MINISTRY OF INTERNATIONAL

TRADE AND INDUSTRY

draft
NATIONAL INDUSTRY

4.
POLICY FRAMEWORK
 what’s

INSIDE
02 acknowledgement

global OVERview
12 The Inevitable Transformation
14 Driven by Multiple Factors

16 Advancement and Convergence of Technologies
18 Competitive Response by Nations & Lessons Learned

CASE FOR ACTION
22 Importance of the Manufacturing Sector in Malaysia
26 Need to Embrace Industry 4.0

27 Propelling SMEs Forward
28 Malaysia’s Readiness for Industry 4.0
30 Addressing Malaysia’s Issues & Challenges

MOVING FORWARD
36 Policy Objectives

38 The National Framework – My-i4.0
44 Strategic Enablers & Actions
64 Implementation Approach

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No part of this document may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording
or otherwise, without prior permission from Ministry of International Trade & Industry (MITI). The information in this document has been updated as accurately as
possible until the date of publication.
 NATIONAL INDUSTRY 4.0
02 POLICY FRAMEWORK

acknowledgements
Due to the breadth and depth of the manufacturing industry, this document
is prepared through consultations with multiple ministries, agencies and
industry players. The topics covered are linked to Malaysia’s business and
competitive advantages and the drivers, potential disruptors and technology
developments in the manufacturing industry.

This document targets a range of stakeholders, with the aim of encouraging manufacturing firms to work
with the entire manufacturing ecosystem to address the challenges and act on the identified enablers.

TECHNICAL WORKING WORKSHOPS INTERVIEWS

GROUPS
A series of workshops One-on-one interviews
Technical working groups were held to bring together were held with top leaders
were created led by government ministries, within the manufacturing
respective ministries and agencies, manufacturing firms industry to supplement,
agencies in the identified from a range of sectors as test and refine the
focus areas to facilitate well as representatives from workshop outputs.
discussion amongst the the education and research
stakeholders. community to discuss future
opportunities and needs of the
manufacturing sector over a 10
year horizon.
 03

Technical Working Groups Lead

Ministry of Communications & Multimedia Ministry of Finance

Ministry of Higher Education Ministry of Science Technology & Innovation
Ministry of Human Resource SME Corporation Malaysia

Contributing Organisations

Agensi Innovasi Malaysia (AIM) MARA Aerotech

Akademi Sains Malaysia MIMOS Bhd
American Malaysian Chamber of Commerce (AMCHAM) Monash University Malaysia
Bank Negara Malaysia MPU University
Collaborative Research in Engineering, Science and Technology (CREST) Multimedia University (MMU)
DreamEDGE Sdn Bhd Nano Malaysia
Economic Planning Unit (EPU) National Instruments
Federation of Malaysian Manufacturers (FMM) National Professors Council (MPN)
German-Malaysian Institute (GMI) Penang Skills Development Centre (PSDC)
Hanhwa Q Cells Petroliam Nasional Bhd (Petronas)
Honeywell Siemens
Huawei SILTERRA Sdn Bhd
IAT Solutions SIRIM Bhd
Infineon Standards Malaysia
Intel Strand Aerospace Malaysia
Invest KL Taylor’s Universtiy
iPlast Universiti Kebangsaan Malaysia (UKM)
Linde Universiti Malaysia Perlis (UniMAP)
Malaysia Automotive Institute (MAI) Universiti Malaysia Sabah (UMS)
Malaysian Communications and Multimedia Commission (MCMC) Universiti Pertahanan Nasional Malaysia (UPNM)
Malaysia Digital Economy Corporation (MDEC) Universiti Putra Malaysia (UPM)
Malaysia Investment Development Authority (MIDA) Universiti Sains Islam Malaysia (USIM)
Malaysia IoT Association Universiti Teknologi Malaysia (UTM)
Malaysia Productivity Corporation (MPC) Universiti Teknologi MARA (UiTM)
Malaysia Technology Development Corporation (MTDC) Universiti Teknologi PETRONAS (UTP)
Malaysian German Chamber Of Commerce & Industry (MGCC) Universiti Tenaga Nasional (UNITEN)
Malaysian Industry-Government Group for High technology (MIGHT) Universiti Utara Malaysia (UUM)
Malaysian Plastics Manufacturers Association (MPMA)

Special Consultations

Global Science and Innovation Advisory A.T. Kearney Global Federations of Competitive Council
Council (GSIAC) (GFCC)
 NATIONAL INDUSTRY 4.0
10 POLICY FRAMEWORK
 11

global overview
The Inevitable Transformation
Driven by Multiple Factors
Advancement and Convergence of Technologies
Competitive Response by Nations & Lessons Learned
 NATIONAL INDUSTRY 4.0
12 POLICY FRAMEWORK

global
OVERview

THE
INEVITABLE
TRANSFORMATION
The world is currently amidst a technological transformation that will fundamentally
change the way we live and work. It is difficult to predict precisely how this
transformation will impact different industries and countries. However, we know that
this transformation is unlike anything we have seen before due to the sheer pace and
breadth of these changes.

Many see these changes as an ushering of new era of growth, change and opportunity.
The ramification it brings for manufacturing firms is forcing nations and governments
to re-evaluate how the manufacturing industry operates and contributes to economic
growth. Nations are now increasing their focus on developing advanced manufacturing
capabilities by investing in high-tech infrastructure and quality education. These are
done by facilitating the transformation of the manufacturing industry and its firms,
advancing to the next technology frontier and raising their economic wellbeing.

The first industrial revolution started with the advent of steam and water power enabling
mechanisation of production processes. The second industrial revolution was driven
by electric power and mass manufacturing techniques. Information technology and
automation brought in the third industrial revolution. The fourth industrial revolution
is exploding on the back of a range of technologies that are blurring the distinction
among physical, digital and biological spaces.

The fourth industrial revolution, or Industry 4.0, transforms how products are designed,
fabricated, used and operated as well as how they are maintained and serviced. It
will also transform the operations, processes, supply chain management, and energy
footprint of factories.
 13

Industry 4.0 changes the global landscape of manufacturing competition, reducing transformation of the manufacturing industry, through Industry 4.0,
the relative competitive advantage of low-cost regions that rely on cheap labour. is also in line with the United Nations’ Sustainable Development
Nations and manufacturing firms that lead in embracing Industry 4.0 technologies Goals (SGDs), especially in support of Goals #9 and #12.
and processes will gain over global competitors. This competitiveness hinges on
the ability to transform by responding to market shifts and technology trends. The

GOAL #9 Build resilient infrastructure, promote sustainable industrialisation and

foster innovation. Inclusive and sustainable industrial development is the
primary source of income generation, allows for rapid and sustained
increases in living standards for all people, and provides the
technological solutions to environmentally sound industrialisation.
Without technology and innovation, industrialisation will not happen, and
without industrialisation, development will not happen.

