Malayasia Falls Behind

MALAYSIA, once considered the preeminent electronics center for Southeast Asia, may have lost its early commanding lead. The labor-intensive aspects of assembling and testing semiconductor chips continue to increase in Malaysia. But experts wonder about this nation's ability to move up the ladder of electronic technology to make continued economic gains.

Malaysia's East Asian neighbors are seeking a greater share of the electronics business, including more-complex sectors.

``Memory is where the action is now,'' says Warren Davis, vice president of the Semiconductor Industry Association in Cupertino, Calif.

Over the past two years, South Korea has made noticeable gains in making 256K memory chips. It is also considered a key player in the DRAM (dynamic random access memory) arena. DRAMS are important features of new electronic products, including ``smart'' facsimile machines and high-definition televisions.

Several Asian nations would like to become manufacturing centers for more-complex devices, including 1m DRAMs and 4m DRAMs (chips with even larger memories) that are seen as cornerstones of advanced electronics in the 1990s, and new techniques such as wafer fabrication.

Officials here recognize that the electronics industry - which is credited with propelling not only Japan but Taiwan, Hong Kong, Singapore, and South Korea into greater prosperity - is undergoing an important change: Labor-intensive functions are being replaced by machines. Human hands can no longer implant the increasingly complex latticework of external leads into a computer chip. Automation is a necessity.

Two dozen multinational companies, based in Tokyo, the European Community, and North America, assign aspects of their electronic manufacturing to Malaysia. The state of Penang has emerged as the nation's chief producing region. Today nearly 40,000 jobs are directly linked to the fortunes of foreign-owned plants there.

Many foreign companies are concerned with the government's New Economic Policy, launched in the late 1970s to increase ethnic Malay participation in commerce. Rules mandating efforts to advance Malays have proved troublesome for the multinationals. This has hindered a leapfrog over back-end (labor-intensive) functions to more-skilled aspects of electronics manufacturing.

As a result, East Asian rivals began to look more attractive to the multinationals, especially since some were committed to serious technology education, thereby offering local low-cost talent. In response, Malaysia promoted a ``Look East'' program that openly courted Japan.

Most Malaysian electronic plants assemble integrated circuits. The business has grown dramatically, with some $2.6 billion of electronics exports in 1987 and $3 billion last year. Over the past 18 months, fueled by a global shortage of integrated circuits, Japanese companies led an investment surge that saw $225 million reaching this single sector in Malaysia.

``The danger for Malaysia is dependence on Japan,'' says Michael Borrus, chairman of the Berkeley Roundtable on the International Economy. ``She [Japan] will safeguard her assets and her own technologies.''

If Malaysia is to climb up the high-tech ladder, it should promote more relationships with other advanced producing countries, he argues.

The Japanese have only paid lip service to local requests for aid in developing a true science and technology infrastructure, Malaysians grumble.

The Japanese, they say, are reluctant to engage in licensing, or in other steps that would enable Malaysia to gain a greater share in the output of electronic products.