GEORGE TOWN (Mar 6): China's move to boost its semiconductor sector through the introduction of a National Integrated Circuit Investment Fund (NICF) in several cities last year is not expected to have a lasting effect.
According to investPenang general manager Loo Lee Lian, the policy was to spur growth and allow Chinese companies to compete on a level playing field with foreign semiconductor multinational companies (MNCs).
However, the effect is likely to be short-term, the way it has gone with China's move to boost growth in the solar photovoltaic sector, she said to the Edge Financial Daily today.
“In 2010, China did the same when it injected operating funds into the solar photovoltaic sector to enable its local industries to compete with foreign companies, thanks to the subsidies which reduced production cost.
“This led to the market being flooded with solar products and prices dropped. It caused the closure of several US companies and at that time 70% of some of the top solar companies were Chinese.
“To counter the effect of that phenomenon which affected US-based companies, the American government introduced the anti-dumping policy which led to the imposition of high taxes for solar products exported to US,” she said.
Thus, US would not allow the same to recur, Loo said, implying that Malaysian companies would also not be keen to work with Chinese companies because the benefits would be insignificant.
Loo was asked to comment on the NICF established under the National Guideline for the Development and Promotion of the IC Industry’ in June last year.
Loo said this after a press conference by investPenang director Datuk Lee Kah Choon who announced Penang’s hosting of the Semicon Southeast Asia 2015 fair at the sPICE Arena from April 22 to 24.
She said China was a favourite for manufacturing among investors due to the low labour cost but that was no longer a mitigating factor because of the high labour turnover rate of about 50% while cost had also increased.
However, producing in China for the Chinese market still has its an advantage due to its large market, she said.
While the policy served only to strengthen the `China for Chinese’ idealogy, Loo said Malaysia, specifically Penang, indirectly benefitted from sensitive issues such as infringement of intellectual property (IP) rights of foreign investors there.
She explained that in the past, there were investors who left Penang to move to China because of the strong movement in the 1990s by the Chinese government to open up its market to attract foreign investors.
“However, we have noticed that in the last few years (based on good investment figures), several projects have come back to us. When I talk to the investors, they claim that labour cost and inflation is high, and IP is an issue there too,” she said citing US MNC Seagate Industries (M) Sdn Bhd re-entry with RM1.05 billion investment as an example of returning investor.
On the Semicon Southeast Asia 2015 fair, Lee said it would the largest microelectronics gathering, organised by US-based SEMI, drawing some 200 companies from the semiconductor, LED, equipment makers, materials and service sectors.
“Penang was chosen because of the role it plays in the electrical and electronics (E&E) industry. According to theMalaysian Investment Development Authority (Mida), approved investments in this sector for Malaysia totalled RM11.1 billion last year.
source:
http://www.theedgemarkets.com/my/article/chinas-move-boost-semicon-sector-wont-have-lasting-effect-investpenang