Ensure sustainable consumption and production patterns. Sustainable

consumption and production is about promoting resource and energy
GOAL #12
efficiency, sustainable infrastructure, and providing access to basic
services, green and decent jobs and a better quality of life for all. Its
implementation helps to achieve overall development plans, reduce
future economic, environmental and social costs, strengthen economic
competitiveness and reduce poverty.
 NATIONAL INDUSTRY 4.0
14 POLICY FRAMEWORK

global
OVERview

driven by
multiple factors

The manufacturing industry is increasingly shifting towards producing more

technologically-complex products.

It is no longer enough for the manufacturing industry to make better things - creating
innovative products and services that will meet customer needs - but also to make
things better - facilitating the design engineering, service planning and execution
as well as improving the management and production processes. Furthermore,
despite steady improvements in the manufacturing output and employment in the
sector, renewed investments will be needed to build the necessary infrastructure and
increase resources to support the continuous growth.

This emphasis on “making better things while making things better” is driven by the
following factors:

• Shifts in the global economic order - the rise of China, economic realignment
due to changes in the developed world, and the rise of fast-growth emerging
economies;

• Rate of technology advancement and its convergence - technology changes

driven by applications of these technology in the manufacturing industry such
as but not limited to Big Data, the Internet of Things, and cloud computing;

• Knowledge & Skills for the future in retaining talent and producing future
workforce by taking advantage of the opportunities of this transformation;

• Global supply chain dynamics – increasing complexity in the supply chain

networks caused by distributed sourcing, engineering, and production, as
manufacturing firms now manage partners in a borderless world not bound by
geographical locations;
 15

• Competitiveness of nations and firms - greater global competition as firms • Changing customer behaviour – influenced by values,
must defend their domestic markets while simultaneously tapping new market personalisation and customisation and the emergence of
segments for long-term growth; new products and new services attributes that are forcing
manufacturing firms to reassess their manufacturing
• Increased regulations - environmental concerns and standards-based factors systems of production.
like ISO compliance that apply across an increasingly interconnected world; and

Industry 4.0 Transformation Drivers

Others
Customer Behaviour Global Economic Order

Regulations

Competitiveness

Global Supply Chain Technology Advancement

* MIGHT Malaysian Technology Strategic Outlook (MTSO) Interview

Knowledge & Skill
 NATIONAL INDUSTRY 4.0
16 POLICY FRAMEWORK

global
OVERview

Advancement
and Convergence of Technologies These enabling technologies
bring a new dimension to the
industrial environment
At the heart of Industry 4.0 is a set of rapidly evolving Many of these technologies have been around or under resulting in a dramatic
and converging technologies. These are pushing the development for several years. However, the increase in industrial
boundaries of what can be manufactured through interaction and resulting convergence of these productivity.
additive manufacturing and advanced materials. These technologies is creating an unprecedented pace and
technologies are enabling richer insights through big breadth of impact. Completely new industries may be
data analytics. They are blurring the lines between created at these intersections. Thus, these are loosely GREATER EFFICIENCIES
physical and digital realms through rich simulations termed as Industry 4.0 technologies. Given below is an Changing the traditional
and augmented reality. They are enhancing human overview of these technologies and their impact on manufacturing system
capacity through artificial intelligence and autonomous manufacturing. By no means is this list exhaustive or production relationships
robots. We are also seeing a shift in the way definitive. between suppliers,
information technology is being used through cloud producers, and customers as
computing, system integration, and the Internet of The definite number of technologies that will disrupt well as between humans and
Things (IoT). Last but not the least, cyber-security the manufacturing industry are uncertain as it is machines.
plays an important role in ensuring information growing and evolving overtime.
systems and manufacturing lines are protected from
cybercrime threats. INTEGRATION &
AUTOMATION
Technologies The manufacturing systems
BIG DATA Advanced would become fully
advancement ANAlytics Cybersecurity SIMULATION Materials integrated and automated as
and a result of the digital
adoption that will transform
convergence the industrial environment.
Artificial AUGMENTED Additive Systems autonomous
Intelligence REALITY manufacturing Integration robots
SELF ADAPTATION TO
CHANGES
The environment will become
Internet CLoud unified by the connected

Enabling of things (IOT) Computing systems that enable

interactions within and

Technologies between systems to allow

self-configuration, failure
The digitalisation of the prediction and be more
production-based industries are adaptive to changes.
driven by these technological drivers
 17

Additive Artificial Big Data Advanced

Cybersecurity
manufacturing intelligence (AI) Analytics Materials

Additive manufacturing is AI is a concept that is made up Increasingly big data techniques New materials and The industrial communication is
advancing with the use of of numerous subfields such as are being applied in nano-structures are being expanding and strongly
new materials opening machine learning, which manufacturing industries to developed that allow for connected, digital security
completely new possibilities. focuses on the development of improve customer experience beneficial material properties, becomes a critical aspect that
For example, 3D printing of programmes that can teach and product quality, realise e.g. shape must not be overlooked in the
organic tissues has created themselves to learn, understand, energy efficiencies, and conduct retention or thermoelectric industrial environment. It has
opportunities for growing live reason, plan, and act when predictive maintenance. It is efficiency. Together with additive now become more complex, as
organs. It is revolutionising exposed to new data in the right now possible to collect masses manufacturing technologies, it it consists of connected devices
traditional production, aided quantities. AI technology will of data from several different will allow for massive and environments that cannot
by a recent surge in metal supplement the smart factory sources to direct decisions that customisations and be protected by traditional
additive printing. towards networked factory, in anticipate product or equipment development of products that cybersecurity approaches.
which data from supply chains, failure. were not possible until now. Current cybersecurity has
design teams, production lines largely been developed for
and quality control are linked to IT-centric devices and
form a highly integrated and environments. The system is
intelligent engines now facing new challenge on
how to embed security
functionality into the IoT devices
with sophisticated cybersecurity.

Simulation Cloud Augmented Internet of Autonomous Systems

Computing Reality Things (IoT) Robots Integration

While many engineers Past industrial revolutions While the initial Augment Industry 3.0 brought in Machinery and robots are System integration
are already familiar with required significant Reality technologies are an era of computing and transformed towards its occurs in vertical (within
simulations in the field of capital as a ticket to still in nascent stages, inter-connectedness, but next generation. Robots the industry value chain)
product design, the entry. With Cloud they are advancing at a it often relied on humans can do more on its own, and in horizontal systems
advent of augmented Computing many of the rapid pace. Some of the to make even the trivial including learning on the (across multiple value
reality, artificial Industry 4.0 technologies first applications can be decisions. Industry 4.0 job and team up with chains) eventually
intelligence and big data can be made available to found in the delivery of technologies embody an other robots and achieving end-to-end
is expected to take even smaller companies information and training. unprecedented humans. This technology digital integration across
simulations to the next as a utility with minimal For example, Augmented proliferation of sensors allows systems to think, the entire value chains.
level. It will be possible to upfront capital Reality can be used to and connectedness act and react
simulate manufacturing investment. Companies deliver part replacement among these sensors. autonomously as well as
processes using different can leverage cloud based instructions to Combined with other conduct remote decision
production settings to product design, maintenance staff in the technologies such as making. This can help
find the optimal way to simulation, artificial field. artificial intelligence and contribute to a
manufacture a product. intelligence, and big data Big Data, it is now company’s
Simulations can also be solutions to improve their possible to envisage competitiveness,
used to test product production processes entirely autonomous productivity and
usage under different and build products better systems that profitability.
operating environment suited for their revolutionise
using different types of customers. manufacturing.
materials.

