The market for Malaysia’s industrial automation vendors seem to have fallen into a state of idle uncertainty in which they will need to re-orientate and adapt in the market. Oil & gas, electronics and the automotive industries are facing rising costs and increased competition from neighboring markets. Albeit high investments in 2014, the focus is now leaning towards chemicals and refinement of petroleum. In this white paper, Solidiance screened 198 automation vendors in Malaysia with 10 in-depth interviews on the business outlook and future industrial opportunities. The survey showed that firms radically turn away from manufacturing sectors such as oil & gas, and instead see the future in processing industries, e.g. chemicals and food processing.

1. www.solidiance.com | 1
MALAYSIA’S
Automation
SectorPursuit of opportunities and shift of industrial investment
OCTOBER 2015
Solidiance has produced this white paper for information purposes only. While every effort has been made to ensure the accuracy of the information
and data contained herein, Solidiance bears no responsibility for any possible errors and omissions. All information, views, and advice are given in
good faith but without any legal responsibility; the information contained should not be regarded as a substitute for legal and/or commercial advice.
Copyright restrictions (including those of third parties) are to be observed.
solidiance

2. 2 | www.solidiance.com
ng interest in
3
4
Expected trends :
Solidiance's survey
with >190 automation
vendors revealed :
Petrochemicals
Industry categorization
per vendors' priority :
Relevance of aftersales market
Impulses from IT industry
Support from ETP program
High
expectation
Expected challenges :
Availability of personnel
Cybersecurity risks
Spare parts supply
Machine safety
Food & beverages
Chemicals
Stable
opportunities
Building &
infrastructure
Electronics
Building
automation
Have-been
Stars
Automotive
Palm oil
Pharmaceuticals
Oil & gas
k :
nues for 3-4 years
t 2-3 years
r to recover
g market,
estment
CTOR
Source: Solidiance
CONTENT
PAGE 3
PAGE 5
PAGE 17
PAGE 13
PAGE 4
PAGE 8
PAGE 16
Infographic
Conclusions
and outlook
Authors
Economic
and
investment
trends
About
us
Automation
vendor
survey
Executive
Summary

3. www.solidiance.com | 3
1
2
3
4
5
6
1
Slowing manufacturing growth in Increasing interest in
Oil & gas Palm oil Electronics Automotive
3
2
4
5
6
Expected trends :
Solidiance's survey
with >190 automation
vendors revealed :
Chemicals Petrochemicals
Surging investment in
Industry categorization
per vendors' priority :
Expectations VS
investment trends :
Petrochemicals Chemicals
Relevance of aftersales market
Impulses from IT industry
Support from ETP program
High
expectation
Expected challenges :
Availability of personnel
Cybersecurity risks
Spare parts supply
Machine safety
Downstream
processing
Falling investment in
Transportation Oil & gas
Food & beverages
Chemicals
Stable
opportunities
Building &
infrastructure
Electronics
Building
automation
Have-been
Stars
Automotive
Palm oil
Pharmaceuticals
Oil & gas
Future industrial outlook :
Investment in processing industries continues for 3-4 years
Upstream recovery in oil & gas : in the next 2-3 years
Local transport : restructure is needed, if ever to recover
Electronics : stable due to innovation, growing market,
continued investment
High expectation
Increasing investment
Petroleum
Petrochemicals
Chemicals
+
High expectation
Falling investment
Food processing
+
Moderate expectation
Stable investment
Electronics
+
Low expectation
Falling investment
Oil & gas
Mining
Palm oil
+
Pursuit of opportunities and shift of industrial investment
MALAYSIA’S AUTOMATION SECTOR
Source: Solidiance

