This article first appeared in The Edge Malaysia Weekly on September 11, 2017 - September 17, 2017

SUIWAH Corp Bhd’s wholly-owned manufacturing subsidiary Qdos Holdings Bhd may have missed out on the early years of the semiconductor boom, but it is making sure it will catch the next wave.

Like its parent, Qdos — which accounted for 62% of Suiwah’s pre-tax profit of RM13.66 million in the financial year ended May 31, 2017 (FY2017) — had adopted a cautious growth strategy. However, this is about to change as the flexible printed circuit (FPC) maker takes an aggressive step forward with a new manufacturing plant and a number of new product releases planned over the next few years.

“We have missed out on a lot of opportunities due to space constraints at our current plant in Bayan Lepas, Penang.  The two-acre facility doesn’t provide sufficient production space and without that, we cannot expand our capacity,” executive director Jeffrey Hwang Shin Hung tells The Edge.

The group will expand its operations to a bigger plant in Batu Kawan to meet the growing demand for its products. Production of molded interconnect substrates (MIS) and FPC, which are used in the telecommunications and automotive sectors, is expected to begin in November. MIS is an essential part of the integrated circuit (IC) package.

The new plant will occupy a 13-acre site, or more than six times the size of its current facility. The group will invest about US$30 million  on buildings and equipment in the first of six phases. The development of the remaining phases will depend on sales and other types of technology Qdos develops in the next few years. “When we hit 60% to 70% of capacity, we will start building the next phase. We are targeting to complete four phases within the next eight years,” says the 31-year-old Jeffrey.

He believes this is an exciting time for the group as it expands to Batu Kawan and moves closer to potential major customers.

“The [semiconductor] industry moves very fast. You need to have the investment done and the capacity when opportunity strikes. There is a lot of growth in this industry, but also a lot of expectations.

“So, you’ve got to grow fast, you’ve got to develop the technology fast, you’ve got to ramp up your production fast and you’ve got to make sure the cost and quality are also very well ensured. For semiconductors, customers want three things — smaller, cheaper and faster,” he says.

“When we expand to Batu Kawan, we will be six times bigger and can quickly unlock additional capacity at the plant. This is the strategy we are taking now — we’ve got to be more aggressive.”

Jeffrey admits that Qdos has been “a bit too cautious” in the flexible electronics industry that was booming 10 years ago.

“If you look at our Taiwanese counterparts, we were bigger than them when we were established in 1994, and a pioneer manufacturer of FPCs. Ten to 15 years later, they are 10 times bigger than us. If we had been more aggressive, we would have grown together.

“This market grew five times over the last 10 to 15 years, [but] Qdos probably grew by two times. The good thing is this is still a sunrise industry,” he says.

“We still have another wave of growth to ride on and we believe it is not too late for us to be more aggressive.”

The change in Qdos’ strategy is also attributed to Jeffrey, who joined the board in April 2013. As the third generation of the Hwang family at the helm, he has made it known he wants to move fast on decisions about Qdos’ future.

Jeffrey is the son of Datuk Hwang Thean Long, the managing director and major shareholder of Suiwah, known for its Sunshine retail chain in Penang. Suiwah is also in the process of developing the Sunshine Tower project on a nine-acre tract in Farlim, which will be one of the group’s earnings boosters.

“We (Qdos) introduced the concept of good-to-great during our 20th anniversary. No bad company can possibly survive for more than 20 years. As such, we should be looking at something more sizeable,” says Jeffrey.

“Instead of looking at ourselves as a RM100 million company, we should be looking at RM1 billion within the next 8 to 10 years. Then only we can get ourselves listed and have the capital to explore more technology advances,” he explains. A spinoff of Qdos on the local bourse could be a possibility in the future, he says.

Jeffrey believes a RM1 billion target is not overly ambitious as the combined value of the flexible electronics and semiconductor substrate industries is estimated at US$20 billion.

“We are very optimistic about the future of this industry. We believe that if we pour in enough effort, the rewards will be there. We have to do a lot of research and development, get the right talents in and make sure our execution is right.”

Qdos saw its pre-tax profit jump 91% to RM8.52 million in FY2017 ended June 30, from RM4.46 million the previous year, due to new project commercialisation, with a premium from higher technological value-add content undertaken by the group. Revenue rose 14% to RM91.45 million, from RM80.24 million in FY2016.

Meanwhile, Suiwah’s net profit grew 25.2% to RM9.55 million in FY2017 from RM7.63 million in FY2016, while revenue rose 5.7% to RM397.26 million from RM375.83 million.

In releasing its FY2017 results on July 28, Suiwah said Qdos is expected to remain profitable for FY2018, adding that the flexible electronics market continues to grow with the emergence of the Internet of Things, wearable electronics, Industry 4.0 and automotive electronics.

Suiwah’s share price has risen 19% from RM2.35 on Jan 4  to close at RM2.80 last Thursday, giving it a market capitalisation of RM160.3 million.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.