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UWC (5292) UWC BERHAD Tapping into 5G and AI

Overall, UWC is bullish on the semiconductor industry, as technology advancement will accelerate with the adoption of 5G and artificial intelligence.

AGAINST fears of a second wave of coronavirus in the US and other countries, some companies in the semiconductor supply chain are tapping on the upcoming trends in 5G and artificial intelligence.

One such company is UWC Bhd that has been receiving orders despite the lockdowns.

For the long term, it intends to move up the value chain in the semiconductor industry to produce more front-end products.

UWC also sees prospects in the life science sector and even if an effective vaccine against the coronavirus is found, priorities on safety and health will ensure continued usage of healthcare-related equipment.

During the lockdown in China, the group did get some diversion of jobs from existing customers, which they accepted and are in the midst of delivery; it also received more enquiries from new customers.

With a plan to increase capacity, UWC is hiring engineers but finds that talent is hard to come by, even though there are so many unemployed people.

UWC's Marting Ng

UWC's Marting Ng

With the movement control order (MCO) period coming to an end and worldwide businesses gradually resuming, the group expects stronger sales from the second half onwards.

During the MCO, UWC was restricted to operate at 50% capacity which had resulted in a slowdown in work for March and April.

But it still managed to grow its revenue and profit after tax, year-on-year, by 45.7% and 65.9% respectively for the third quarter ended April 30.

Demand has been exceeding supply and despite the current disruption in the supply chain, UWC is able to meet a big portion of the demand.

Things will further improve when the MCO is lifted, and the Malaysian economy is on a gradual path of recovery.

As supply chain operations rev to full force, UWC’s operations will also reach 100% capacity.

The completion of work that has been backlogged will neutralise the weaker output during the MCO period.

High demand

“We are optimistic that this high level of demand will sustain into the future, ’’ said UWC deputy CEO Matin Ng.

Orders for the semiconductor sector remained strong during the MCO period, with no cancellations to date.

The group did incur higher operating expenses such as logistic costs, as well as expenses related to its production and standard operating procedures in sanitisation.

Overall, UWC is bullish on the semiconductor industry, as technology advancement will accelerate with the adoption of 5G and artificial intelligence.

Major countries are investing more into the semiconductor industry which is one of the foundational technologies that provides the edge in innovation.

The group’s strategy to produce more front-end products will help garner higher profits and margins.

More orders are also expected from the life science segment, where UWC is working closely with a new client to develop Covid-19 related equipment.

The life science business grew 6%, quarter to quarter; it contributed 20% to the latest quarterly results.

Amidst ongoing efforts to expand its customer base for the life science business, a second wave of coronavirus will potentially increase orders for its Covid-19 related test equipment and components.

Even if an effective vaccine is found, laboratory tests will still be conducted to enhance the effectiveness of the vaccine, or to detect any potential mutation of the virus.

“We ventured into the life science business a few years ago, and this has proven to be a very stable business for the group, ’’ said Ng.UWC has 830 employees and plans to hire more engineers, in line with its expansion plans.

But amidst the bullish outlook on its businesses, its biggest challenge is to search for the right talent, especially following plans by multinationals to set up factories in Penang.

To create its own pipeline of talent, UWC is providing scholarships and working on the matter with institutes and universities.

The group aims to increase automation processing to reduce the usage of human capital and the likelihood of making errors.

Industrial robotic arms and collaborative robots or cobots are used on the production floor; due to the ramp-up in business, UWC has bought three units of automated material handlers instead of one, as stated in its listing prospectus.

More analytic software is being used; liquid crystal displays showing live data are installed on the production floor and computers or tablets are attached to machines for machine or shopfloor integration.

“We are on track to become a visual factory, ’’ said Ng. “With just the tip of a finger, we are able to access our systems to track overall equipment effectiveness and machine performance.’’

With the data extracted from the machines and integrated with its cloud system, it is able to perform big data analysis.

During the lockdown period, UWC had requested for video conferencing to carry out the process of qualifying products.

This minimised disruptions to its operations, as it continued to receive enquiries from new and existing customers.

While its semiconductor supply chain and life science businesses are picking up momentum, the group is actively pursuing its goal towards higher automation and efficiency.

The views expressed here are the writer’s own.

https://www.thestar.com.my/business/business-news/2020/06/29/tapping-into-5g-and-ai
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