Nine major foreign factories in Penang shut down and retrench workers “Silicon Valley in the East” in critical situation

Nanyang Siang Pau, October 26, 2015

Penang, Butterworth, Oct 25 – Penang may lose its prestigious “Silicon Valley in the East” status following takeovers, moving out, merger, shut down and also retrenchment of the nine major plants in the state.

Even though Penang has managed to secure the second Chinese investment worth tens of millions of ringgit within six months, Nanyang Siang Pau learnt that in the near future nine foreign factories will either move out of the state or move out of the country, be acquired, merger and even layoffs, according to conservative estimation more than a thousand workers will be affected in which the status of electronic industrial hub as well as the reputation of being the “Silicon Valley in the East” Penang have been enjoying will also be severely affected.

It is learnt that the nine plants involved are Motorola which has been acquired earlier on and turned into a research and development (R&D) department, Western Digital, German renowned electronic audio equipment group Blaupunkt, HGST, Amphenol TCS, EMC, UTi, Ericsson and AMD.

According to sources from Penang industrial area, plants to be shut down are Western Digital which will move over to Kuala Lumpur, HGST to shut down its Penang branch and shift to Johor Bahru, while Amphenol TCS will close down its plant at the phase one industrial park in Bayan Lepas and move to China.

Motorola will be taken over by Sanmina Corp., while EMC will be acquired by Dell, UTi to be bought over by DSV and Ericsson will be taken over by Flextronic.

Meanwhile it is learnt that AMD will merge with Nandong Fujitsu Microelectronics.

Blaupunkt to lay off 300 workers

Apart from moving out and takeover of many plants, Blaupunkt Malaysia has declared bankruptcy.

Industrial sources said Blaupunkt will retrench about 300 workers and close down its Penang plant.

An insider of Invest Penang who chose to be anonymous said it was not sure whether other plants will also be moving out of Penang, but more than a thousand workers will definitely be affected in the exercise, and the number could even be more.

Production line revenue decline, 150 workers may lose job
Amphenol TCS shifts to China

According to reliable source, Amphenol TCS will close down its plant in phase one of the Industrial Park in Bayan Lepas and move over to China, 150 workers will lose their job.

Amphenol TCS, an American owned company, is strengthening its position in Asia pacific area, according to sources, the production line revenue has been declining, and it has therefore decided to shift the factory to China based on business strategy considerations.

Under the exercise, 150 workers including engineers and operators are expected to lose their jobs.
Nevertheless, all workers affected will receive a hefty sum of retrenchment benefits.

Amphenol TCS was set up in 2001, in 2008 it was acquired by Amphenol United States as its subsidiary, presently it has a work force of more than 800 people. The connecting products manufactured by the factory are being used by branded smart phones as major components.

Sanmina Corp. will acquire Motorola early next year except its R & D department.

The acquisition of Motorola will be accomplished on early 2016, but Motorola will maintain its R & D department to focus on international customer service.

According to an industrial source, currently Motorola has got about 3,000 workers, it is believed that the workers will not be affected except the change in management.

However Nanyang Siang Pau reporter could not get in when trying to approach the company.
The company security guard politely told reporters that his superior did not allow reporter to take photograph at the place, and also did not response to the request by reporter.

Nothing to do with Penang’s investment environment

With the shift of the plants to Johor Bahru and Kuala Lumpur, does it indicate that Penang has lost its competiveness? A senior industrial operator deny such utterance, saying that it was due to globally economic impact plus the strategic deployment of foreign investors, and therefore it has nothing to do with Penang’s investment environment.

“We are optimistic as the Chinese investors are moving in slowly, you see, within six months we have got the Jinko Solar and the JA Solar moved in.”

He opined that in future there will be more foreign firms investing in Penang and therefore, it is not true to say that Penang has lost its status of electronic industry hub.

Officials avoid talking about it which creates more mystery

Industry operators avoid talking about this issue, and officials refuse to comment on it, causing the issue to become more mysterious.

Our reporter tried to contact Dato’ Azman Mahmud, Chief Executive Officer of Malaysia Industry Development Authority (MIDA), however he refused to make any comment, saying that the Ministry of International Trade and Industry would be issuing statement on the issue.

He reiterated that the situation was still positive as far as Malaysia is concerned.

Our reporter has also contacted director of Invest Penang Dato’ Lee Kah Choon, however, he only mentioned in his WhatsApp message that presently he was abroad and did not make further comment.

HGST factory to close down in next March

The talk on the closing of the HGST plant has been going on for months and it is expected to be closed in next March relocating to Johor Bahru.

An employee who declined to be named told reporter that the plant will be closed next March, the management had drawn up a retrenchment plan but details have yet to reveal.

He also pointed out that the reason of closing down the plants was aim to reduce the operating cost because their production line revenue has gone down.

On whether all the workers will be retrenched or part of the factory will be taken over by Western Digital, he said he has no idea on this.

He also told reporter that he believe after the closure of the plant, Penang Western Digital will come out with next action.

HGST was known as STEC before it was acquired by HGST, a subsidiary of Western Digital in 2013.

Retrench to reduce operating cost

There were all kinds of rumours since early this year on Western Digital, some said it would close down the production line in Penang, others said that it would resort to retrenchment to reduce operating cost, and recently there was rumour saying that it would relocate to Kuala Lumpur.

For verification, our reporter talked to one of the staff of the company, he said whether the factory was going to move to Kuala Lumpur has yet to confirm.

He said it was normal for a factory to lay off workers or to shut down the production line when the revenue was declining. However, in view of the recent takeover of the US firm Sandisk by the company, he believed that the plan to relocate the plant might be shelved even if the company had made such a decision.

Unable to repay the debt
Blaupunkt of Germany bid farewell to Butterworth

The German electronic audio group Blaupunkt which had carried out expansion plan on its plant in Juru, Butterworth three years ago will close down its plant soon.

The new plant cum regional sales centre which was located in Juru was officially opened by the then deputy Minister of International Trade and Industry Dato’ Seri Mukhriz together with Penang Chief Minister Lim Guan Eng on November 11, 2012.

Blaupunkt first came to Penang in 1973, the new plant cost RM88 million and employed 100% local workers (a total number of 350) including 50 Malaysian engineer who were involved in production R & D.

After setting up the new plant and regional sales centre in Juru, Blaupunkt had planned to invest another RM40 million in five years.

According to the New Straits Times report, Blaupunkt is undergoing a voluntary winding up of wholly-owned subsidiary Blaupunkt Malaysia Sdn Bhd and has appointed a provisional liquidator.

Two of its directors had declared to the Companies Commission of Malaysia that the company was unable to continue its business due to its inability to pay its debts.

The company is expected to have its case heard at the Penang High Court on October 27.

Ooi Eng Hock: Big impact on the state economy
Penang manufacturers need to carefully verify

Dato’ Dr. Ooi Eng Hock, Federation of Malaysian Manufacturers Penang branch chairman said even though Penang manufacturers had been receiving such information on and off, in view of the importance of electronic industry to the Penang state economic development, they need to carefully verify the information.

He said the information received by Penang manufacturers including the relocation of plants, shut down and acquisition, but the situation is not clear yet. Therefore, the federation would have to make verification with the relevant manufacturers and let them make detail announcement.

“However, some manufacturers have announced the details such as Amphenol TCS has announced that it will close the plant in Bayan Lepas and move to China; Motorola will turn into R & D department and make production line outsourcing while the whole market knew about the happening of German audio group Blaupunkt,” he added.

He said owing to the economic slowdown, manufacturers have to take measure, but the electronic industry is very crucial to Penang state economic development, thus they need to verify carefully before making any announcement.

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