From silicone to carbon nanotubes to graphene, Penchem emphasises R&D because Ng is not interested in competing in low-margin, over-competitive markets — he wants to blaze a trail.
These are exciting times for Penchem Technologies Sdn Bhd, the homegrown company founded by Dr Ng Chee Mang. The firm, which started out specialising in epoxies, plans to roll out advanced materials such as silicone and graphene next year and take on the big boys globally.
Long before the government announced its plan for graphene, little-known advanced materials company Penchem Technologies Sdn Bhd already had the wonder material in its sights. Its founder and CEO Dr Ng Chee Mang had been working on carbon nanotubes (which is basically graphene rolled into a tube), so it was a natural progression to look at what graphene could do.
Graphene is a single-atom thick layer of carbon, described as the strongest (200 times stronger than steel), thinnest and most pliable crystal, as well as the best electrical conductor known to man.
Malaysia only announced its National Action Plan on graphene in July, but Penchem, which has been conducting R&D on this wonder material with Professor Abdul Rahman Mohamed of Universiti Sains Malaysia (USM), will be rolling out its various graphene-related applications in about six months’ time.
Because, as Ng puts it, it is not about the graphene (which has been around since 2004), but its applications. And that’s what Penchem has been working on.
Ng recently returned from San Francisco where, along with a Malaysian delegation of companies under the Malaysia External Trade Development Corp (Matrade) banner, he exhibited at Semicon West 2014 and received the highest number of inquiries about its graphene ink. Having met the potential customers, Ng believes the number of orders could be quite substantial.
In fact, he is sure of it. On a trip to Shenzhen to source for bargain materials, he found a UK company selling graphene ink in “liquid paper” tubes, which cost about RM40 each. “We can easily halve that price,” he says.
Penchem is working on a line of 3D printers that will use graphene ink so that users can print out their own circuits. Printed circuit boards currently use copper, which is relatively expensive, or silver, which is really expensive. If they find a way to replace these metals with graphene or a composite of graphene and silver or copper, the cost can be brought down substantially.
But for Penchem, which is probably the only advanced materials company in Malaysia, graphene is only part of the story. It has also been working on carbon nanotubes (graphene rolled into tubes) and silicone.
What are carbon nanotubes? They are large molecules of pure carbon that are long, thin and shaped like tubes. As individual molecules, nanotubes are 100 times stronger than steel and one-sixth its weight. Some carbon nanotubes can be extremely efficient conductors of electricity and heat, depending on their configuration, and can act as semiconductors.
Basically, Penchem was looking for an alternative to synthetic epoxies to put into high performance chips, which generate a lot of heat. The heat has to be offset, or else the chips will melt or break down. So instead of using glue, Penchem was looking at carbon nanotubes, which displace the heat in a chip more effectively.
The research into carbon nanotubes was partly funded by Collaborative Research in Engineering, Science and Technology (Crest), and was conducted by Penchem, Polytool Technologies and USM. They were looking to grow carbon nanotubes on the IC plating. The challenge was to grow the nanotubes evenly so they displaced heat properly.
From carbon nanotubes, it was a natural progression to graphene. “Carbon nanotubes are actually graphene grown into a tube. When you open up the tube, it becomes a flat sheet. So that is graphene, and it has new applications,” says Ng.
None of this may sound interesting or awe-inspiring until you remember that Ng started Penchem with nothing but the few coins in his pocket and the shirt on his back after a relatively cushy job at Hewlett-Packard (HP). Going from a paid employee on an upward trajectory in a relatively stable electronics firm to starting something from scratch with no idea of how to do it, takes some guts. And this he has in spades.
Ng has a restless mind, constantly inquiring, reaching for something new and better. For him, the worst state of being is complacency, which he had slipped into at HP, where he stayed 15 years, moving up through the ranks pretty quickly owing to his ability and drive. And he enjoyed himself along the way.
“When you are in that environment and your salary keeps increasing, and you have a lot of friends because there are 4,000 people in the country, the job is not too tough, and you get to travel, well, it’s a lot of fun,” he says.
Ng started out as an engineer. He was promoted to specialist engineer within a year and section manager within two. Four years later, he was department head. Yet, he was feeling restless.