4. 4 | www.solidiance.com
Executive
summary
The market for Malaysia’s industry suppliers has reached
a turning point. After years of stable growth, Malaysia’s
closely intertwined state and industry sectors seem to have
fallen into a state of idle uncertainty, forcing automation
vendors to re-orientate and adapt in the market. In this
paper, we examine a screening of 198 automation vendors
in the country, a subset of which was surveyed in-depth
on their views of their market and contrast these with the
latest industrial developments, namely the massive shift in
investment growth sectors.
The former core production sectors of Malaysia – Oil & Gas,
Palm Oil, Electronics and Automotive – are facing world
market plunge, rising cost and increased competition from
the neighboring markets, especially with the reduced trade
barriers of the ASEAN Economic Community (AEC) coming
into effect since 2015. Although investments were still up in
2014, they are massively changing their focus away from oil
& gas, automotive and other former key sectors, and towards,
for instance, chemicals and refinement of petroleum.
Industrial automation vendors question about where the
remaining opportunities are and which factors will affect a
moveinthemarket.Oursurveyshowsthatfirmsradicallyturn
away from the once “land of milk and honey” in the oil & gas
aswellastheir“breadandbutter”businessinmanufacturing
sectors, and instead see the future in processing industries
such as chemicals and food processing. Firms also see a
rising relevance of the aftersales business and believe that
positive impulses could also come from the IT industry.
Sector specific data partially confirms the future potential
seen by vendors in their newly preferred areas, yet also leave
a lot of questions open. At this point, it is hard to predict
how industrial investments and demands for automation
will turn out in 2015 and beyond. What is clear is that there
is not going to be a broad rebound of industrial growth
across sectors, but vendors must pro-actively seek for the
“pockets of opportunity” and prepare to offer their products
and services outside of their comfort zones.

5. www.solidiance.com | 5
Malaysia’s manufacturing has slowed in value as former core sectors cool down;
hence industrial suppliers need to look for new sources of growth
Manufacturing
turnover in Malaysia
Malaysia’s economy
Effect of currency conversion:
CAGR in MYR for 2010-2012
~8% and 2012-2014 ~ 6%.
Hence slowdown in domestic
currency is much more
moderate.
Economic and
investment
trends
Malaysia is one of the most
developed nations in ASEAN
and has shown in the past a
solid, industrial growth. It has
developed essentially in four
main industrial sectors:
• Oil & gas – large reserve
fields, mostly raw exports
• Palm oil – large
plantations, mostly raw
exports
• Electronics – the biggest
technically manufactured
export
• Automotive – for the
domestic market only
In recent years, the technical
manufacturing, both in
electronics and automotive,
has slowed down. Producers
and vendors of automation
goods and services must ask
themselves which sectors
in Malaysia can open future
opportunities and still hold
potential for growth at this
point.
There are some sectors which
may hold this potential,
especially one much discussed
recently that is the chemicals
and petrochemicals sector,
which now overlaps with the
petroleum / downstream
industry.
Source: Malaysian Department of Statistics,
Economist Intelligent Unit (EIU), Solidiance
Analysis
59
69
73 75 75
-
10
20
30
40
50
60
70
80
90
100
2010 2011 2012 2013 2014
BillionUSD
~11%
~2%
CAGR

6. 6 | www.solidiance.com
Malaysia’s approved investments (billion USD) Malaysia’s investments by sector, 2014 (billion USD)
There is an evident shift in the Malaysian
economy as downstream processing,
petrochemicals, and chemicals, see an
apparent surge in investments, while top
sectors such as transport and oil & gas
are falling in investments. The strong
increase in downstream processing
and petrochemicals are mainly due to
super large projects such as the RAPID
integrated refinery and petrochemicals
project worth 16 billion USD (invested over
several years). Electricals and Electronics
appear stable while other sectors form
a mixed picture. A strong increase is
also in the production of basic metals,
such as foundry projects. Buildings and
construction could not be recognized
here due to unrepeated reporting of
investments. Other manufacturing sectors
in total amount to roughly 4.3 billion USD
worth of investments.
Approved investments were ~74 billion USD in 2014. The main driver remains to be the service sector with almost ~47 bn USD of
investment. Notably, in 2014, the domestic investment had more impact to the economy, accounting for 72.6%, whilst the remaining
27.4% accounted for foreign investments. The investments recovered moderately fast after the economic crisis in 2008 and continued
to increase over the last years.
Malaysia’s manufacturing
investments were up 38% in
2014, but with a big shift in the
invested industries
There is evidently constant
rise of investments, but mostly
in the services sector
Malaysia’s former “stars” are
declining in investment, while
other sectors seem to see a surge
34.8
46.5
42.8 32.8
33.0
48.3
52.4
68.6
73.7
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
2006 2007 2008 2009 2010 2011 2012 2013 2014
46.7
22.5
4.5
Services Manufacturing Primary

