ASEAN Ascends: Malaysia – An Ideal Place for Smart Manufacturing
Smart manufacturing has emerged from integrating advanced technologies with manufacturing, which is pushing production processes towards a higher level of automation and connectivity. Smart manufacturing will be crucial for manufacturers to stay relevant and competitive, as well as allowing them to capture higher value‑added positions in the supply chain.
During a recent field trip to Malaysia, HKTDC Research visited Hong Kong‑headquartered manufacturer CVI Modern Technology Development Ltd (CVI Group). The Group specialises in plastic materials and chemical masterbatch manufacturing and trading, serving its corporate clients that are mainly located in Asian countries such as China, India, Vietnam and Indonesia. Based on specific requirements from these clients, the Group’s factory in Selangor produces packaging for manufacturing products ranging from foodstuff to medical equipment, with specific functions such as antifogging and odour barrier packaging.
The group relocated its production lines from Hong Kong to Malaysia in the mid‑2010s and has been digitising its operations to facilitate the use of the Internet‑of‑Things (IoT)1 to monitor factory operations, allowing real‑time and remote control of the production process. In an interview with HKTDC Research, Director of the group, Robert Yan, shared his experience on relocating his production base to Malaysia and how technologies are integrated into factory operations.
Malaysia an ideal place for expansion or relocation
According to Yan, the Group first considered relocating its production facilities when the US imposed anti‑dumping charges on Mainland China in the mid‑2000s. The company decided to move to Malaysia after assessing the suitability of relocation in various ASEAN countries. Outlining why Malaysia was chosen, Yan said: “Infrastructures are well‑developed compared with its regional peers and English is widely used. More importantly, similar to Hong Kong, common law is practised in the country, making administration work such as preparing and reviewing legal documents much easier.”
The company adopted a step‑by‑step approach to relocating, with older production facilities being the first to be moved. Explaining that the transition was smoother than anticipated, Yan said: “We expected that it would take about three months for equipment in Hong Kong to be installed in the factory in Malaysia and workers in Malaysia to be ready for production. But it turned out that the Malaysian factory was ready for operation in one month, largely due to the quick adaptation of local staff in Malaysia.” Speaking about the reasons behind the smooth transition, Yan noted: “It was due in part to the popularity of Hong Kong TV series and movies in Malaysia – Hong Kong cultures are largely understood by locals here, making management easier.”
Installing smart production lines and solar panels to save operation costs
For manufacturers, digital transformation such as the deployment of a variety of connected technologies can help maintain the output quality without the use of excessive manpower and can detect any irregularities through the production process. CVI’s factory in Selangor currently has about 50 staff to manage 10 production lines, with five of the older ones requiring manual monitoring on the use of chemicals for producing the plastic materials requested by buyers. The other five lines are more advanced, equipped with a programmable controller to ensure the chemical mix or the polymer is correctly inserted based on clients’ requirements.
All 10 production lines in the factory are digitally connected, so that managerial staff can have real‑time production statistics to understand the performance of the production lines, facilitating data analytics on the performance of production lines by comparing the expected performance with actual output statistics. The IoT system can also send alerts to management when it detects any abnormality such as malfunctioning of machines. In addition, production data can be accessed online, allowing managers to monitor the factory operation remotely, which was particularly useful during the Covid-19 pandemic when cross‑border travel activities were restricted.
These digitised production lines also increase worker productivity, requiring fewer people to monitor, which helps offset labour costs. As discussed in our previous article (ASEAN Ascends – Malaysia: Moving Up Along Value Chain), wages in Malaysia are relatively high compared with most of the ASEAN neighbour countries. Yan explained: “We automate our production processes, so that fewer workers will be needed to maintain the same level of production. This helps us address the high labour cost in Malaysia.”
Given that Malaysia is a Muslim‑majority country, Ramadan festivities in March‑April often create bottlenecks in production due to temporary staff shortages.2 When asked how the Group’s factory can address this issue, it was learned that mutual respect and understanding on cultural differences has helped the Group smooth seasonal bottlenecks. For instance, Muslim and non‑Muslim worker shifts are arranged to help account for leave during major holiday periods, such as Ramadan or the Chinese New Year, minimising production disruption.
In addition to the installation of smart manufacturing lines to lower labour costs, the company has also installed solar panels to generate its own electricity to support the factory’s operation since 2022. Yan said savings on the factory’s electricity bill is expected to cover the instalment cost of the panels within three years. Meanwhile, the installation also reflects the company’s long‑term commitment to Malaysia.
Hong Kong remains the Group’s headquarters
While the Group has relocated its production lines to Malaysia, Yan said that Hong Kong remained critical to its business, adding: “The Hong Kong office is responsible for sales operations, R&D and sampling based on clients’ requirements as well as handling the Group’s banking matters given that Hong Kong remains an international financial hub.”
According to Yan, the Group’s production lines were previously located in an industrial area of Hong Kong’s Tuen Mun district. The premises are now the Group’s R&D laboratory, leveraging the technical capabilities of staff in the Hong Kong office and proximity to the Group’s major clients, which are located in the mainland. Given that clients have unique requirements on plastic packages, the Group needs to develop samples by adjusting chemical substances for clients’ approval before mass producing them in Malaysia.
Another important function of the Group’s Hong Kong office is to handle finance matters. As sales orders are proceeded in Hong Kong, all business receipts will also be collected in the same office. Yan said that since most major banks in the city have a presence in Malaysia, this makes banking transactions between the two places more convenient. The Hong Kong office also plays a key role for the Group to secure bank loans for operations. Since lenders typically need to review borrowers’ financial backgrounds before approving loans, Hong Kong being the Group’s headquarters for more than three decades helps prove its creditworthiness.
Advice for Hong Kong manufacturers exploring expansion or relocation option
With the ongoing supply chain recalibration, recent years have seen more companies diversify their production bases, with the ASEAN region being popular for such movement.3 While mainland China remains the Group’s major market, Yan noted that as some of the company’s clients were relocating, this would also affect their operations in view of the geographical shift in the supply chain.
With last year marking the 10th anniversary of the Group’s factory in Malaysia,4 Yan gave three pieces of advice for those considering setting up production bases in the country. Firstly, recalling his experience of having multiple field studies in various ASEAN countries before setting up a production base in Malaysia, Yan noted that “understanding local culture” and “having on‑the‑ground observations” are very important, particularly for manufacturers, given that the factory operation will rely on local staff in the long run.
Secondly, for traditional industries such as plastics manufacturers, upgrading production processes by adopting emerging technologies and/or increasing product uniqueness by conducting R&D activities are essential in a technological‑driven world.
This complements the third piece of Yan’s advice, that adding “technical complexity” is crucial for manufacturers so that the products will be more competitive in the market, strengthening producers’ bargaining power. This is particularly relevant to those producing in Malaysia, given that its manufacturing costs are relatively high compared with regional peers, making it difficult for companies to compete by engaging purely in price competition.
1 IoT describes the network of physical objects – “things” – that are embedded with sensors, software, and other technologies for the purpose of connecting and exchanging data with other devices and systems over the internet. Some refer to IoT systems in industrial settings as Industrial IoT (IIoT).
2 March‑April can be a busy period for manufacturers as foreign buyers, especially those from the US and the EU, may start to place orders for their major shopping festivals such as Christmas and Thanksgiving.
3 See HKTDC Research (2025) – GBA Supply Chain Diversity: Enhancing Connectivity Among ASEAN, Hong Kong and Mainland China
4 CVI Modern Technology Development Ltd (2014) – Opening of Our New Malaysia Production Site.
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