“After all, what had I achieved after so many years? I found I was just caught up in the current and everybody was basically doing just the same thing,” he says.
The final push was news that HP would no longer exist in its original form — all its business not related to computers, storage and imaging would be spun off to form Agilent.
“I left the company while it was still HP. I told myself that if there were going to be changes in my life, I would be the one controlling them. And I wanted to test myself. How would I be at managing my own company?”
And so Ng started Penchem, manufacturing epoxies by himself. Without any relevant experience or proper start-up capital, he pounded the pavement looking for customers. He managed to attract the interest of those in the construction and boat-building industries because, as he modestly puts it, “… their quality standards were not so high”.
He says, “At the time, we didn’t make the epoxies ourselves. We bought the raw materials — the epoxy resins and fillers — from various suppliers and compounded them to make the finished product.”
All Ng’s capital went into getting a factory in Permatang Tinggi in Penang, a low-lying area that got flooded every couple of years and was notorious because of a train wreck that occurred a few years back when a school bus attempted to cross the tracks and got hit by an oncoming train.
Having very little money left, his initial equipment was extremely basic. “My mixer was an electric drill, costing something like RM200, to which I fitted with a stirrer, the kind that you can buy from any hardware shop. I used this to mix the epoxy resins and fillers in a plastic container,” he says.
His PhD in chemistry came in handy here. He experimented with the different ingredients to see which mixture would cure and harden well. And that’s what he sold to customers.
Ng started out in 2000 as a one-man show, doing everything from sales calls to production himself. Six months in, he hired his first operator. “When I started the business, I went into it because I needed to earn something so that I wouldn’t starve. But I moved up the value chain almost immediately and within a year, I was selling to the construction industry.”
But it was very competitive and there were low barriers to entry; almost anyone could imitate his formulation and sell it for less. He soon realised that the business was not sustainable because the margins were narrow and the industry too competitive.
So he branched out into epoxies for electronics. “I started out with adhesives for smartcards — you know, the glue you use to stick the integrated circuit to the smartcard. And I moved up, bit by bit.”
Ng was able to reach break-even 1½ years later. “We didn’t have heavy overheads. There was just me and one or two other operators.”
As the company grew, he was able to hire more people, but it was a while before he could afford a graduate. “It was four years before we could hire our first graduate from USM, a quality engineer who was going to help me get ISO 9000,” Ng says.
His customers had been clamouring for the company to get certified. At first, this annoyed him. “I thought, we have been doing our work so well, how can they accuse us of not having a system?”
But eventually, he understood. His customers were multinational corporations (MNCs) and it was important for them to only deal with suppliers that had been properly certified.
“We needed certification to show our customers that we actually had quality standards. So, we got an engineer and a grant from Sirim and at about the same time, we hired our first R&D staff.
“But those were tough times and we could not afford to pay them much. So the moment we got our ISO 9000 certification, they left and joined an MNC and we had to start all over again,” Ng says.
When he hired his first two graduates, something shifted inside him. “That’s when I realised that people are key, and we need to have quality people. The operators can help you in the production processes, but we needed people to manage that production, to help in R&D, to manage the company’s finances.”
Before this, Ng had been doing everything himself and the crazy, hectic lifestyle this called for was starting to take its toll. “I stayed late every day. In fact, I never really went home.”
He realised that he needed managers to move some of the responsibility off his shoulders. “First, I needed to hire engineers whom I could promote to managers in a really short period of time, say one or two years.”
But how do you retain managers when you are a small company competing against large MNCs for staff? “The first thing is salary,” says Ng. “You have to make them comfortable that you are paying them enough so that if they compare with their friends in the MNCs, it is not too far off. Also, I give them a lot of freedom to make decisions, although sometimes I have to turn around and bite my nails because when you give away so much responsibility, mistakes are bound to happen.”
There are two ways of handling this. One is to jump in immediately and try to fix it. The other is to stand aside and allow the mistake to happen. “Sometimes they have to learn it for themselves, the way I did. When you do things yourself, you make mistakes and then you learn.”
