IR4.0 expected to benefit the technology sector

This article first appeared in The Edge Financial Daily, on October 17, 2019.
IR4.0 expected to benefit the technology sector
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Technology sector
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We attended the International Conference on Industry 4.0 (IR4.0) held by SEGi University on IR4.0 enablers, such as simulation, augmented reality, artificial intelligence, cloud computing and big data analytics, as well as the blockchain technology.

We came away with a few key takeaways. Among the key challenges of implementing IR4.0 shared by the speakers are: i) a lack of skills and resources (no “deep pockets”) with the use of autonomous robots and smart manufacturing at only 7.4%; ii) risk management and compliance concerns (such as those regarding cybersecurity and data protection); iii) finding the right technology partners; and iv) enduring executive support and leadership.

There will be income tax exemption for 70% to 100% of statutory income for five to 10 years. Unabsorbed capital allowances and accumulated losses incurred during the pioneer period can be carried forward and deducted from post-pioneer status of a company.

Furthermore, there will be an allowance of 60% to 100% of qualifying capital expenditure (capex) (factories, plants, machinery or other equipment used in an approved project) incurred within five to 10 years from the date the first qualifying capex is incurred.

There will be an expansion of the Automation Capital Allowance (ACA) to cover the service sectors for the first RM2 million and an extension of the existing ACA until 2023.

Several presenters also stressed the importance of authenticity in the medical space. With more than 250,000 children suffering from the consequences of counterfeit drugs each year, there is increasing demand for a decentralised data recording ledger that is immutable to ensure that the data provided by the entire supply chain of medicine is dependable. Non-fungible tokens serve as an excellent solution in this case as patients would be able to track the data of a specific pack of medicine before consuming it.

The application of the blockchain technology is still in its infancy and often faces scrutiny from regulators as we currently see in the case of N2N Connect Bhd’s rocky journey in developing a blockchain-enabled exchange. However, we are positive that Budget 2020 has allocated RM25 million for digital application pioneer projects, including the blockchain technology. With developers and regulators working hand in hand, we believe the adoption of the blockchain technology can improve the economy and social welfare by amplifying the technology’s main reason for existing — to promote transparency.

Although challenges exist, we note that the newly launched Shared Prosperity Vision 2030 is also in line with efforts to ensure that the requirements of IR4.0 are met through upskilling of labour with the creation of higher-value-added jobs in manufacturing and services through technology and automation.

We believe equipment makers such as Greatech Technology Bhd (“unrated”) and Pentamaster Corp Bhd (“unrated”) may see direct benefits from the move towards IR4.0 given their expansion into providing factory automation solutions. We believe the move towards IR 4.0 would benefit not only the technology sector but other sectors as well in the long term. — AmInvestment Bank, Oct 16