7. www.solidiance.com | 7
Value of registered investment projects in
Malaysia for selected industries
Source: Malaysian Investment Development Authority, Solidiance Analysis
Note: *In the data we acquire, Petrochemicals are included along with Petroleum category, whilst in our survey, Petrochemicals are included in Chemicals category
**Oil & gas are not recorded under manufacturing investments
20142013
(ApprovedInvestmentsinUSDBillion)
1.9
3.1
1.8 2.1
1.7
1.4
5.9
5.0
3.5 3.4
1.8
3.1
0.9
4.2
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Petroleum and
Petrochemicals*
Electrical &
Electronics
Chemicals Transport and
Automotive
Basic Metals Food Processing Oil & Gas Mining
and Palm Oil**
Average stages of investments registered in 2014
- In production, as of 2015: 74.3% - Under Implementation: 8.2% - Planning Stage: 17.5%

8. 8 | www.solidiance.com
The activities of automaton
firms have been focused so
far on some of the technical
industrial sectors such as
electronics and automotive,
plus key processing industries.
About 80% of Malaysian
automation firms build
The divide between firms
giving a positive and negative
outlook sentiment reflects
the change of the automation
landscape. Firms are either
clearly positive - as they are
betting on the right sectors -
or negative as their industry
focus cannot capture the
current opportunities.
Automation
vendor survey
Over than 190 automation vendors were screened and surveyed on their
business location, expected trends and outlook
their headquarters in Kuala
Lumpur and Selangor region.
Automation firms in non-
central regions tend to be
focused heavily on technical
know-how and products suited
for the local industries, e.g.
electronics in the north region.
Malaysian Automation vendors’ presence
Malaysian
Automation
vendors’
presence
Malaysia’s automation vendor landscape
North
52
Central
192
South
36
South
East
9
North
East
3
0
1
2
3
4
5
6
Negative Slightly
Negative
Slightly Positive Positive
Current Business
situation
Business Outlook

9. www.solidiance.com | 9
0 1 2 3 4 5 6
Support from the ETP program
Impulses from the IT industry
Relevance of aftersales market
0 1 2 3 4 5 6
Availabilty of personnel
Cybersecurity risks
Spare parts supply
Machine safety
Expected trends*
Expected challenges*
*Trends Index based on weighted average
of interviewees’ answers. “Completely
Irrelevant” (0), “Less relevant” (1), “More
relevant” (2), “Completely relevant” (3) to
the question: “What are the most relevant
business trends in automation?”
*Challenges Index based on weighted
average of interviewees’ answers.
“Completely Irrelevant” (-1), “Less relevant”
(-0,5), “More relevant” (1), “Completely
relevant” (3) to the question: “What are the
most relevant challenges in Malaysia’s
automation sector?”
Solidiance Automation Vendor Screening
2015 : an analysis based on published
office presence of 198 listed automation
distribution firms in Malaysia and
represents an estimated 90% market share.
The aftersales market is becoming more significant to the vendors. Especially in partially
decreasing markets, maintenance and service are important business areas. The
availability of (local) engineering experts will be one of the main issues of the automation
industry while cyber security and the access to spare parts may be an upcoming challenge
as well.
Business Outlook of Automation vendors