Adopted from BCG, Lux Research, McKinsey & A.T. Kearney

 NATIONAL INDUSTRY 4.0
18 POLICY FRAMEWORK

global
OVERview

Competitive Response
by Nations & Lessons Learned

Recognising the importance of the transformation of the manufacturing industry to their industrial future state, many countries
have launched Industry 4.0 related policies and programmes to support the research, development and deployment of Industry
4.0 technologies and processes at their local manufacturers.
 19

Set high aspirations: Setting right aspirations is critical to drive outcomes.

Policymakers should have clear, actionable, targeted and impactful objectives
for IR 4.0 strategy. This helps bring the right attention and act as an inspiration
for the country.

Ensure the right level of focus: With such ambitious nation-wide programmes,
it is easy to get too narrowly focused on a few subsectors on one hand or being too
broad on the other. Balanced coverage of sectors and technologies is critical. At the policy
level, the focus should be on building an enabling environment to encourage innovation
and adoption in priority sectors.

Pay attention to enablers: Enablers such as infrastructure, funding, skills and

technology create a fertile ground to encourage innovation and kickstart a virtuous,
We can draw the self-sustaining ecosystem. Policymakers need to tailor emphasis to the current
following lessons realities of their country.
from the
experiences of
other countries in
charting the Include SMEs: Industry 4.0 technologies both present opportunities for SMEs and
transformation to risk that many are left behind. Thus, an inclusive programme is required to ensure that
Industry 4.0: SMEs can make the transformation to more advanced manufacturing processes. More
importantly, Industry 4.0 provides an opportunity for the small companies of today to
become giants of tomorrow.

Provide access to funding: Availability of capital and incentives from the beginning
ensures that Industry 4.0 programmes have a solid start in the country. Funding and
incentives should be directed towards both R&D and adoption of these technologies in the
process of manufacturing.

Implement from the top: Industry 4.0 is expected to have far reaching impact
across industries, societies and the broader economy. Thus, it is not a domain of any one
government department or agency. Governance for such initiatives should be initiated at
the top most level in the country, with emphasis on strong cross-ministerial and agency
collaboration.

Several of the globally leading manufacturing countries have already embarked on their Industry 4.0 transformation and are in advanced stages of implementation, e.g.,
Germany, US, UK, China and Korea. It is critical for Malaysia to both learn from these experiences and to move fast in its own Industry 4.0 adoption to not fall behind in its
own global manufacturing position.
 NATIONAL INDUSTRY 4.0
20 POLICY FRAMEWORK
 21

CASE FOR ACTION

Importance of the Manufacturing Sector in Malaysia
Need to Embrace Industry 4.0
Propelling SMEs Forward
Malaysia’s Readiness for Industry 4.0
Addressing Malaysia’s Issues & Challenges
 NATIONAL INDUSTRY 4.0
22 POLICY FRAMEWORK

CASE FOR
action

Importance of the
Manufacturing Sector in Malaysia

The Malaysian manufacturing industry is an important economic sector contributing

about 22% to the GDP in the last 5 years. To date, its growth has had the effect
of stimulating jobs, attracting investments and creating business opportunities in
the downstream activities and related services sectors. The manufacturing sector
is expected to remain resilient and is on track to achieve the targeted annual GDP
growth rate of 5.1% under the 11th Malaysian Plan (RMK-11).

It is important to note that the sector is made up of a large number of SMEs, which
account for 97% of the manufacturing firms. Although most of these SMEs do not have
a strong global presence, many have the potential to be global exporters. Together with
other ongoing initiatives like the eCommerce Strategic Roadmap or the Digital Free-
Trade Zone (DFTZ), the Government is trying to provide the right platform for SMEs
to reinvent themselves and adopt the latest technologies to be globally competitive.

On a global level, Malaysia has enjoyed a fairly strong and competitive position in both
manufacturing and the use of technology. The Global Manufacturing Competitiveness
Index 2016 (by Deloitte Touche Tohmatsu) ranked Malaysia at 17th place among 40
countries. The report also projected Malaysia to climb four notches to 13th by 2020.
On the technology and innovation side, the Global Innovation Index 2017 (by Cornell
University, INSEAD and WIPO) ranked Malaysia at 37th globally among 127 countries
and 8th in Asia. Further, the recent Readiness for the Future of Production Report 2018
(by WEF and A.T. Kearney) highlights that Malaysia is positioned well to benefit from
the future of Industry 4.0.
 23

Manufacturing Industry Employment

Malaysia’s Manufacturing GDP contribution and growth
2,119,158 employees

SMEs IN THE MANUFACTURING SECTOR

RMK-10 RMK-11
57.90%
4.8%
Target: 42.10% Employment

5.1%
Employment by Large Firms
Millions (RM)

by SMEs
Average Growth
Average Growth
312,497
299,168 DEPENDENCY ON FOREIGN LABOUR

283,863 74%
Malaysian
267,554
26% Citizen
Non-Malaysian
254,725
243,904
232,528
219,151
211,920 Skills Level
202,961
192,493

6.10 *6.17 6.10

5.04 5.39
5.44 4.89
4.44 4.45 Low- Semi- High-
4.41
skilled skilled skilled
3.41
7% 75% 18%
* Based on Malaysia Standard Classification of
Occupations (MASCO) 2013, referenced by
Economic Census 2016

Qualification

7.5% 80.5%
University SPM/SPM (V)
Degree and or equivalent
Above and below

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
12%
Diploma/
Source: RMK-11 & MITI internal analysis *Current status STPM or equivalent
 NATIONAL INDUSTRY 4.0
24 POLICY FRAMEWORK

CASE FOR
action

NUMBER OF ESTABLISHMENTS BY PROFILE OF EMPLOYED PERSONS,

MANUFACTURING SUB-SECTOR MALAYSIA, 2016
Manufacturing Sector 49,101 Establishments Manufacturing Construction
Textile,
Electrical, Beverage Wearing
Petroleum, and
Electronic Apparel and
Chemical,
and Optical Tabacco Leather
Rubber and Products
Products Products
Plastic
Products 8% 1% 19% 16.9% 8.8%
9%
62.2% 11.4% 0.7%
Transport
Equipment, Non-Metallic
Other Mineral
Manufacturing Products,
and Repair Basic Metal
and Agriculture Mining &
11% Fabricated Services
quarrying
Metal
Products
Vegetable and Animal
Oils and Fats, and 18%
Processed Foods
17% Wood Products,
Furniture, Paper
Products and Printing
17% Source: Labour Force Survey Report 2016, Department of Statistics, Malaysia