One of Ng’s favourite success stories where staff is concerned is Rafiza Ramli. “After my first R&D engineer left, I recruited other R&D engineers, and Rafiza was one of them. I recruited her from USM’s School of Materials Engineering. I was very fortunate because she already had a master’s degree.
“A few years later, we asked her whether she would like to do a PhD. We were developing a new product, silicone, and I didn’t have any specialised knowledge in that. We knew it could be done, but you would need to invest time and effort to study it. So I asked her if she would do her PhD in silicone at USM and develop a line of products, and she agreed,” he says.
Next, Ng went to the university to see who could oversee her doctorate, but found no one specialising in exactly what he wanted. However, a lecturer, Dr Zulkifli Ahmad, who specialised in organic synthesis was willing to give it a go.
“He had the chemical expertise and our engineer was willing to work with him. That was about seven years ago. Now, we have a big reactor making silicone at our plant. It churns out almost eight tonnes of silicone per month. Our engineers actually built the reactor and we’re currently sampling customers,” Ng says.
Silicone is big business. The major players worldwide are Dow Corning (US), Shin-Etsu (Japan) and Wacker Chemie (Germany). Penchem will effectively be going head to head against them, and Ng wants to carve out a niche for himself, possibly in light-emitting diodes (LEDs), because he has already worked with some companies in the industry.
“Right now, I have a team of chemists who can actually tailor the molecule to the shape that we want. As a result, we can get the performance that we want. So for the LEDs, we can compete.
“To manufacture glass, you need high temperatures of say, 1,000° Celsius. With our technology, we hope we can process glass at lower temperatures, say 150°.”
Penchem emphasises R&D because Ng is not interested in competing in low-margin, over-competitive markets — he wants to blaze a trail. With this in mind, almost 40% of the company’s profits get ploughed back into R&D. And this is why it will become one of the first companies in Malaysia to come out with products related to graphene and carbon nanotubes, for which he has already secured overseas buyers.
How did Penchem go from merely epoxies to more advanced materials? It took a near-death experience for the company in 2008 to push it up the value chain.
“One of our suppliers closed their production of raw materials and we could not buy enough of that material to make our epoxies. So, we were unable to supply it to a customer and lost its business for a year.”
With less revenue coming in, Ng was forced to borrow money to keep the company afloat. But banks were reluctant to deal with electronics companies at the time, as well as anyone who had anything to do with such companies. As these were Penchem’s main customers, the banks closed their doors to him.
He was almost at his wits’ end, but his finance manager came up with a creative, albeit risky, solution to tide the company over temporarily. “She took me to a number of banks and I borrowed money on my credit cards. In 2008, there were no restrictions on how much you could borrow on your credit card. This kept us afloat for a month until we got back some business.”
It was a hard lesson, but a necessary one. “We had depended so much on outsiders for raw materials that when they cut off the supply, we were stuck. I wondered why we had been so stupid. Because even when they were supplying us with the material, it was clearly not their best, which they kept for themselves. And if we didn’t have the best raw materials, how could we be the best in what we do?” Ng says.
This was the turning point. Penchem went from being an assembler of other people’s raw materials to a developer of its own raw materials using the latest technology. “It got our people excited and they were willing to stay on with the company to create new materials and new technology,” he says.
While much of the story is aspirational, Ng is first and last a typical Penangite. He has solid financials to back up his story and his expansion plans. Not bad for a guy who started with nothing and was able to rake in RM500,000 within two years.
Last year, Penchem made RM5.6 million and this year, it is pushing for RM9 million. Next year, with the introduction of its silicone and conductive materials products, it is expecting to see revenues of at least RM20 million.
This is not merely a wish, Ng says. “We have customers in the pipeline that are almost at the end of our qualification cycle.”
Although he is unwilling to divulge who these customers are, he says they are large overseas companies, and that these products are too advanced for the Malaysian market at the moment.
And so this quiet company, which has been toiling away in relative obscurity for so long, is about to leap out onto the national consciousness. Most people will be impressed by the graphene or its international markets or the fact that the company will be doubling or tripling its bottom line, but it is mainly a story of one man’s gumption and his ability to work with what he had to create — something solid, lasting and innovative.