Malaysia’s Manufacturing: Sectors & Opportunities

One of Southeast Asia’s most discrete markets, Malaysia has long been a hotbed of activity in the semiconductor chip/electronics, automotive, oil and gas, medical device, and plastic and rubber segments. With a highly skilled workforce, strategic geographical positioning, and low cost, it is one of the most promising markets for global manufacturing.

Malaysia as a Manufacturing Hub

With manufacturing holding second place as a driver of Malaysia’s GDP (after its service industry), the country has been working on a transition toward being an industrial production economy.

Well known as one of the world’s biggest producers of rubber, Malaysia is also a leading producer of cocoa, palm oil, tropical hardwoods, pepper, tin, and palm oil as well as petroleum. These natural resources have provided a strong foundation for the country’s initial industrial activities and continue to play a significant role in its economy.

However, in recent years, there has been a noticeable shift in Malaysia’s industrial landscape. The country is no longer just an exporter of raw materials; it has successfully branched out into more sophisticated and diverse manufacturing sectors. This includes the production of transport equipment, non-metallic mineral products, and an impressive array of electrical, electronic, and optical products.

One of the standout features of manufacturing in Malaysia is its booming electronics industry. The country has become a key player in the global supply chain for semiconductors and electrical components, with many international tech giants setting up production bases here.

Another noteworthy aspect of Malaysia’s industrial sector is its growing pharmaceutical industry. With an increasing focus on healthcare and medical research, Malaysia is positioning itself as a hub for pharmaceutical manufacturing and research and development.

Manufacturing Industries Across Malaysia’s Regions

Manufacturing Industries Across Malaysia's Regions

  • Peninsular Malaysia (Selangor and Penang): Electronics, Automotive Manufacturing
  • Northern Malaysia (Perak, Kedah, Perlis): Building Materials, Rice Production, Solar Panel Manufacturing
  • Southern Malaysia (Johor): Palm Oil Processing, Food Manufacturing, Petrochemicals
  • East Coast of Peninsular Malaysia (Kelantan, Terengganu, Pahang): Textiles, Petrochemicals
  • East Malaysia (Sabah, Sarawak): Timber, Oil and Gas Industries

What Are the Advantages of Manufacturing in Malaysia?

As a country that has been rich in natural resources for many years, Malaysia has long been a player in the international trading markets. This has contributed to its growing, educated, middle class, who have a key advantage – it is a population that is proficient in English communication.

In addition to this, the regulatory and fiscal environment has been conducive to the growth of the manufacturing sector. In 2018, the Industry4WRD initiative created a financial support facility designed to promote Malaysia’s advancement in the smart manufacturing industry – namely for semiconductor chips, and other new technology services/solutions.

With a growing number of Special Economic Zones throughout the country, Malaysia offers many tax and customs duty incentives along with customs and trade facilitation, investment and infrastructural support, as well as access to skilled labor.

This, in tandem with a geographical location with good transport infrastructure, modernized ports, and a strategic position right above the port city-state, Singapore, makes Malaysia a highly attractive place for business.

What Are the Disadvantages of Manufacturing in Malaysia?

Despite all the benefits of manufacturing in Malaysia, there are some disadvantages. One of these is that the nation, while resource-rich, is not fully equipped with all the raw materials required for certain elements of machinery, automotive parts, and apparel. These need to be imported in at a cost.

Labor can be an issue – hiring and maintaining labor is a challenge faced across most of Southeast Asia. This can lead to lower productivity levels and a lack of competitiveness between manufacturers.

Inefficiency and higher costs of logistics can also be an issue when looking at Malaysia as the various Special Economic Zones function with their own regulatory attitudes.

Verifying Suppliers and Ensuring Product Quality in Malaysia

How do you get started with taking advantage of the opportunities Malaysia offers for manufacturing?

While there are challenges with any supplier anywhere, it is important to have someone on the ground who can support your manufacturing and business needs.

A third-party quality control company can ensure suppliers deliver the goods, on time, and to international standards. A local partner can:

1. Determine if suppliers are trustworthy through a Supplier Quality Audit and Supplier Verification Process;
2. Identify and eliminate quality defects in products before shipment through Quality Control Inspections;
3. Improve vendor performance through Supplier Management Solutions
4. Evaluate that suppliers meet the requirements and standards through Quality Management System AuditsManufacturing Process Audits, and Environmental Audits.

Supplier Audits in Malaysia

Starting with supplier verification in Malaysia, the first step should involve thorough background checks. This includes confirming the supplier’s official name, business registration, tax details, any certifications they hold, and their export capabilities. Visiting their production sites can give you a direct look at how they operate, treat their staff, and their commitment to safety and environmental norms.

It’s also key to verify if the supplier has a solid track record in producing the type of goods you need. Investigate their past dealings, request references, and check their standing in the industry. Ensuring they have the necessary expertise, equipment, production capacity, and skills tailored to your requirements is crucial.

A vital part of this process is evaluating their Quality Management System (QMS). Certifications like ISO 9001, ISO 13485, IATF 16949, AS9100, or ISO 17025, while not obligatory, can indicate a strong commitment to quality. A comprehensive QMS should showcase defined procedures for managing non-conformities, customer complaints, corrective and preventive actions, and ongoing improvement efforts. Establishing robust quality management systems and conducting regular supplier quality audits, either internally or via third-party quality assurance firms, is essential.

Product Quality Control in Malaysia

After selecting a supplier, continuous monitoring is essential to ensure consistent product quality. Third-party quality inspections in Malaysia are crucial, providing an impartial evaluation of product quality and the manufacturer’s adherence to your agreed specifications. These inspections help identify defects before shipping and generally include checks on materials, workmanship, functionality, packaging, labeling, and shipping marks.

Pre-shipment inspections are particularly useful in confirming that the products meet your quality standards and specifications. This step allows for the correction of any issues before the products leave the factory, helping to avoid costs and delays related to product returns or rework.

In cases where setting up a local presence is difficult, travel costs are prohibitive, or your team lacks experienced auditors, hiring a quality control agency in Malaysia can be a practical solution. These companies are knowledgeable about local laws, industry standards, and best practices, and can offer an unbiased evaluation of your supplier’s quality control processes and their compliance with your requirements.

About Us

With over 40 years of experience in the Asian markets, Pro QC International is an ideal partner for any business looking to take advantage of the opportunities provided by Malaysia as a manufacturing destination. Pro QC has maintained and grown its business by providing quality assurance solutions, engineering and consulting services in highly competitive environments by strategically adapting and making improvements in performance in line with market trends.