Growth Expected for Plastic Product Manufacturers

This is because their plastic components and plastic-sheet products are also used in the industrial electronics, automotive, medical, and power tool industries, and not just in consumer electronics.

Prestige Dynamics Industries Sdn Bhd and Cepco Trading Sdn Bhd, both based in Seberang Prai, are two companies that are expected to navigate the choppy seas of the consumer electronics industry with slight growth.

Prestige Dynamics, for example, is expecting to see a 5% increase in its revenue for this year, growing its revenue to RM42 mil from RM40mil in 2011. Cepco is also expecting to see a 5% increase in its revenue for this year from RM90mil a year ago, due to the demand for its plastic extrusion sheet products used in the industrial electronics sector.

Prestige Dynamics managing director Tan Wee Ming said the company's revenue for this year is projected to be around RM42mil, compared with RM40mil a year ago, due to the new business contracts secured early this year, when the consumer electronic market was starting to experience a downturn.

"These key contracts are coming from the US and Europe," says Tan.

The manufacturing of enclosure components for consumer electronics such as audiovisual equipment, one of Prestige Dynamics' core businesses, is slowing down due to economic uncertainty in many parts of the world. This core business generates 35% of the company's revenue.

Tan says contracts from automotive companies in the US and Europe will be key to boosting revenue for Prestige Dynamic this year.

"We are now making 6,000 to 10,000 sets of rear light guides per month for a major automobile brand in the US. Next year the production is expected to increase to 12,000 and 15,000 sets a month," Tan said.

Prestige Dynamics also secured a new contract earlier this year from a company in the medical device industry in the US.

"We are now supplying plastic casings and valves for respironic products. Currently, the production rate per month is 20,000 units. Next year the figure is expected to increase to 100,000 units per month," he said.

Prestige Dynamics also manufactures plastic parts for portable printers for the US and worldwide markets.

"This is another high-value product that will generate at 5% of the company's revenue for 2013," he said.

For the European automobile market, Prestige Dynamics is making the plastic parts for the sunroof systems of passenger cars and trucks.

"This is a high-value, low-volume, contract," Tan said.

He added that the company is also expecting an existing German customer, an internationally recognised power tool manufacturer, to increase orders for two-component moulded casings.

"Two-component moulded casings are enclosures made of two types of plastic raw materials. This is a core business, which contributes 30% of the company's revenue. Our customer's power tool business is expected to grow 20% next year," Tan said.

Prestige Dynamics is investing around RM15mil for a second production facility in Seberang Prai.

"The RM15mil plant, with 30,000sq ft of built-up area on a three acre site should be operational in mid-2013.

"It will have a clean room to produce plastic parts for medical devices.

"The plant will be equipped with an automated spraying line for painting automotive plastic parts, and also laser marking facilities for labeling automotive components. These facilities will allow us to expand our business in the automotive and medical device sectors," Tan said.

The company has also implemented a lean-manufacturing system employing IT hardware and software to enable the company to keep track on its orders for raw materials and the time taken to complete a product.

"The system helps us to reduce wastage, improve efficiency in the production process, shorten production periods, and ensures that products are delivered on time," Tan added.

Cepco director Jansen Lim Soon Hin said the group's business supplying acrylonitrile-butadiene-styrene (ABS)and engineering plastic resin to the multi-national corporations in the semiconductor and electronics industries is expected to drop by about 10% this year.

"This is a core business for Cepco, which generates about 60% of the group's turnover. Fortunately, our plastic extrusion sheet products for the industrial electronic sector, and printed circuit board assembly products for the light-emitting diode industry are up.

"These products, which generate the remaining 40% of the group's revenue, will help to boost revenue this year by about 5% from RM90mil a year ago," he said.

Lim said the group's plastic extrusion sheets are widely used in industrial electronic products for packaging electronic components such as capacitors which control power.

"Besides the industrial electronics sector, the food and medical industries also use our plastic extrusion sheets. Our plastic extrusion sheets come in rolled form or we can customise them to sit the customers' needs," Lim said.

Although ABS plastic resin prices have increased to US$2,300 (RM6,900) per tonne, compared with US$2,200 per tonne in July, it is hard for plastic resin product manufacturers to pass the costs on to customers, Lim said.

"This is due to the intense competition in the business.

"The price of ABS plastic has gone up because of rising oil prices, and not because of demand," Lim said.

Lim added that the group plans to relocate to Batu Kawan Industrial Estate in three years.

According to the latest IHS iSuppli Home & Consumer Electronics Service report, global consumer electronics market revenue is forecast to grow slightly by 1.3% to US$361bil from US$356bil in 2011.

The global electronic and semiconductor industries have worsened with the book-to-bill ratio standing at 0.75 in October 2012 (three month average basis), compared to 0.81 in September.

According to SEMI's latest book-to-bill report, North America-based manufacturers of semiconductor equipment posted US$743.2mil in orders worldwide in October 2012 (three-month average basis) and a book-to-bill ratio of 0.75.

The bookings figure is 18.6% lower than the revised September 2012 level of US$912.8mil, and is 19.8% lower than the October 2011 order level of US$926.8mil. A book-to-bill ratio of above one indicates that more orders are received than filled, and hence a strong market where demand outpaces supply.Similarly, a book-to-bill ratio of below one indicates weaker demand.