WP Labuan (0.2%)
CONCENTRATION OF Perlis (0.8%)
Kelantan (3.8%) Sabah (3.7%)
MANUFACTURING Kedah (6.7%)
Terengganu (4.1%)
P. Pinang (8.5%)
ESTABLISHMENTS IN Perak (8.9%)
MALAYSIA Selangor (20.4%)
Pahang (3.6%)
Kuala Lumpur (10.7%)
N. Sembilan (3.9%) Sarawak (5.2%)
Melaka (3.1%)
Johor (16.4%)

Source: Analysed by ASM, Economic Census 2016 Manufacturing Sector, Department of Statistics, Malaysia
 25

NUMBER OF EMPLOYMENT FOCUS SECTORS OF

BY MANUFACTURING INDUSTRY 4.0
SUB-SECTOR, 2015
Value
Employees % Added
(persons) Share (RM Billion)
RMK11 catalytic and high-potential sectors

Electrical, electronic
528,913 25.0 77.6
and optical products Electrical & Machinery & Medical
Chemical Aerospace Other Sectors
Electronics Equipment Devices

Petroleum, chemical,
rubber and plastic 376,084 17.8 68.7
products

Non-metallic mineral The Electrical & The Machinery The Chemical The Medial The Aerospace
products, basic metal 34.3 Electronics & Equipment industry is one device industry industry has
331,643 15.6 industry is the industry is one of the catalytic spans an been
and fabricated metal
products leading industry of the key areas industries in the extremely wide designated as a
in Malaysia’s for growth and country with range of strategic sector
manufacturing development, rapid growth industries from with high
Wood products, sector, focusing on due to the rubber and growth
27.8 contributing high availability of oil latex, plastics, potential in the
furniture, paper 298,437 14.1
products and printing significantly to value-added and gas as a machinery and country’s
the country’s and high feedstock engineering industrialisation
exports and technology support and and • Automotive
employment M&E electronics technological
Vegetable and animal
development • Transport
oils and fats and food 256,908 12.1 22.1
programmes
processing
• Textiles

• Pharmaceutical
Transport equipment, Subsectors: Subsectors: Subsectors: Subsectors: Subsectors:
other manufacturing 207,959 9.8 17.2 • Metal
and repair • Electronic • Specialised • Petroleum • Consumables • Engineering &
components M&E for specific products & design • Food
industries petrochemicals • Surgical processing
Textiles, wearing • Consumer instruments, • Aero-
apparel and leather 102,243 4.8 5.0 electronics • General • Plastic clinical device & manufacturing • Services
products industrial M&E, products implants
• Industrial parts and • System
electronics components • Rubber • Healthcare integration
products equipment
Beverages and • Electrical • Power • Maintenance,
tobacco products 16,971 0.8 4.4 products generating M&E • Chemical & Repair and
chemical Operations
• Machine tools products (MRO)

RM • Oleochemicals
Number of employees 2,119,158 100 257.1
billion

Source: Economic Census 2016 Manufacturing Sector, Department of Statistics, Malaysia

 NATIONAL INDUSTRY 4.0
26 POLICY FRAMEWORK

CASE FOR
action

Need to Embrace
Industry 4.0
Despite its strong current position, the state of the manufacturing industry has
been a case for concern in the last few years. Malaysia has moved away from
being an investment destination for low cost labour manufacturing activities and is
challenged by lower cost competitors from emerging economies and rapidly changing
technologies.
In line with the global trends outlined before, three major factors are impacting the
future of manufacturing in Malaysia and its competitive position, offering opportunities
for growth, but also challenging its position:

• Global value chains and geographies of production are continuing to shift,

especially as China and other Northeast Asian countries are relocating production
to ASEAN. This is opening up new opportunities for Malaysia, though Malaysia
will need to transform itself fast, as other countries in the region like Indonesia,
Thailand and Vietnam are catching up.

• Quality of labour and higher productivity, not low labour cost will be
the new source of competitive advantage. Although Malaysia’s labour
productivity has grown at 3 to 4% over the last few years, its relative
global position and use of higher skilled labour has not moved forward:
Malaysia’s labour productivity was ranked only at 44th position in 2016, a position
that has remained unchanged since 2009 where Malaysia was also ranked 44th
The relative share of highly skilled labour declined from [..]% in 2010 to 18%
in 2017.

• New technologies are disrupting and fostering a technology-based model

of production. Barriers of adoption have come down with key Industry 4.0
technologies maturing and cost declining. Application of technologies to
improve efficiency and product quality are becoming the new normal, requiring
Malaysian manufacturing firms to innovate and invest in new technologies to
remain competitive.
 27

As such, it is imperative for Malaysia to transform itself, at an accelerated pace, SMEs stand to gain the most from the policy framework. The aim
and embrace Industry 4.0 as a critical cornerstone to propel and sustain its future is to optimise the framework conditions and support structures
manufacturing competitiveness. Specific attention needs to be given to four accordingly, so that manufacturing SMEs will be able to meet the
overarching goals: challenges of Industry 4.0 and take full advantages of the benefits
• Drive continuous growth in manufacturing GDP and opportunities it presents.
• Increase national productivity
• Create higher skill employment opportunities
• Raise innovation capabilities and competitiveness
• This will require a new and comprehensive policy framework that guides the
transformation, systematically addresses potential barriers, and fosters urgency
and action across the industry and all other stakeholders.

Propelling
SMEs Forward
In Malaysia’s transformation, particular attention needs to be paid to
SMEs, as they account for the bulk of manufacturing companies (97%)
and a major part of employment (42%).

While most of the large manufacturing firms are already anticipating the
benefits and risks of adopting Industry 4.0 practices, Malaysian SMEs
appear to be cautious in taking the leap. Most worryingly, despite the
enormous economic potential of Industry 4.0, SMEs in the industry remain
relatively unaware about it. There is a risk that Malaysian SMEs might be
left behind.

Industry 4.0 has the potential to transform manufacturing SMEs in multiple

ways: improving productivity, efficiency and cost; enhancing organisational,
management and production capabilities; enabling better quality and
quality monitoring; and developing innovators and producers of Industry
4.0 technologies.

The level of transformation required is, however, very substantial for SMEs. It will
not just be about adopting industry 4.0 technologies, but also about changing
business processes and operating models. For example, SMEs will need to
collaborate and participate in broader production networks with other SMEs,
large firms or multinational corporations. Digitalisation of the manufacturing
system will be important to build direct links to end customers and produce innovative
and customised products. Scale effects are also being redefined, as SMEs are making
headways in many markets and outperform larger corporations due to their agility and
adaptability. As such, manufacturing SMEs will need to learn how to deal with these
disruptions, be more resilient, and embrace the rate of change as an opportunity.
 NATIONAL INDUSTRY 4.0
28 POLICY FRAMEWORK

CASE FOR
action

Malaysia’s Readiness
for Industry 4.0
A key question is how ready Malaysia is for Industry 4.0. The recent report on the Readiness for the Future of Production Report 2018, jointly published by
the World Economic Forum (WEF) and A.T. Kearney, provides a global assessment of 100 countries and positions Malaysia in the “Leader” quadrant. These
are countries with a “strong current production base” and who are “positioned well for the future”. It is also interesting to note that Malaysia and China are
the only two countries in the “Leader” quadrant, who are not high-income countries.

