The Silicon Valley model works here . . . but ever so slowly!

We were recently asked by MDeC, if there were MSC companies that followed the “Silicon Valley” model. What we found was interesting and indicates that although it takes much longer here, there are Malaysian entrepreneurs who have a regional and perhaps global reach.

Known as the “Eight Samurai” the early MNCs; National Semiconductor, Advanced Micro Devices. Intel and others led the techno-revolution in Penang. It would seem natural that Penang would birth “high tech” global companies, yet it has taken many years for candidate companies to emerge.

ViTrox Technologies Berhad

Listed on the Main board of Bursa Malaysia, ViTrox was first admitted to the ACE market in 2005. In 2015 on the back of RM160.29 million in revenue and the PBT was RM55.74 million. We asked CEO and co-founder, Chu Jenn Weng how he combined his interest in photography with engineering and he said; “After my internship at HP, I convinced my lecturers [at University Sains Malaysia] to allow me to do a project in machine vision. I continued to develop these skills and at HP, I spent five years designing machine vision inspection machines.”

ViTrox now competes on the global stage and their challenge is recruitment of the best engineers. They test for competence, capability and skills, but the final interview is done by Chu who says; “development is a team effort, so we need to make sure we get talented engineers, but they must have the right attitude – able to architect solutions and willing to play as a team.”

Research & Development budgets are a challenge for public companies

Vitrox sets aside about 15% of revenue for the development of new products – that’s substantial. R&D expenditure for 2015 was RM24.131 million, of which 94% goes to engineer salaries and expenses.

Liew Choon Lian, founder and CEO of MDT Innovations Sdn Bhd, a RFID solutions company also makes a large commitment to R&D. Still privately held with only 18 staff and 2015 revenues of RM108.34 million, their R&D spend was RM14.39 million, or 13.2%. COO, Sim Hon-Wei explained the high spend and said; “This is an emerging field. To constantly stay ahead we need to develop new products by exploring new methods, new parts and new materials.”

Aemulus Berhad is also from Penang

Aemulus was listed on the ACE Market of Bursa Malaysia in October 2014. Co-founders, Ng Sang Beng and Yeoh Chee Keong were colleagues at Altera Corporation in Penang. They decided to produce low-cost, fit-for-purpose testers for camera modules in phones in 2004 by “researching the products and building a new design architecture from scratch” said Ng.

Over the years Aemulus has moved up the value chain to produce chipset based testers. Initially it was a struggle to get customer acceptance, even from Penang based prospects. Ng says, “It’s easier now as we are better known and much of the decision making for tester products has moved to Asia - where the production centres are located.”

MDT Innovations Sdn Bhd

MDT revenues have grown steadily through providing “track and trace” services for crowd movements and assets. In 2003, MDT decided to focus on RFID systems, which is an expensive proposition. Although MDT is profitable, to fund their growth, they have raised about RM40 million from investors. Sim spoke about the importance of experience in his team; “Of the 13 engineers, including myself, 9 have been with us since 2001, that’s 15 years. This is an industry where design for production is a critical skill. It’s hugely expensive to commission a piece of silicon and so we need to be ultra-careful in the design process.”

Can you form a team first, then look for the right business frame?

Andrew Tiang founder of N2N Connect Berhad did exactly that! After a career with several MNCs, in different roles he decided to start a business. With the team settled on building an online trading platform for broking firms. In 2001, working with JF Apex, they bootstrapped the development of the product. They then pitched CIMB. The initiative was called iTrade@CIMB and allowed CIMB to develop the largest retail broking network in Malaysia. N2N went public in 2005 on Bursa's MESDAQ, now renamed the ACE market. N2N’s trading platform has been extended to handle derivatives, palm-oil commodity futures, forex trading as well as other asset classes.

In 2014, Nikkei Inc. and subsidiary QUICK Corp, a major Japanese information terminal provider acquired a major stake in the company. N2N intends to expand into the Pan Asia region and has been securing approvals from the exchange regulators. Tiang explained; “The exchange needs to 100% sure of the integrity of our system. We have approvals from all the major exchanges in the region including ASEAN exchanges, Hong Kong, Australia, Saudi Arabia, Kuwait and the Chicago Mercantile Exchange.”

The Malaysian eco-system seems to have reached a level of maturity

It is great to know that Malaysia as a clutch of technology companies that have expanded into the region, helmed by entrepreneurs who have accumulated considerable wealth, which they are using to seed new ventures.

++++ The full article, appeared in DNA under the title "The Silicon Valley model works here, but very slowly" https://www.digitalnewsasia.com/silicon-valley-model-works-here-very-slowly