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SJM: Silicon Valley cutbacks are felt in Malaysia
By Sarah Lubman
30/6/2001 2:31 am Sat
Posted at 11:58 p.m. PDT Monday, June 25, 2001
Silicon Valley cutbacks are felt in Malaysia
BY SARAH LUBMAN
A year ago, Malaysia opened a trade office in San Jose, hoping to
lure more high-tech companies to its rapidly developing shores.
These days, inquiries are down, and Yew-Fook Phang, the director of
the Malaysian Industrial Development Office, has altered his pitch to
fit the sluggish economy.
``We have to tell companies about the lower cost of doing business
there,'' Phang said. ``Before, we tried to promote Malaysia as the
dynamic, growing Asia Pacific area. But this downturn is global in
U.S. tech companies still see Malaysia as an attractive, low-cost
production site. But as orders and sales have fallen, the results are
trickling overseas in the form of layoffs and manufacturing lulls.
The latest job cuts were announced last week by Solectron, which cut
its worldwide workforce by an additional 16 percent, bringing the
total number of layoffs this year to 20,700 workers. Before the
latest round of layoffs, Solectron, the world's largest contract
manufacturer of electronics, employed 9,000 people at its three
circuit board and systems assembly sites in Penang and Johor.
Malaysia ``is participating in the slowdown just like everyone
else,'' said Bill Callahan, a spokesman for National Semiconductor.
The Santa Clara firm had cut its staff 10 percent worldwide by the
end of May, including in Malaysia, where it previously employed 2,500
people at its chip assembly and testing operation in Melaka.
In March, Seagate Technology closed a disk-drive assembly site in
Malaysia, laying off 4,000 workers. A spokesman said that while the
slowing economy wasn't the cause, it did speed up Seagate's plans to
consolidate its Malaysia operations.
In 1999, Malaysia was the eighth largest high-tech export market for
the United States, and its sixth largest high-tech import market,
according to the most recent statistics from the American Electronics
The roster of Silicon Valley companies with significant Malaysia
operations includes Intel, Agilent and newcomers such as Gibraltar
Semiconductor of San Jose, one of the few companies expanding there.
Gibraltar, a subsidiary of New York-based Mini-Circuits Laboratory,
moved just this month into its first building on a 10-acre site in
Penang and began hiring Malaysian engineers and designers to work on
its radio frequency microwave components. Kelvin Kiew, Gibraltar's
president, said they chose Penang because it had the engineering
talent the company needs, in addition to being close to two big
customers, Motorola and Agilent.
``The uncertainty there makes people apply for jobs,'' Kiew said.
``We get a lot of good candidates.''
Regarding Malaysia's much-hyped Multimedia Super Corridor, Kiew said,
``I actually don't know where it is physically located.''
He added that the MSC -- which is just south of the capital, Kuala
Lumpur -- is geared toward Internet and computer companies, not the
He added that the MSC -- which is just south of the capital, Kuala Lumpur -- is geared toward Internet and computer companies, not the wireless industry.
Kiew, like many U.S. executives, sees Malaysia as a good long-term
bet, citing its relative political stability and its infrastructure,
which compares well with competitors like China.
In the interim, though, companies must navigate the tricky territory
of slowing down without undermining their ability to respond once the
``Managers who run Malaysia operations are desperately trying to find
out what's happening in the tech sector here,'' said Ernie Bower,
president of the Washington-based U.S.-ASEAN Business Council.
``They're trying to walk a tightrope: you have to cut back output
right now, but you don't want to lose your investment plan or your
If the tech slump continues beyond the first quarter of 2002, Bower
added, some tech companies might pull out of Malaysia, which would
force it to start courting other industries.
Malaysia is already trying to diversify its high-tech dependence by
venturing into the space industry, doing light aircraft assembly and
composite parts manufacturing.
For now, Malaysia's office in San Jose is also setting its tech
sights lower. Since many big software companies such as Siebel
Systems and Oracle already have operations in Malaysia, Phang is
concentrating on smaller firms with about 20 to 30 software engineers.
``We don't want to depend on the semiconductor industry because it's
very cyclical,'' Phang said. ``Once there's a downturn, firms have to
lay off thousands and thousands of people, and it gets very