10. 10 | www.solidiance.com
* Index based on weighted average
of interviewees’ answers. “Completely
Irrelevant” (0), “Less relevant” (1), “More
relevant” (2), “Completely relevant” (3) to
the question: “What are the future growth
sectors for Automation in Malaysia?”
Solidiance screened over than 190
automation vendors with 10 in-depth
interviews on their business outlook and
future industrial priorities. Based on the
survey, the vendors had radically turned
awayfromsomeoftheprevioushighprofile
sectors and bet on previous side-lines of
the business plus keep a few sectors in a
middle-field of preference. The industries
were grouped into three clusters :
1. “New hopes”, as these sectors appear
to have suddenly high expectations in
them
2. “Solid bets”, sectors that had
performed well in the past and could
be at least stable in coming years
3. “Fallen from grace”, large sectors,
once hailed motors of growth, seem
to have lost their importance here
While future investments are hard to
predict in these sectors, recent investment
records seem to confirm that the new
focus is on chemicals, while the decline in
coming investments, for instance, in oil &
gas, is evident shown by the low oil price.
Ranked automation
vendors’ priorities for
relevant industry sectors
The surveyed vendors
appear to re-orientate
themselves towards new
sectors, while still eyeing
manufacturing classics
The new priorities for
automation vendors – Solidiance
automation vendor survey 2015
“New hopes” “Solid bets” “Fallen from grace”
Food and
Beverages
Buildings and
Infrastructure
Building
automation
Palm Oil
(processing)
Pharmaceutical
industries
Oil & Gas
industry
Automotive
2
2.5
3
3.5
4
4.5
5
5.5
ElectronicChemicals
Averagevalueofindexedanswers*
Solidiance Automation Vendor Screening 2015 : an analysis based on published office presence of 198
listed automation distribution firms in Malaysia and represents an estimated 90% market share.

11. www.solidiance.com | 11
The top fields* designated
by surveyed vendors for
Malaysia vary in product
requirements, locality and
complexity
Note: *Highest ranking sectors by relevance index based on automation vendor survey, excluding infrastructure

12. 12 | www.solidiance.com
Industry Food & Beverage (Petro) Chemicals Electronics Buildings
ApplicationFamily
Processautomation
Productionautomation
Process automation Production automation
Process automation
Specific systems
KeyApplications
• Cleaningprocesses
• Cookingprocesses
• Fermentationprocesses
• Unitlabeling
• Unitpackaging
• Productquality
• Cracking processes
• Distilling processes
• Reaction processes
• Mixing and Blending
• Product quality
• Waste water
• Unit testing
• Unit assembly
• Unit stacking
• Unit packaging
• Product quality
• HVAC control
• Air flow
• Cooling / Heating
• Energy management
• Security
KeyProducts
• Processsoftware
• PLC,scada,HMI
• Smalldrives
• Sensors,relays
• Process software
• Scada, HMI
• Small drives
• Large drives
• Sensors, relays
• PLC, scada, HMI
• Small drives
• Sensors, relays
• Process software
• Scada, HMI
• Small drives
• Sensors, relays
KeyRegions
• CentralMalaysia
• Allotherregions
• Central Malaysia
• South Malaysia
• East Malaysia
• Central Malaysia
• North Malaysia
• Central Malaysia
• All other regions
ProductComplexity Low High High Medium
RiskReduction High High Medium Medium
SavingsPotential Low High High Medium
Process automation:
Refers to the automation of continuous “flowing” processes for
fluids, gases as in chemical processes, fermentation of beverages
or air cooling etc.
Production automation:
Refers to the automation of discrete “step wise” productions such
as in loaves of bread baked, number of chips tested, bottles of
beers filled etc.
Product complexity:
Refers to the variables that must be accounted for in the
automation and hence increase the cost of automation.
Risk reduction:
Refers to reduction of risk for human life and product liability,
effectively reducing company risk and cost of capital.
Savings potential:
Refers to lowered production cost i.e. by reducing downtimes and
labor, allowing faster amortization of the investment.

13. www.solidiance.com | 13
Conclusions
and outlook
Broadly, the vendors’ expectations are in
line with the growth of investments, yet
some sectors, such as F&B, are out of line

