Soaring with the aerospace segment
ABOUT 10 years ago, Lim Ngak Ee, the founder of Nagoya Plastic Industry Sdn Bhd, invested RM100,000 to train its workers to produce high precision components for aircraft.
At that time, the company was a manufacturer of precision components for the electronics, automotive and medical device industries.
“We ventured into the aerospace sector because our research had indicated that the industry would grow in the years to come and the electronics sector is very volatile.
“The company needed another growth area to generate revenue.
“The whole preparation process took more than a year before we got the AS 9000 certification and the RM100,000 did not include the funds invested for new equipment,” Lim says.
The aerospace certification is necessary because the components such as screws used in aircrafts has to be light and coated with the appropriate chemicals.
The aerospace investment has started to bear fruits. Nagoya now makes precision plastic components for seats in helicopters and for the media systems of aircraft, supplying to US-based and European multinational corporations (MNCs) in the country.
The aerospace sector currently generates about 5% of Nagoya’s revenue but Lim hopes to increase the segment’s contribution to 20% in two to three years.
“With our experience in the aerospace industry, we are in negotiations for new aerospace jobs with overseas companies,” he says.
There are about 10 local SMEs as well as players from China that are competing with Nagoya in the aerospace business.
“One of our challenges is how to keep the cost of imported raw materials such as engineering resin from US, Japan and Germany low.
“We need to cap the import cost below 45% of the selling price for the margin to be reasonable.
“Thus, we need to constantly improve the manufacturing processes and invest in new equipment,” he notes.
Additionally, the workers need to be trained to keep wastage at a minimal level and to complete projects on time.
Shortage of skilled workers is another challenge for the company.
“In our industry, it is difficult to be fully automated. There are precision parts that can only be produced with manual labour.
“We can only automate 50%-60% of the production process,” Lim says.
The main contributor to Nagoya’s revenue is the automotive sector, making up about 40% of turnover. The company makes components for the rear lights and the cover used in the entertainment system of automobiles.
“We face stiff competition from Thailand,” Lim says. To square off competition from China and Thailand, the company has built a reputation as a manufacturer of low-volume and high-mixed of precision components.
“This means Nagoya is a producer of precision components for a niche or specialised market, where the competition is less intense.
“This strategy has worked well as it cuts down unnecessary competition. We have never experienced any plunge in our business since 2008,” Lim adds.
About 90% of its business comes from supporting the MNCs in the country. Nagoya expects revenue of RM40mil for 2017, compared to RM30mil in 2016.
Meanwhile, Boeing has forecast a need for over 39,600 airplanes, valued at more than US$5.9tril, over the next 20 years. This will benefit the growing local aerospace industry.
In its “About our Market: Current Market Outlook 2016-2035” report, Boeing says 38%, or about 15,000, of the new airplanes will be delivered to Asia. Airbus projects a need for 33,070 new passenger aircraft – valued at US$5.2 trillion – over the next 20 years, based on its latest global market forecast report.
According to Mida, from January to August 2016, approval was given for three aerospace projects with investments worth RM260mil.
These investments, mainly from Singapore, include expansion and diversification projects in Malacca and Penang that would create 144 new jobs.