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SEMICON Southeast Asia 2016: The future of smart manufacturing in Malaysia




The SEMICON Southeast Asia (SEA) 2016 conference in Penang, Malaysia, gathered experts in the region and highlighted microelectronics and industrial automation innovations from the semiconductor industry.

The focus of the conference continues to be around the hot topic of “factory of the future” or “smart manufacturing,” which generally refers to the use of technology to increase automation in the manufacturing process. The smart manufacturing concept usually focuses on the use of technologies like sensors, networks, software, analytics and equipment automation that digitally connect manufacturing factories. These technologies enhance a factory’s intelligence by not only connecting standalone plants with other factory sites, but also connecting machines and processes within a factory using Internet of Things (IoT) solutions and merging existing industrial infrastructures with cloud computing. 104 million new nodes were connected to industrial automation networks in 2015—an increase of 8.5% year-over-year from 2014 that reflects the rapid adoption of technologies aimed at creating the factories of the future.  

Many semiconductor manufacturers like Global Foundries, Advanced Micro Devices (AMD) and SanDisk demonstrated several ways to implement automation in their manufacturing facilities at SEMICON SEA 2016, highlighting their vision of “factory of the future” and continuing to drive the automation trend. IHS believes that in the short term, the benefits of automation will be limited for the semiconductor industry in Malaysia due to process complexity, high cost and non-technological aspects including cybersecurity and a lack of skilled engineers.

Semiconductor manufacturing processes can generally be divided into three categories: wafer fabrication, assembly and test. Due to process complexity, the adoption of automation technologies in wafer fabrication facilities is expected to outpace the adoption rate in assembly and test facilities. In Malaysia, more than 80% of semiconductor manufacturing plants are assembly and test despite semiconductors and circuit boards accounting for 20% of total exports. For this reason, IHS does not expect a big impact in the short term on high-end industrial automation solutions in Malaysia that would involve a rapid adoption of smart machine and industrial robots.

Bringing automation to industrial manufacturing equipment is also a high-cost endeavor. Manufacturers are likely to address the automation issue first by focusing on the lower-cost option of automating information handling, which would entail solutions that enable digitization of the data generated in the manufacturing process. This is particularly relevant as the semiconductor industry in Malaysia continues to face rising costs and increased competition from neighboring countries like Vietnam and Indonesia. Hence, the benefits from automation in Malaysia will have limited impact in the short run.

In addition to the technology aspect of “factory of the future,” a few critical areas need to be addressed that may currently be acting as inhibitors to the market:

  • Cybersecurity is one of the main concerns as large amounts of data and information are being collected throughout the factory. 
  • The lack of availability of skilled engineers in the field of smart manufacturing is a challenge for semiconductor manufacturers.

Because of these factors, companies are still taking baby steps towards implementing smart manufacturing in Malaysian facilities. Collaboration between hardware suppliers and IT companies as well as active funding from government authorities like the Malaysian Investment Development Authority (MIDA) will play an important role for semiconductor players that are embracing automation and smart manufacturing. Once the benefits of productivity and efficiency through smart manufacturing initiatives have been realized in the Malaysian semiconductor industry, implementation decisions will be easier. 

Vinita Jakhanwal is a Senior Director for IHS
Posted on 17 May 2016

About The Author

Senior Director, Displays & APAC Research

Vinita is the Senior Director for Displays and APAC Research in the IHS Technology group. At IHS she directs consulting, research & analysis and forecasting for the Display market. She is also responsible for building and leading the IHS Technology R&A practice in APAC (Malaysia & India). With over 19 years of experience in strategic research and consulting, she is one of the world’s leading authorities known for her actionable strategic industry analysis and insight on the Display industry. She is extensively quoted in leading dailies and publications and is invited to speak at major conferences worldwide. Her clients include companies across the entire electronics value chain from the top electronic brands, to display manufacturers, to component makers and financial services firms. Vinita is known for providing exceptionally accurate market forecasts, even for new and emerging display applications and technologies.

Vinita previously worked at McKinsey & Company and Frost & Sullivan. She earned bachelor’s and master’s degrees in Economics from Delhi University, India.