14. 14 | www.solidiance.com
Automation vendor priorities vs. investment trends
In 2014, certain sector investments showed significant faster
growth than others. This is, to a large degree, in line with the
new priorities of the automation vendors - assuming that trends
continue into 2015. This is at least likely for petroleum and
petrochemicals due to the state driven “super” projects that will
continue. Also, the chemical sector has had a significant increase.
For food processing, however, the data seems to contradict as
investments here are falling. This can be explained, for instance,
by either very new trends coming up just in 2015 or perceptions
unrelated to the investment trend. The neutral-to-positive stance
of the vendors on electronics make sense in light of the data as
well, as investment growth here is stable.
Theautomationvendorsurveywasnotabletocoverbasicmetalsas
a potential sector. While the super heavy processes of this industry
only partially fall under classical manufacturing automation, this
could indeed be an interesting field for future development.
Malaysian automation vendors’
industry ranking vs. investment growth
3
3.25
3.5
3.75
4
4.25
4.5
4.75
5
5.25
5.5
-75% -50% -25% 0% 25% 50% 75% 100% 125% 150% 175% 200%
Rankingbyautomationvendors
Investment growth in 2014
Vendors follow
investm
ent trend
Chemicals
Petroleum
and
Petrochemical
Considered equivalent in rank
Food and Beverage
Processing
Electronics
Transport
Oil& Gas,
Mining
and
Palm Oil
Two sectors are not covered :
- Buildings (insufficient investment data)
- Basic Metals (insufficient survey data)
Source: World Bank, Industry Data, Solidiance Analysis
Note: Separated Investment Data on Buildings insufficient for analysis

15. www.solidiance.com | 15
A closer look at three key
sectors of interest show future
potential that may exist but
should be given a differentiated
view
Sector opportunities
Vendors’ priorities make sense on a broad
level, but may need a reality check
While the new priorities of vendors on
chemicals and petrochemicals against
former top fields such as automotive and
oil & gas make sense, their optimism needs
to be validated. On food and beverage, the
flaming political announcements are not
backed by hard investment data and the
fantastic investment surge in petroleum
and petrochemicals is driven by a few large
projects.
Future industrial outlook
Trends are likely to continue in key
sectors
The government and joint-venture driven
investments in processing industries are
likely to continue at least for the next
3-4 years. In the classical sectors such as
oil & gas, upstream recovery is likely due
after 2-3 years when global economic
conditions favor higher energy prices.
The local transport industry will have to
restructureifevertorecover.Exportsectors
such as electronics will likely be stable as
innovation from regional headquarters
plus growing global technology markets
and stable domestic conditions will favor
investments.
How to win in the market
Thefactualmarketaccesswillcountmore
than ever in the automation industry
The growth in chemicals as well as
petroleum and petrochemicals are
dominated by super projects. This means
that few decision makers will steer
massive project volumes. Some companies
will emerge as winners while many others
will miss out.
Similarly, in small and not (yet) growing
sectors like F&B, the access and presence
in the underdeveloped market will decide
who wins when the sector takes off.

16. 16 | www.solidiance.com
Fabian Teja
Boegershausen
Manager
Fabian is a Solidiance’s Manager
responsible for their Malaysia
operation, based in Kuala
Lumpur, with over 8 years of
experience in research and
consulting. Fabian accumulated
his experience by playing
different roles across different
organizations, serving clients
such as Continental Automotive
and Siemens Industrial. He
earned his Master‘s Degree
in Financial and Industrial
Management from Karl
Franzens-University in Graz,
Austria.
Frederik Junge
Visiting Analyst
Frederik is a visiting analyst
based in Solidiance’s Malaysia
office, currently finishing his
degree in Sociology Politics
and Economics at Zeppelin
University, Germany. He has
lived in a number of Asian
countries including Nepal and
Malaysia. Prior to Solidiance he
has worked in several German
business consultancies where
he obtained insights on the
global expansion strategies of
fortune 500 companies.
AUTHORS

17. www.solidiance.com | 17
What we do
Soldiance is a corporate strategy consulting firm with focus on Asia
Pacific.WeadviseCEOsonmake-or-breakdeals,definenewbusiness
models and accelerate Asia growth. Through our 10 offices across
Asia, we provide our clients with a better understanding of intrinsic
regional issues. To learn more about how Solidiance has helped many
Fortune 500 & Asian Conglomerates to succeed in Asia, please visit:
http://www.solidiance.com/clients.
What we are focusing on
Our industry experience is centered on healthcare, industrial applications,
chemicals, downstream oil, lubricants and the automotive industry. Our Asian
market entry and growth strategy services provide the required insights and
the necessary roadmap to capture a profitable market share in the region.
Additional details
Solidiance has offices in China, India, Indonesia, Malaysia, Myanmar,
Philippines, Singapore, Thailand, UAE and Vietnam. We are fast expanding
and always on the lookout for exceptional people.
ABOUT
US

18. 18 | www.solidiance.com
solidiance
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