This is both an enviable and a challenging position for Malaysia. On the one hand, it underscores Malaysia’s strong current manufacturing position and
its readiness for Industry 4.0. On the other hand, it also highlights the economic value at stake if Malaysia is not able to transform itself in an accelerated
manner. The gap to global leaders like Japan, Korea, Germany, Switzerland and China is still significant and other regional countries like India, Indonesia,
Singapore and Thailand have aggressive plans and are moving fast in their implementation.

Drivers of production score (0-10)

10 High-Potential Leading
United States
8 Singapore Germany
France Japan
Malaysia China Korea
6 Poland Italy

2
Nascent Legacy
0
0 2 4 6 8 10
Structure of Production score (0-10)
East Asia and the Pacific Latin America and the Carribean South Asia
Euroasia Middle East and Nort Africa Sub-Saharan Africa
Europe North America

Note: Average performance of the top 75 countries is at the intersection of the four quadrants.

Source: Readiness for the Future of Production Report, World Economic Forum, 2018
 29

WEF’s analysis identifies technology, human capital, global trade & networks, and institutional frameworks as key drivers of production for Industry 4.0.
Malaysia’s rankings in each of these drivers emphasises priorities in technology, human capital and institutional frameworks (21st to 30th position out of
100 countries), consistent with some of the challenges highlighted previously:

Technology adoption and diffusion are particularly important for SMEs and underscore
the importance of creating production networks and collaborations with MNCs and large
companies

Human capital focus is key to creating an accelerated shift in productivity, especially as

Malaysia has been relying on low labour cost in the past, with a declining share of
skilled labour

Strengthening institutional frameworks underpins the role of government in creating the

right ecosystem and facilitating collaboration platforms

On global trade & investment, Malaysia is already well integrated into regional value
chains and exhibits a very good trade infrastructure, which is reflected in its strong
global ranking (7th).
 NATIONAL INDUSTRY 4.0
30 POLICY FRAMEWORK

Addressing Malaysia’s Issues & Challenges

Lack of awareness on the impact of

and need for Industry 4.0
Lack of a centralised and easily technologies, both in terms of
accessible information platform to opportunities and business model
understand best practices and disruption, especially among SMEs.
relevant use cases

Evolving customer expectations

Few visible success stories of and demand for customisation of
applying Industry 4.0 technologies and products and faster delivery speeds
Awareness
processes by local companies

Best practice
understanding Ownership of Intellectual Properties
Innovation due to inter-connectivity and
information sharing along the
supply chain
DEMAND
Higher cost of adoption and
longer payback period for Digital
Industry 4.0 technologies and High Cost of Low digital adoption especially
readiness & among SMEs (~20%) and
processes Investment
connectivity limited use of automation by
Skill manufacturing firms (majority
Inadequate understanding Enhancement of firms use less than 50% of
of costs vs. benefits and automation)
ability to conduct Industry
4.0 business case analysis Lack of integrated and digital
approach to data gathering
along manufacturing and
supply chains
Limited understanding of
Significant shortage of required
manufacturing firms of required future
talents, skills & knowledge for Industry
skills and expertise and own readiness Exposure to cyber threats with
4.0, particularly in the areas of IoT,
to embark on Industry 4.0 increased connectivity and new
robotics and AI
transformation technologies, especially IoT
 31

To ensure the new policy comprehensively addresses potential issues and challenges faced by Malaysian
manufacturing firms, a series of industry and government agency workshops were conducted, involving a broad
range of stakeholders.

The issues are summarised in the following, both on the demand and on the supply side.

No national platform and mechanism to coordinate

Multiple, but isolated efforts and limited
programmes and structure collaborative and
coordination among all stakeholders in moving
aligned approaches for Industry 4.0 requirements
toward a common vision for Industry 4.0

Existing, but underutilised funds for

Gaps in deployment of high speed
training and development and need
broadband infrastructure in key
Governance for higher allocation for STEM
industrial and training locations and
education (e.g., scholarships)
not always able to support Industry
4.0 technology needs Funding &
Infrastructure No specific financial support and
Incentive
incentives for Industry 4.0
technology development, ranging
Limited digitalisation and digital from R&D, prototyping, testing,
integration of key government SUPPLY scaling up to upgrading facilities
agencies and processes into
manufacturing and supply chains
Standards
(e.g., some certifications, licensing, &
custom clearances, approvals, etc.) digital Ecosystem
integration Support Limited number of local players
Lack of clear standards for providing Industry 4.0 solutions
equipment or systems that support Training across key technologies and not
local and global inter-operability of Providers cost competitive vis-à-vis
Industry 4.0 technologies and international players
processes

Limited collaboration and industry take-up of Industry 4.0

outputs from universities and research institutes
Education syllabus Existing training programs
and pedagogy for Limited not sufficiently geared Shortage of experts in the industry, universities and research
STEM related attractiveness of toward Industry 4.0 and institutions across most Industry 4.0 technologies
subjects not manufacturing as current pool of trainers
attractive and career destination unable to keep up with the Insufficient local capabilities and capacities in providing
matched with for top talent advancement of cyber security solutions that protect Industry 4.0 applications
industry needs technology
 NATIONAL INDUSTRY 4.0
32 POLICY FRAMEWORK

CASE FOR
action

Malaysia
moving forward…
From the stakeholder interactions and issue analyses, five themes emerge that drive
the development of an end-to-end Industry 4.0 ecosystem in Malaysia. They have
also been guiding the development of the new Industry 4.0 policy framework and the
four key Industry 4.0 goals of GDP contribution, national productivity, higher skilled
employment, and innovation capabilities.

Upskilling and reskilling existing and future

labour pools need to be at the heart of Malaysia’s
transformation

Inclusive involvement of SMEs is critical to

power a holistic step up in labour productivity across the
economy

Significant evolution in innovation

capabilities and collaboration platforms is essential to
foster the development of and access to cost-effective
technologies that address specific sector needs

Focused funding support is needed to kickstart

the adoption and complement private sector investments

Good digital infrastructure is required to enable

reliable and secure Industry 4.0 operations
33
 NATIONAL INDUSTRY 4.0
34 POLICY FRAMEWORK
 35

MOVING FORWARD
Policy Objectives
The National Framework – My-i4.0
Strategic Enablers & Actions
Implementation Approach
 NATIONAL INDUSTRY 4.0
36 POLICY FRAMEWORK

moving
FORWARD

Policy
Objectives

Already, a number of initiatives and organisations have been established at the

national, state and regional level by both the Government and industry to develop
plans and actions to strengthen various manufacturing industries. This support
for and focus on manufacturing firms are important and create a strong platform.
However, these programs have largely been developed independently and often have
overlapping objectives and industry audiences.

