Beyond Robots and Machines

Automating Malaysia’s Manufacturing Sector

The year 2020 is shaping out to be a nightmare for the world’s economies. The COVID-19 pandemic has sent markets spiraling down to levels unseen since the 2008 financial crisis. It serves as an eye-opener to many as businesses find themselves faced with the necessity to automate in order to survive.

The movement control directed by the Malaysian government as an effort to contain the spread of the pandemic has virtually sent the manufacturing sector into a standstill. Factory owners are faced with a conundrum as workers are unable to be physically present at work. As a result, businesses can only operate at reduced capacities, if at all, leading to disruptions to production lines.

The current situation showcases the inherent vulnerability of the nation’s manufacturing sector that has been heavily reliant on labour-intensive industries. Automation allows for production lines to be more flexible, resilient and agile and given the state of things, the sector has to brace itself to transform and adapt for the future.

The Present

The manufacturing sector accounted for 22.3 percent of national GDP in 2019 – a 3.8 percent increase from 2018. Despite this, the percentage has remained stagnant since 2013, and the Government believes that for the sector to grow in value, it has to undergo a massive transformation.

Undeniably, the Malaysian manufacturing sector has evolved with the tides, incorporating automation with every shift of the various Industrial Revolutions. However, while automation may not be alien to the country’s manufacturers, its adoption and embrace has always been on the back burner.

Robotics, on the other hand, has entered the manufacturing scene since the Third Industrial Revolution. Malaysia’s manufacturing sector, specifically has started integrating robotic assembly lines for the past two decades.

According to the Readiness for the Future of Production Report 2018 published by the World Economic Forum (WEF), Malaysia is ranked within the top 25 leading countries well-positioned to prepare for global production paradigms that are about to take place in the Fourth Industrial Revolution. 

However, based on the FMM – MIER Business Conditions Survey, the adoption of Industry 4.0 related business strategies remains unexceptional. As of the first half of 2019, only 34 percent of businesses in Malaysia have adopted automation. Application of Industrial Internet of Things (IIoT), Big Data and autonomous robots remains preliminary, below 15 percent.

 The Future

The National Policy on Industry 4.0, more commonly known as Industry4WD is an initiative by the Malaysian Government to drive the technological transformation of the nation’s manufacturing sector. The ultimate aim is to increase productivity, enhance cost efficiency, and encourage capabilities in technology and innovation as well as to foster more high-skilled workers.

The policy outlines the nation’s aspiration to become a strategic partner for smart manufacturing and related services in the Asia Pacific region. Smart manufacturing refers to the adoption of high technology in the manufacturing ecosystem. Above and beyond the use of robotics and IT in assembly lines, smart manufacturing leverages, more than ever, on data analytics.

According to IBM, 1TB of production data is created by an average factory daily, but only 1 percent of the data are analysed in real-time. The integration of IIoT will enable an ecosystem in which data generated from different sources on the shop floor to be effectively transferred to a cloud platform. Through the application of AI and Big Data analysis, the enormous amount of data can be processed and transformed into knowledge.

With Industry 4.0, also comes the concept of industrial robotics. In simple terms, we are witnessing the rise of “smarter” robots. With the integration of AI, robotics can go beyond performing repetitive and routine tasks they are programmed for, albeit with great precision and accuracy, to enabling these machines a degree of intelligence which allows them to interact and respond to their surroundings.

Ultimately, it is meant to improve efficiency and quality of manufacturing process and output, making production lines more resilient and agile. 

Overcoming the Challenges

McKinsey & Company reveals that by 2030, automation could displace an equivalent of 4.5 million workers in Malaysia. In fact, a 2017 report by Khazanah Research Institute reveals that more than half of all current jobs in the country is expected to be disrupted with the rise of automation, with semi to low skilled workers having to bear the brunt of this massive change that await the Malaysian labour market.

This might be one of the factors to the slow adoption of automation in Malaysian Small and Medium Enterprises (SMEs). SMEs make up 98 percent of companies in Malaysia but only contributed 38.3 percent to national GDP in 2018, therefore the need for them to go for more effective means of production is inevitable and integral to realise the nation’s vision of becoming a high-technology and high-income nation by 2030.

The Malaysian Government, through Industry4WD strives to create inclusive programmes that will help cushion the risks present for SMEs.

These include the Industry4WD Intervention Fund. The Fund provides a matching grant for expenditures by the manufacturing and related services sector on intervention projects. Evaluation is based on the recommendations of Industry4WD Readiness Assessment (RA) Report which assess the capabilities and readiness of these companies to adopt emerging technologies.

MIDA is also helping push the automation agenda via its Automation Capital Allowance (ACA) targeted at two categories of industries which include high-labour intensive industries such as rubber products, plastics, wood, furniture, textile and other industries such as electrical and electronics and food manufacturing sectors. Its objective is to spur automation incentives among SMEs.

The Opportunities

According to International Federation of Robotics (IFR), the automotive industry applied the highest amount of industrial robots between 2016 to 2018. This is followed by the electrical and electronics, metal and machinery industries.

Malaysia holds 14 percent of market share in global automotive manufacturing industry. Frost & Sullivan expects that the local industry will continue on a positive growth for 2020, with 1 percent growth in sales to 608,790 units. The National Automotive Policy (NAP) which sets the target for industry contribution to increase to 10 percent of national GDP will be an added boost to the growth of the industry.

Automation is not foreign to the automotive industry. The use of collaborative robots, more commonly known as cobots, are utilised across the supply chain.

Designed to not displace, but work together with workers, cobots are easily set up and does not require complex programming. It makes for a suitable option for SMEs who have been hesitant to employ automation due to lack of technical expertise and finances. Given its scalability and flexibility, it acts as an alternative to traditional robots which were designed to do one task repetitively.

The pandemic serves as a reminder to businesses that the move towards automation is no longer an option, but a necessity. As Malaysia moves forward with aspirations to become a high-income nation by 2030, the manufacturing sector need to realise its potential to augment with technology in the face of an increasingly competitive and uncertain global market.