More local companies benefitting from trade war

PETALING JAYA: At least two more locally listed companies have jumped on the bandwagon to explore new opportunities stemming from the escalating US-China trade war.

Penang-based PIE Industrial Bhd is negotiating to secure electronic manufacturing projects with China-based parties while Johor-based furniture maker Wegmans Holdings Bhd is said to be in talks with China partners who are keen to use the latter’s facilities in Malaysia for their future exports.

Wegmans officials also recently said that the company has continued to receive high number of enquiries and sales leads from US customers who are looking to shift their orders to Southeast Asia.

For PIE, it is currently negotiating to secure five electronic manufacturing projects that would generate a collective revenue of about RM50mil a year.

According to PIE group managing director Alvin Mui, some of these projects came to PIE as a result of the US-China trade war.

“Some multi-national corporations in China are giving us the projects so that they can ship the products to the US from Malaysia,” he said.

Mui told StarBiz that he expected the deals for the projects to be done in the third quarter of 2019. According to Mui, the five projects involved manufacturing box-build industrial electronic equipment and printed circuit board assembly products.

“The group strives to expand its customer base to China in the coming years with these opportunities arising from USA-China trade war,” he added. According to Mui, in view of the potential business opportunities from China, the group added in the third quarter 2018, 10 surface-mount-technology (SMT) production lines to support future shipment demand.

“The expansion has been completed and we now have 24 SMT production lines in the Seberang Jaya factory,” he added.

Mui said the EMS division, which generated 75% of the group’s 2018 revenue, should improve this year.

In 2018, the revenue of the EMS segment dropped by RM22.4mil or 4.3% when compared with the preceding year.

Moving ahead, the policy of minimum wages and levies for foreign labour, and the fluctuation of foreign currency exchange are the main challenges of the group.

“The group will gradually transfer some of the production lines in Malaysia to Thailand to mitigate the risk of uncertainties in the foreign workers hiring policy.

“We will enhance innovation and extend our vertical integration capabilities while introducing more automation for the manufacturing process,” he said.

In the case of Wegmans, sources said that two of its top executives are presently in China for talks with potential partners.

It is understood that these could be parties interested to shift some of their furniture production to Wegman’s facilities in Muar, Johor, so as to overcome the tariffs imposed on exports from China into the US.

A recent extensive report on the trade war by Nomura Global Markets Research identified furniture as one of the goods that the US is looking for import substitution (away from China imports).

Nomura also pointed out that Malaysia is the fourth largest beneficiary of the trade diversion arising from the trade war.

At its AGM on May 21, Wegman’s MD Keh Wee Kiet had said that the export market remains a key growth driver, especially the US, from where there was an influx of orders. “The on-going US-China trade war has in fact provided us a lot of business opportunities as we received higher enquiries and sales leads from US customers who are looking to shift their orders to Southeast Asia,” Keh had said.

Two weeks ago, when Wegmans released the results for its first quarter ended March 31, 2019, the company said that revenue from North America continued to record strong growth, surging 89.63% year on year to RM9.62mil and was the largest contributor to the group’s total revenue at 42.73%.

In a press release, Keh said for the whole of FY2018, revenue from the US market grew 33% year on year, overtaking the Japanese market as their primary revenue contributor.

“We believe the favourable demand trend will prevail in 2019, as more buyers are switching their sourcing destination,” Keh had said.

He had added that Wegmans has also ventured into original brand manufacturing under their own Collino Designs brand and that this was part of their strategy to further penetrate the furniture market in China.

He added that Wegmans was busy expanding its production facility in Muar to cater to the growing demand and that Wegman’s existing factories are operating at near full capacity. Wegmans new factory has a production capacity that is similar to its existing plant. It will be equipped with new and upgraded machineries that increase automation, productivity and improved production efficiency and will enable them to take on larger orders, the company had said previously.

Source: TheStar