KUALA LUMPUR: KESM Industries Bhd (fundamental score: 2.35; valuation score: 2.4) will increase testing services for microchips used in autonomous or self-driving vehicles, capitalising on encouraging prospects of the global auto electronics segment.

Executive chairman and chief executive officer Samuel Lim Syn Soo (pic) said the group expects automotive microchip demand to pick up. He said self-driving cars are expected to hit the world market within the next decade.

“As such, demand for microchips is expected to grow significantly over the next few years,” he told reporters after KESM’s annual and extraordinary general meetings yesterday.

KESM has three semiconductor testing plants, which are located in Selangor, Penang and Tianjin, China.

Lim said the three plants are currently 70% to 80% utilised.

On capital expenditure (capex), Lim said KESM will invest more money in its business to maintain its competitiveness.

“I can’t provide you with an exact figure, but the average capex for the past five years was about RM60 million, and it will be more this financial year,” he said.

He said KESM’s capex for the current financial year ending July 31, 2015, might exceed the RM60 million average over the last five years.

From a broader viewpoint, Lim said the global semiconductor market has been positive, after recording a compound annual growth rate of 13% over the past three years.

He expects the trend to continue, although demand growth for microchips used in mobile devices and personal computers was expected to be flattish.

On the weakening ringgit against the US dollar, Lim said KESM conducts its business in the local currency, hence, it is not highly exposed to foreign exchange fluctuation.

According to notes accompanying KESM’s latest financials, its borrowings as at Oct 31, 2014 amounted to RM65.74 million. Of that amount, RM12.43 million is denominated in US dollars.

This article first appeared in The Edge Financial Daily, on January 16, 2015.