There is a need for a more streamlined and cohesive national agenda under which
these initiatives and organisations can be integrated to accelerate Malaysia’s
transformation into a smart and modern manufacturing system. This will also include
the need for a greater alignment across government, research and academia regarding
priority industries, specific goals, enabling actions, and their funding. Countries like
Germany and Japan provide examples of best practices where government, research
and academia are tightly integrated with the manufacturing industry through
collaborative Public Private Partnerships (PPP) that develop innovative solutions for
specific industry needs.

With this in mind, Malaysia has put in place the National Industry 4.0 Policy Framework
– My-i4.0 – that provides a concerted and comprehensive transformation agenda for
the manufacturing sector.
 37

THE OBJECTIVES OF THE

INDUSTRY 4.0 POLICY ARE THREEFOLD – ACT:

A C T
Attract stakeholders to
Create the right ecosystem
Industry 4.0 technologies & Transform Malaysia’s
for Industry 4.0 to be
processes and further industry capabilities in both a
adopted and align existing
increase Malaysia’s holistic and an accelerated
and future development
attractiveness as a preferred manner
initiatives
manufacturing location
Targeted outcomes
• Higher manufacturing
Attract stakeholders Create the right ecosystem Transform industry sector contribution
• Adoption of Industry 4.0 • Talent supply & skill levels capabilities • More high value-
• SME inclusion • Collaboration platforms • Labour productivity added products
• Preferred manufacturing • Digital infrastructure • Cost efficiency • Continuing FDI
location • Funding support • Share of high-skilled jobs
• Data availability & sharing • Technology & innovation
• Innovation capacity capabilities
• Local technology
development

Action
Plans

Strategic
Enablers

NATIONAL
FRAMEWORK BY National 4 37
THE NUMBERS
13
Goals

5
Strategies
 NATIONAL INDUSTRY 4.0
38 POLICY FRAMEWORK

THE NATIONAL
THE NATIONAL FRAMEWORK FRAMEWORK

My-i4.0

Strategic partner
Total solution
Malaysia’s vision for the for smart Primary
provider for
manufacturing sector in manufacturing & destination for
advanced
the next 10 years related services in high tech industry
technology
The Vision Asia Pacific

Specific goals to
Labour Manufacturing
guide and measure Innovation
Productivity Contribution to High Skilled Jobs
the progress of Capacity
Growth Economy
transformation
The National Goals

A set of shift factors

that need to be
optimised in a
balanced manner PROCESS
The Shift Factors PEOPLE TECHNOLOGY

Specific
enablers that SKILLS &
FUNDING INFRASTRUCTURE REGULATIONS TALENT TECHNOLOGY
determine the Funding Enabling Regulatory Upskilling Access to
& Outcome- Ecosystems & Framework Existing &
strategies, Based Efficient Digital & Industry Producing Smart
Technologies
The policies and Incentives Infrastructure Adoption Future
Talents
Enablers action plans
 39

ENVISIONING
THE FUTURE OF MALAYSIAN
MANUFACTURING INDUSTRY
The development of these visions is made in full realisation that there is a need to
transform the manufacturing industry to embrace Industry 4.0. This is due to the fact
that global trends point towards the ability to master and adopt to the new technology
development will which will then drive Malaysian towards greater competitiveness.

Rationale
Visions Ensure continued
Strategic partner for relevance and
smart manufacturing importance for Malaysia
and related services in global & regional
in Asia Pacific production value chains

National vision Rationale

for Malaysia’s Visions
Remain preferred
Primary destination
manufacturing manufacturing location
for the high-tech
sector in next for leading global and
industry
10 years regional players

Rationale
Create a holistic
Visions
ecosystem that propels
Total solution provider
Malaysia’s
for advanced
transformation and helps
technology
SMEs break out and
scale up
 NATIONAL INDUSTRY 4.0
40 POLICY FRAMEWORK

moving
FORWARD

SHIFT FACTORS
Malaysia’s transformation will require an approach and ecosystem that optimises and balances the relationships between people, processes and technology.
Industry 4.0 adoption will only be as good as the processes that are implemented around it, and the processes are only as good as the people who execute
them.

The Shift Factors PEOPLE PROCESS TECHNOLOGY

Purpose Given its criticality, Improving both Technology

developing, upgrading manufacturing and advancement is
and retaining the business processes is increasingly propelling
required talent and skills important for Malaysia’s global manufacturing
are at the center of the transformation and the competitiveness and the
new national policy. policy aims to create a policy framework fosters
favourable business a seamless and
environment and facility accelerated adoption of
public-private Industry 4.0
partnerships. technologies, especially
for SMEs.

To bring the shift factor gears together and achieve optimal results, a well-coordinated orchestration and top-level driven implementation will be important.
41
 NATIONAL INDUSTRY 4.0
42 POLICY FRAMEWORK

moving
FORWARD

NATIONAL GOALS & TARGETS

The specific goals and targets are in support of the national vision for the transformation of the manufacturing industry. They guide and measure Malaysia’s
progress in improving productivity, strengthening the innovation capacity and capabilities, driving the shift to a higher skilled workforce, and expanding the
overall contribution of the manufacturing sector to the national economy.

To increase the level of productivity in the manufacturing sector;

To elevate the contribution of the manufacturing sector to the economy;

To strengthen our innovation capacity and capability, reflected in the global

innovation ranking; and

To increase the number of high-skilled workers employed in the manufacturing industry

The targets for the goals are developed from the 2016 baseline figures:

Absolute contribution in Numbers of skilled workers

Productivity of the
Ringgit Malaysia (RM) term Global Innovation
employed in
manufacturing industry Index ranking
from the manufacturing sector the manufacturing sector
per person
to the national economy

From RM106,647 From RM 254 billion From#35 From 18%

To increase by
To RM 392 billion To top 30 nations to 50%
30%
43
 NATIONAL INDUSTRY 4.0
44 POLICY FRAMEWORK

THE STRATEGIC
THE STRATEGIC ENABLERS
ENABLERS EXPLAINED

F I
Funding Infrastructure
Funding & Outcome - Based Incentives Enabling Ecosystem & Efficient Digital
Infrastructure
The development and adoption of Industry 4.0
technologies and processes may require Fast and secure data connection is a basic
substantial investments by manufacturing requirement for the realisation of Industry 4.0. A
firms. Questions will arise on what incentives good and reliable internet speed rate is needed
and funding options are available by both for implementing internet-based production
Government agencies and private entities, technologies or services, be it IoT solutions, use
especially for SMEs. of augmented reality and wearables in
production, or the evaluation of real-time data.
The funding strategies are aimed at Although Malaysia has deployed High Speed
encouraging companies to adopt new Broadband and 4G technologies on a
The manufacturing technologies and processes
and invest in R&D, specifically to develop
wide-spread basis, there are still some gaps in
key industrial and training locations.

Strategic
local solutions targeted at Malaysia’s needs
and priorities. Special attention will be given A digitalised and connected infrastructure across
to collaborative efforts in developing and supply and manufacturing value chains is critical

Enablers deploying Industry 4.0 technologies.

