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22-24 May 2010

Malaysia: High costs hit electronics sector

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The outlook of the electronics industry is good in the second half of 2010 but it is facing a sharp increase in the selling prices of raw materials due to a serious shortage, which impacts negatively on the earnings of some companies, according to a report in the StarBiz, a local business daily.

Electronics manufacturers had to either pass on the costs to customers by increasing their selling prices or absorb the costs. Companies like Mini-Circuits Technologies Sdn Bhd, which are unable to pass on the costs, are already seeing a big dent in their profits.

The higher cost of raw materials coupled with a strengthening ringgit had eaten into the profits of Mini-Circuits Technologies.

“Both factors have eroded our profits by about 10 percent. It is hard to increase our selling prices due to the intense competition,” chairman and president Datuk Seri Kelvin Kiew told StarBiz.

“During the peak of the economic crisis, many producers of passive and active electronic components did not invest in increasing capacity.

“Thus when demand from contract electronic manufacturers in Asia Pacific suddenly kicked in, even the world's largest producers of electronic components were unable to meet it.

“The shortage situation started more than six months ago,” he said.

Passive electronic components include resistors, capacitors, and inductors, which do not have the ability to increase the power or amplitude of a signal, while active electronic components are microprocessors, amplifiers, and switches, which have the ability to raise the power of a signal.

Both are used in telecommunication and consumer electronic products.

A passive electronic component unit is normally priced between 3 US cents and 10 US cents, while an active electronic component unit can cost a few US dollars to over $100.

Since the shortage situation late last year, the prices of these components, especially active electronic components, had increased significantly by two to three times, depending on the type and function.

The shortage had also led to many electronic manufacturing companies having to extend their lead time, resulting in late delivery.


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