Flextronics set to make Malaysia a major EMS hub

FLEXTRONICS is determined to make Malaysia its electronic manufacturing services (EMS) hub.

With seven factories in Malaysia, the Nasdaq-quoted contract manufacturer emerged as the global leader in EMS this week after announcing its final quarter results by overtaking Solectron in sales.

Flextronics in Malaysia manufactures mobile phones, palm tops (PDAs), photocopy machines and other high-tech branded items made an operating profit of RM444mil, an increase of 14% from the previous year.

The company?s senior vice-president and management director Peter Tan said Malaysia was one of the more intense manufacturing locations for Flextronics globally and within the Asia-Pacific region.

According to Tan, Malaysia is an ideal and strategic location for high-volume electronics manufacturing and cost-effective production because of the availability of a well-developed information technology, communications, and logistics infrastructure at a lower cost structure.

"This essentially provides Flextronics a competitive edge within the EMS business community in the global environment and an opportunity for continuous growth,?? he said.

Currently, it has five manufacturing facilities and two plastics plants in Malaysia.

Singapore-based Flextronics initially began its venture into Malaysia in 1992 with the introduction of its flagship manufacturing plant in Senai, Johor.

In the past decade, Flextronics continued to accelerate its presence here with three more extension phases at its Senai site.

This was followed by the acquisition of several other factories in Malaysia.

Flextronics has aggressively invested in its manufacturing operations in Malaysia by acquiring the manufacturing facilities of original equipment manufacturers (OEMs) such as Ericsson, Xerox, Dovatron Industries, and JIT Electronics.

To complement and support its manufacturing operations, Flextronics has also established two plastics factories in Senai and Tampoi.

These factories specialise in plastic injection moulding, and produce plastic casings and enclosures for a variety of end products.

Tan said Flextronics in Malaysia had the competency and capacity to render a full spectrum of manufacturing services and solutions, which included mechanical and electronics engineering, prototyping, product introduction and industrialisation, printed circuit board assembly, materials procurement and product distribution.

The eventual goal of Flextronics through this rapid expansion is to potentially create an industrial park concept development facility in Senai, Johor, according to Tan.

"In Malaysia Flextronics has the diversity and technology to manufacture a wide array of electronic gadgets and devices ranging from consumer products such as computers, mobile phones and personal digital assistants (PDAs) to industrial products like satellite receivers and broadband access equipment," he said.

Among the major and global customers and partners of Flextronics in Malaysia are Sony, Ericsson, Hewlett-Packard, Handspring, Xerox, Motorola, Braun, 3M, Infocus and Planar.

With a positive outlook in line for Malaysia in the near future, Flextronics is set to make the country a major manufacturing and logistics hub for its global operations in the Asia-Pacific, said Tan.

Its net global sales amounted to RM13.1bil, up 6.6% from a year ago, for the quarter ended December last year.

The EMS marketing communications director (Asia-Pacific) Valerie Kurnaiwan said the company had worked hard to become the industry leader after eight years on the Nasdaq.

"We take great pride in the accomplishment. Flextronics will continue to be selective and only accept business that can provide a good return to our shareholders. So our focus will remain on earnings growth and improving our returns on tangible invested capital,?? she said during an interview.

Its other factories in the Asia-Pacific are in Singapore, China, India and Thailand.

The company is a global provider of operational services focused on delivering design, engineering, manufacturing and logistic solutions to branded technology companies.

With the December quarter results, Flextronics is currently the leader of the EMS industry in terms of revenue, profitability, working capital management, return on invested capital and market capitalisation.

"We are absolutely thrilled to have arrived at the top of the heap in our industry,?? said Kurnaiwan.

"We still have much work to do following our efficient performance keeping our inventory turns at the lowest."

She added: "Our focus will remain on earnings growth and improving our returns on tangible invested capital. In addition, we do expect to continue our leadership in driving costs out of the business by expanding our industrial parks, by relentlessly improving working capital metrics.

"At the same time, we are working extremely hard to expand the service offerings we provide, which allows us to create more value for the customer and thereby earn a higher level of return than can be achieved solely by competing on price. While this strategy is in place, there clearly is much yet to be accomplished."