Published November 6, 2008

Sales of US tech firms in M'sia set to fall

Global demand for consumer electronics products faltering

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(KUALA LUMPUR) Sales by US tech firms with factories in Malaysia are expected to fall this year as the global financial crisis hits demand for consumer electronics. A recovery is unlikely until the second half of 2009.
Slow day: Malaysia-based tech companies are cutting down spending on equipment and conserving resources as they brace themselves for what could be the industry's worst period in history, says industry group

A severe slowdown will have big repercussions for the economy because electronics is Malaysia's biggest export industry and accounted for almost 40 per cent of overseas sales in September, figures yesterday showed.

Global demand for consumer electronics products such as cellphones, MP3 players and personal computers, is faltering, said Wong Siew Hai, chairman of Malaysian American Electronics Industry (MAEI). '(Sales) are likely to fall below last year,' Mr Wong said yesterday.

Sales by MAEI's 17 members, which include Motorola, Dell, and Intel, totalled RM73.8 billion (S$30.9 billion) in 2007. The organisation had previously forecast sales might grow a thin 0.4 per cent.

Reflecting a global downturn, the government on Tuesday cut its 2009 growth forecast to 3.5 per cent, which would be the slowest pace since 2001, from 5.4 per cent.

Malaysia-based tech companies are cutting down spending on equipment and conserving resources as they brace themselves for what Mr Wong said could be the industry's worst period in history.

'The outlook for 2009 is very unclear and uncertain. People that I spoke to, they can't even tell me what's happening due to uncertainty on the demand side. They can only see weeks, they can't even see months to forecast,' said Mr Wong.

'I think it's not clear that things are going to come back up yet, definitely not in the first half of next year,' he added.

The International Monetary Fund last month slashed its global economic growth forecast to 3 per cent from 3.9 per cent, the slowest pace in seven years, although investment bank UBS sees just 1.3 per cent global growth, the slowest in 27 years.

All G-7 countries, except Japan, will see their economies shrink next year, UBS said. The US economy, a big buyer of Malaysian made electronics good, is expected to contract by 0.6 per cent in 2009, it said.

Weakening demand for consumer electronics will also hit local contract manufacturers such as Unisem and Malaysian Pacific Industries , Mr Wong said.

A prolonged economic slowdown worldwide could lead to an industry-wide consolidation and there is a risk of layoffs here as companies downsize and cut workers, Mr Wong said.

'If they say this one is going to continue for long- term, then they will have to let people go. We will have to watch it carefully, I would not rule this out, because I expect the impact of the economic crisis to be great,' he said. -- Reuters