UPDATE 1-U.S. tech firms in Malaysia up 2006 sales target http://today.reuters.com/news/articleinvesting.aspx?type=companyNews&storyid=115592+18-Jul-2006+RTRS&WTmodLoc=InvArt-L2-CompanyNews-2
Tue Jul 18, 2006
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KUALA LUMPUR, July 18 (Reuters) - U.S. tech firms in Malaysia raised their 2006 sales growth forecast on Tuesday, citing strong global demand for wireless devices, but warned that pricey energy could hit sales.
The Malaysian American Electronics Industry (MAEI), whose members produce about a quarter of Malaysia's electronics exports, said sales will rise 9 percent to 72 billion ringgit ($19.5 billion) this year, higher than an 8 percent growth forecast made in March.
Electronics are the backbone of Malaysia's $118 billion economy, with items such as semiconductors and DVDs making up half of total exports. Sales totalled 66 billion ringgit in 2005, unchanged from a year earlier, said the body which groups firms such as Intel Corp. (INTC.O: Quote, Profile, Research), Motorola (MOT.N: Quote, Profile, Research), Western Digital (WDC.N: Quote, Profile, Research) and Dell (DELL.O: Quote, Profile, Research).
MAEI's forecast upgrade comes after the Semiconductor Industry Association raised its 2006 global sales growth estimate for microchips to 9.8 percent from 7.9 percent.
But MAEI said soaring oil prices could dampen growth in Malaysia's main trading partners and crimp demand for Malaysian exports.
"The recent events of the Lebanon war and fuel price going up to more than $75 per barrel were not factored in. How this will impact consumer confidence is not very clear right now," MAEI Chairman Wong Siew Hai told reporters.
"For right now we think that the numbers will hold."
Almost all of the goods produced by MAEI firms are exported, mainly to the United States.
Malaysia is one of Asia's most open economies in terms of trade, with exports generating the equivalent of about 100 percent of gross domestic product.
Malaysian exports have been growing steadily, expanding 13.2 percent in May from a year earlier, defying concerns that high oil prices and a stronger ringgit currency would dampen demand.
But, the industry body said firms were grappling with higher electricity and fuel prices.
"MAEI companies have noted that Malaysia's attractiveness as a high-tech manufacturing location is affected by rising operating costs. The recent hike in oil prices and increase in power utilities costs have impacted the industry," MAEI said in a statement.
Malaysia raised electricity tariffs an average of 12 percent on June 1 and fuel prices by about a fifth in February.
Wong said the firmer ringgit had had a minimal impact on MAEI firms while higher interest rates had not deterred investment.
Capital investments by MAEI firms were forecast to rise to 3.1 billion ringgit this year from 2.8 billion ringgit in 2005, Wong said. Investment in design and development would rise about 24 percent this year from 1 billion ringgit in 2005, he said.
The key challenges facing the Malaysian electronics industry included a lack of suitably qualified engineers and improving the government delivery system, he added.
"We need to get talents in and we need to develop our own talents," he said. ($1 = 3.6840 ringgit)
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