To ensure progress and impact, the incentives

to foster a seamless movement of goods, data
and services, drive efficiency and resource
optimisation, and support joint development
F.I.R.S.T will be linked to specific outcomes.
These strategies are applicable to both
efforts. Currently, a number of value chain
elements are still not to be digitalised across
manufacturing firms as the users and many ministries and agencies, ranging from
adopters and to service providers of Industry various approval, licensing, certification, to good
4.0 technologies and solutions. clearance and other processes.

Service providers will play an essential role in

helping Malaysian companies accelerate their
transition to Industry 4.0, particularly in
developing people, transforming processes and
adopting technologies. As such, involving service
providers and linking them to manufacturing
firms, especially SMEs, is important to create a
holistic and effective Industry 4.0 ecosystem.
 45

R S T
Regulations Skills & Talent Technologies
Regulatory Framework & Industry Upskilling Existing & Producing Future Access to Smart Technologies & Standards
Adoption Talents

Regulation is a key enabler of Malaysia’s Industry 4.0 is fundamentally reshaping the Understanding of and access to advanced,
Industry 4.0 transformation. Special emphasis jobs landscape and will foster significant cost-effective and interoperable Industry 4.0
will need to be on increasing the awareness changes in how industrial worker perform technologies are at the core of unlocking the
of the need and benefits of adopting Industry their jobs. Entirely new jobs with very different potential of Industry 4.0. At present, the
4.0 technologies and processes. This is skill requirements will be created, while majority of Malaysian manufacturing firms
particularly important for SMEs who still have others, especially manual tasks, will become surveyed adopt less than 50% automation.
a limited understanding of digital and Industry obsolete. The shifting employment landscape
4.0 and often are concerned about the cost has significant implications for industry, The experiences from other countries
and level of change required. education systems, and the Government. demonstrate the importance of
digital/technology labs and collaborative
Moreover, to foster an accelerated A qualified and skilled workforce is platforms, especially public-private
transformation, mechanisms will need to be indispensable for the introduction and partnerships (PPP), in disseminating Industry
put in place to help manufacturing firms adoption of Industry 4.0. The technical 4.0 technologies and transferring knowledge.
understand their current capabilities and what knowledge required is high, and will be The Government aims to work with global and
it will take for them to transform and primarily recruited from the STEM (science, local industry majors to set up digital and
implement Industry 4.0 technologies and technology, engineering, mathematics) Industry 4.0 demonstration and collaboration
upgrade processes and skills. subjects. However, for some years the number labs.
of STEM graduates has fallen below
Data integrity, security and analysis are expectations. Moreover, standards compliance that fosters
another important area of focus to ensure interoperability of systems, both nationally
seamless data flow across value chains. This There is an urgent need to create a skilled and internationally, is important to support
will also help the Government understand and diverse workforce, with high salary, both seamless value chains, optimise resources,
priority issues across initiatives, ministries by up-skilling the existing labour pool and by and improve productivity.
and agencies and, consequently, can chart attracting and developing future talent in the
effective programs and regulatory support. manufacturing sector. Particular attention also Finally, developing and commercialising new
needs to be given to re-skilling and technologies and processes that address
re-deploying lesser skilled workers to other specific needs in priority sectors will be
sectors and activities. crucial to retain Malaysia’s position as a
preferred high tech and manufacturing hub
and supply chain partner.
 NATIONAL INDUSTRY 4.0
46 POLICY FRAMEWORK

THE
NATIONAL Attract Create

STRATEGIES
F I R
Funding Infrastructure Regulations

Funding & Enabling Ecosystem & Regulatory Framework &

Outcome-based Incentives Efficient Digital Industry Adoption
Infrastructure
2016

RM 106 647 Strategy F1: Strategy I1: Strategy R1:

Labour Provide outcome-based Strengthen the digital Increase awareness of the

Productivity incentives, including tax connectivity in and between need, benefits and
incentives to encourage industrial, education and training opportunities of Industry 4.0
investments in, and adoption hubs to remove connectivity technologies and business
RM254b of, Industry 4.0 technologies bottlenecks in adopting Industry processes among
& processes. 4.0 technologies. manufacturing firms
Manufacturing
Contribution

Strategy F2: Strategy I2: Strategy R2:

35
Introduce dynamic and Enhance the digitalisation and Create a platform and
Ranking in Global innovative financial products integration of government mechanism to help
Innovation Index to encourage adoption of processes and infrastructure manufacturing firms,
industry 4.0 technologies & along supply and manufacturing especially SMEs, assess and
processes value chains. develop their Industry 4.0
capabilities
18%
High Skilled Workers in
Manufacturing
Sector Strategy I3: Strategy R3:

Involve services providers for Improve data integrity, standards,

Industry 4.0 and link them to sharing security to facilitate
manufacturing firms to help seamless integration of value
implement technologies, chains and support
processes and skill intra-ministerial analysis to chart
development effective Industry 4.0 programs
 47

Transform

S T
Skills & Talent Technologies

Upskilling Existing & Access to Smart

Producing Future Talents Technologies
& Standards
2025

Strategy S1: Strategy T1: +30%

Enhance the capabilities of the Establish digital/technology labs and Labour Productivity
existing workforce through national collaborative platforms, especially Growth
development programmes specially public-private partnerships (PPP), to
designed for specific manufacturing create awareness and understanding,
sectors and support re-skilling and foster the adoption of new RM392b
re-deployment. technologies, and facilitate the transfer
of knowledge Manufacturing
Contribution

Strategy S2: Strategy T2:

30
Ensure the availability of future Establish and implement standards for
talent by equipping students with systems interoperability for smart Top 30 Ranking
the necessary skillsets to work in manufacturing and Industry 4.0 in Global
the Industry 4.0 environment. technologies. Innovation Index

50%
High-Skilled
Workers in
Strategy T3: Manufacturing
Sector
Intensify Research, Innovation,
Commercialisation and
Entrepreneurship (RICE) programmes
and activities in specific Industry 4.0
technologies and processes that
support and advance priority sectors.
 NATIONAL INDUSTRY 4.0
48 POLICY FRAMEWORK

FUNDING & OUTCOME-BASED INCENTIVES

F1
STRATEGY
Provide outcome-based incentives, including tax incentives to
encourage investments in, and adoption of, Industry 4.0
technologies & processes.

RATIONALE
The Government aims to support industry transformation and develop local technology development by providing
and aligning incentives with targeted outcomes to manufacturing firms and solution providers.

STRATEGIC OUTCOMES

Fiscal and non- fiscal incentives for local firms, SMEs and start-ups as well as multi-national corporations (MNCs) that deploy or
develop Industry 4.0 technologies and processes.

