The sup­ply chain’s value chain

The Star Malaysia - StarBiz - - Short Position -

GARTNER Inc, a provider of re­search to the tech­nol­ogy in­dus­try, ex­pects spend­ing on con­sumer elec­tronic de­vices to grow by 7% this year. This was up from its fore­cast of 2% spend­ing growth last year.

It cau­tions that there will still be fluc­tu­a­tions in the ship­ments of th­ese de­vices on a year-on-year ba­sis, but fore­casts world­wide ship­ments of de­vices such as PCs, tablets and mo­bile phones to grow 1.3% or 2.3 bil­lion units this year af­ter de­clin­ing 3% last year.

This should be good news for Malaysia’s elec­tri­cal and elec­tron­ics (E&E) in­dus­try, which ac­counted for 36.7% of the RM935.39bil in to­tal ex­ports last year.

In­ter­est­ingly, Gartner says the spend­ing growth will be un­der­pinned by bet­ter spec­i­fi­ca­tions on top of the in­creas­ing aver­age sell­ing prices, which it ex­pects to rise by 5.6% this year from 9.1% last year.

The bet­ter spec­i­fi­ca­tions mean that lo­cal E&E play­ers must move up the value chain. As they pro­duce high-spec­i­fi­ca­tion goods, the over­all econ­omy will also ben­e­fit as high-end ser­vices such as re­search and de­vel­op­ment (R&D) cen­tres, ser­vices that are sorely lack­ing in Malaysia, are set up.

High-end man­u­fac­tur­ing will be a cat­a­lyst for not only R&D jobs but other high-end ser­vice in­dus­tries, in bank­ing and fi­nance, for ex­am­ple, or even ur­ban ser­vices.

The global econ­omy is closely tied to the sup­ply chain where a prod­uct is con­cep­tu­alised in one place, then de­signed in an­other while dif­fer­ent parts are man­u­fac­tured in half-a-dozen other lo­ca­tions be­fore be­ing put to­gether in yet an­other place and shipped out to the end-mar­kets. Th­ese parts criss-cross oceans and con­ti­nents and are part of the global trad­ing sys­tem.

Malaysia oc­cu­pies an in­ter­me­di­ate po­si­tion where the E&E value chain is con­cerned, as its fac­to­ries are more parts man­u­fac­tur­ers than the pro­duc­ers of the fin­ished goods.

That’s where a fo­cus on de­vices that house high-tech soft­ware for the In­ter­net of Things and cy­ber­se­cu­rity fea­tures will help in mov­ing up the value chain and help cre­ate the high-end jobs needed to raise wages.

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