GEORGE TOWN: Difficulty in recruiting local workers and the reluctance of youths to take up skills like machine tooling are posing challenges for companies like Penang-based Prodelcon Sdn Bhd.

The challenge is going to get tougher with the company’s plans to expand. Prodelcon, which has carved a niche in the precision tooling industry since 1985, is expanding by going into the manufacturing of surgical instruments, implants and life sciences equipment.

Prodelcon got involved in the medical devices field about five years ago. While still a small part of its business today, the company expects this sector to achieve double-digit growth in future. Prodelcon’s managing director Billy Ooi sees great potential in this field, all the more with the government’s plans to promote it.

“We believe that with the government promoting the medical devices sector under the Economic Transformation Programme, it is more stable compared to the semiconductor industry which has been fluctuating in recent years.

“The medical devices sector has potential to grow and we hope to expand this sector and also set up life sciences lab automation at the new plant,” said Ooi.

Prodelcon is building a new plant in Bukit Minyak on the mainland that will be double the size of its current 55,000 sq ft facility in Bayan Lepas on Penang island. The new plant will also double its capacity. The company is investing RM20 million-RM25 million on the land, equipment and building, and is scouting for a four-acre piece of land, said Ooi in an interview with The Edge Financial Daily. But getting the necessary workforce may prove to be tougher.

Foreign workers, most of whom are operators, currently make up 40% of Prodelcon’s workforce. Operators make up the largest group of employees at 60%, the rest are engineers and machinists.

To reduce its dependence on human labour, Prodelcon has invested in more sophisticated equipment that enabled it to automate 80% of its operations. But it is still not enough.

Ooi says part of the problem lies in the young.

“It will not augur well for the future as our youth are not keen to acquire skills by working their way up and learning from scratch, especially in the tooling industry which has great potential.

“I speak from experience as this is what I had to do when I was younger. If they have the experience working from the basics, they will make better engineers,” Ooi added.

Ooi underwent a micro machining apprenticeship programme after finishing his secondary school education in mid 1970s. In 1977, he left for studies in Ireland, and came back four years later to work as a quality control engineer with the subsidiary of a multinational company in Penang which was involved in supply tooling and moulding.

He called it quits after four years and decided to venture into the tooling industry with a partner, SH Chew, who had also worked in the micro-machining industry.

The two wrote a business plan and managed to obtain RM250,000 in funding from local companies to start their business in a 2,000sq ft shoplot at Sungai Pinang on the island.

From producing spare parts such as punchers, dies, gigs and fixtures for semiconductor companies in Bayan Lepas, they expanded to include high-precision machinery and assembly for radio frequency microwave and photonics and building automation systems.

Ooi said Prodelcon went through three recessions over the years but managed to remain resilient, survive and grow stronger.

From the rented shoplot, they moved to a small 15,000 sq ft factory at Kampung Jawa in Bayan Lepas in 1990.

In 1996, the company, which up to then had survived on small contracts from local companies, started getting contracts from MNCs.

That same year, Prodelcon collaborated with a Singapore company and another MNC to build moulds for auto moulding machinery.

Chew retired that year and Ooi took over as managing director. Prodelcon then joined forces with Jotech Metal Fabrication Sdn Bhd in a corporate exercise to be listed on the second board as Jotech Holdings Bhd in 2000.

In 2008, Jotech Holdings Bhd was acquired by AIC Corporation Bhd, a local semiconductor company located in Kulim, where Ooi was appointed as the CEO while at the same time he also helmed Prodelcon as the managing director.

Prodelcon is now wholly owned by AIC Corporation. The larger AIC has a workforce of 750 which produces integrated chip products that are supplied worldwide.

According to Ooi, the acquisition was driven by the synergy between the two companies — AIC is also involved in the semiconductor industry, doing assembly and tests.

Prodelcon, which has a 275-strong workforce, grew its revenue from RM37.5 million in 2005 to RM46.2 million last year. Surgical items contributed 10% to 15% of revenue. Prodelcon itself accounts for one-third of AIC’s revenue of RM160 million.

This year, Ooi expects compounded revenue growth of 10% as there is too much uncertainty in the global semiconductor sector. This is exacerbated by the shortage of parts and disruptions to the supply chain arising from the earthquake in Japan, the debt crisis in Europe, escalating prices of oil and gold, and the strengthening of the ringgit.

Despite these, the company is looking ahead.

“We are looking at developing some products and equipment with customers and radio frequency (RF) microwave products for foreign customers.

“We believe in developing our core competency and will focus on our four pillars namely precision tooling, automation equipment, RF photonics/microwave, and surgical implants and instruments, to provide integrated one-stop solutions for customers.

“We will also go into contract manufacturing with high-level assembly of surgical instruments and RF microwave devices,” he added.

He said Prodelcon is also looking for good companies it could acquire, especially strategic businesses that would complement what the company is doing today.

But the challenge of getting the necessary workforce is not far from his mind. Ooi said although he is very reluctant to move the business overseas, the company may not have a choice in years to come as it is getting even harder to recruit workers. Prodelcon has considered moving to neighbouring countries like China and Thailand but concluded that these countries were not ideal for its operations.

This article appeared in The Edge Financial Daily, May 9, 2011.