at $221 million.

Malaysia’s role as a manufacturing haven for global tech companies has given rise to vibrant trade with the United States.