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Electronics SMEs urged to embrace South-east Asia as their growth driver

Singapore

WILL big global firms want to set up shop - as DBS senior economist Irvin Seah put it - "in a place that looks more like an old folks' home"?

As cost competition and demographic change put the squeeze on small and medium-sized enterprises (SMEs), companies in electronics manufacturing should look to the regional value chain as a growth driver, he said at an industry event on Wednesday.

But to live long and prosper, they must tap both Southeast Asia's value and "Industry 4.0" technology tools.

Mr Seah noted: "In the 1980s, Japanese companies ventured all over the world because they knew that their market was slowing down, greying, and as a result, there was a push factor.

"But there was also a pull factor, because it meant higher revenues for them. The same happened to Taiwanese companies in the 1990s.

"So, going forward, I do foresee this will happen in Singapore as well. Much greatly depends on whether our SMEs are willing to answer the call and to take that plunge overseas."

He was speaking on a panel at a DBS symposium titled "The Future of Electronics", to an audience of about 200 - mostly small-business owners. Citing production trends in South-east Asia, where companies spread their activities across different countries depending on cost and value, he said: "You can see from that, the intra-regional trade in infocomm technology does reflect this very close interconnectivity."

He predicted that more global SMEs would cushion the blow from a Singapore silver tsunami. "Leverage on the regional market. You scale up, you grow. As you grow, you generate revenue, which will be repatriated back to Singapore, which will then finance the cost, the social expenditure associated with the ageing population. This is the way we can sustain growth."

Fellow panellist Edwin Ng, managing director of printer Markono Content Solutions Group, said: "One advantage is that we can leverage the strong (intellectual property) ... which makes it a safe environment to take risks, try new things. Then, once we get the secret sauce right, we scale up regionally."

Derrick Yap, chief executive of PBA Group, said several times that "Southeast Asia is a great place to be". "Many years ago, we were debating within the company whether we should get on the bandwagon," he recalled. "Everyone was 'China!', so if you didn't talk about China, you were dead, really. Your company had no future."

But Mr Yap, whose family's robotics business branched out of distribution into design and manufacturing, said the company opted to focus its efforts on South-east Asia instead, where it believed the rewards were better. "And I think that paid off fantastically, because now you see outflows of people from China going into South-east Asia," he said.

"And you see, if you combine the whole economy of South-east Asia, it's not small." He added that SMEs can now punch above their weight with automation and other tools: "We are very, very bullish about the industry, I think more so now than ever before, because of Industry 4.0 technology...

"Because of technology, SMEs are able to talk on par with multinational corporations (MNCs), so they can collaborate with MNCs, they can supply to MNCs with consistent quality, with scalability." Jason Jameson, who oversees the IBM Watson Internet of Things in the Asia-Pacific, agreed that advanced manufacturing "isn't just for big companies". "I think a good strategy as an SME is often to be able to... get it both ways. You can eat their lunch and/or you can work with them to grow bigger. If you're a supplier to a big company, you're going to be asked to do this anyway."

DBS's Mr Seah noted that new manufacturing technologies, such as the Internet of Things, are set to boost demand for electronics components, parts, gadgets and devices - "and Singapore, one of the key electronics manufacturing economies in the region, will definitely benefit from that."