ACTION PLANS/PROGRAMMES

To explore on realigning and leveraging incentive packages to encourage the adoption of Industry 4.0 among local firms,
especially SMEs

To explore on providing incentive packages to MNCs partnering with local firms, especially SMEs, to expedite the adoption and
implementation of Industry 4.0
 49

FUNDING & OUTCOME-BASED INCENTIVES

F2
STRATEGY
Introduce dynamic and innovative financial products to encourage
adoption of industry 4.0 technologies & processes

RATIONALE
In fulfilling the needs of diverse and innovative businesses, the Government and private sector will spur the
implementation of Industry 4.0 through dynamic and innovative funding options for local firms, SMEs and start-ups
as well as multi-national corporations (MNCs).

STRATEGIC OUTCOMES

A suite of comprehensive financial products that local firms, SMEs and start-ups as well as multi-national corporations (MNCs)
can leverage on in line with their needs in implementing and adopting Industry 4.0 technologies and processes, across all stages
of business life-cycle

Development funds for adoption, development or deployment of Industry 4.0 technologies and processes

ACTION PLANS/PROGRAMMES

To explore on creating Government-led development funds for Industry 4.0.

To create awareness among local firms on the availability of various financing options to expedite the adoption and
implementation of Industry 4.0 and encourage hybrid purchase or service arrangement for B2B in their financing agreements.

To explore on aligning existing alternative financing including venture capital, crowd funding and other intermediaries to expedite
the adoption and implementation of Industry 4.0.
 NATIONAL INDUSTRY 4.0
50 POLICY FRAMEWORK

ENABLING ECOSYSTEMS & EFFICIENT DIGITAL INFRASTRUCTURE

I1
STRATEGY
Strengthen the digital connectivity in and between industrial,
education and training hubs to remove connectivity bottlenecks in
adopting Industry 4.0 technologies.

RATIONALE
Fast and secure data connection is a basic requirement for the realisation of Industry 4.0. technologies and services.
Malaysia already has deployed High Speed Broadband and 4G technologies on a wide-spread basis, but there are
still some gaps in key industrial and training locations that could impact the adoption and development of Industry
4.0 technologies and processes.
The strategy aims to systematically address and remove key connectivity bottlenecks in priority locations.

STRATEGIC OUTCOMES

Ensuring high speed and reliable connectivity for industrial, education and training hubs

Enabling adoption of digital and Industry 4.0 technologies and processes among manufacturing firms and related service
providers

ACTION PLANS/PROGRAMMES

To prioritise and expedite the implementation of High Speed Broadband (HSBB) at key industrial areas and training centres

To encourage the deployment of converged networks that are essential for Industry 4.0 technologies, especially IoT
 51

ENABLING ECOSYSTEMS & EFFICIENT DIGITAL INFRASTRUCTURE

I2
STRATEGY
Enhance the digitalisation and integration of government processes
and infrastructure along supply and manufacturing value chains.

RATIONALE
Digitalising and integrating government processes and infrastructure elements along value chains will be key to
enable secure data flows, assure seamless goods movements, and drive improvements in efficiency and
productivity.
A number of government processes are not yet digitalised and will need to be optimised, digitalised and integrated
to support Malaysia’s Industry 4.0 transformation. These include certain approval, licensing, certification, good
clearance and other processes.

STRATEGIC OUTCOMES

End-to-end digitalisation of government processes along the manufacturing and supply industry value chains

Seamless movement of goods and services between manufacturers, suppliers and supporting agencies with improved visibility
and optimised resourcing

ACTION PLANS/PROGRAMMES

To assess priority government-related processes and elements that impact manufacturing and supply chains and Industry 4.0
transformation

To support the accelerated digitalisation and integration of these processes, led by the respective government agencies
 NATIONAL INDUSTRY 4.0
52 POLICY FRAMEWORK

ENABLING ECOSYSTEMS & EFFICIENT DIGITAL INFRASTRUCTURE

I3
Involve services providers for Industry 4.0 and link them to
manufacturing firms to help implement technologies, processes and
skill development.
STRATEGY

RATIONALE
Services related to Industry 4.0 are an important element to help Malaysian companies accelerate their transition to
Industry 4.0, especially in developing people, transforming processes and adopting technologies.
Hence, Industry 4.0 service providers need to be involved as an integral part of the ecosystem and be connected to
manufacturing firms, especially SMEs, who often have limited visibility.

STRATEGIC OUTCOMES

End-to-end ecosystem support and service provider visibility for manufacturing firms

Improved performance of services providers in helping manufacturing firms adopt and transform to Industry 4.

ACTION PLANS/PROGRAMMES

To develop and disseminate a catalogue of service providers

To link service providers to manufacturing firms and SMEs through collaboration platforms
53
 NATIONAL INDUSTRY 4.0
54 POLICY FRAMEWORK

REGULATORY FRAMEWORK & INDUSTRY ADOPTION

R1
STRATEGY
Increase awareness of the need, benefits and opportunities of
Industry 4.0 technologies and business processes among
manufacturing firms

RATIONALE
Lack of awareness of digital and Industry 4.0 is one of the main issues and barriers to embark on the smart
manufacturing transformation.
A greater understanding of Industry 4.0 is crucial for manufacturing firms to make informed decisions on
investments, especially on assessing impact, determining cost and benefits of automation, and capitalising on data.
Structured awareness programs are needed to educate and promote the understanding and need for action to local
firms and particularly SMEs.

STRATEGIC OUTCOMES

Increased understanding of the need, benefits and opportunities of Industry 4.0

More manufacturing firms adopting Industry 4.0 technologies and processes

ACTION PLANS/PROGRAMMES

To undertake a comprehensive Industry 4.0 awareness programme across all stakeholders with particular focus on SMEs

To create a regulatory sandbox that enables firms to manage regulatory risks during the testing stage.
 55

REGULATORY FRAMEWORK & INDUSTRY ADOPTION

R2
STRATEGY
Create a platform and mechanism to help manufacturing firms,
especially SMEs, assess and develop their Industry 4.0 capabilities

RATIONALE
For many companies, Industry 4.0 will be a major transformation, not only by investing in technology, but also by changing business processes and culture.
The experiences of other countries show that assessment tools and platforms for learning and best practice sharing help companies, especially SMEs,
pinpoint priorities of not only what to address, but also how to transform.
Implementing this strategy will require a close collaboration with the different industry associations to ensure focus on the right sector priorities.
This strategy will also help the Government assess better the broader needs, challenges and priorities of Malaysian manufacturing firms.

STRATEGIC OUTCOMES

Better understanding among manufacturing firms of best practices, their own capabilities and transformation requirements

Profile of the state of readiness of the local manufacturing industry in adopting Industry 4.0 for targeted technology improvement
and support prioritisation

ACTION PLANS/PROGRAMMES

To create tools and processes to help manufacturing firms assess their capabilities and readiness to adopt Industry 4.0
technologies and processes

To establish a national Conformity & Industrial Assessment as a platform for conducting this assessment, sharing global and local
best practices, supporting the development of local firms, and identifying national Industry 4.0 priorities

To establish collaborative programs with other countries that are leading the Industry 4.0 transformation to share best practices
and help guide Malaysia’s programmes for optimal impact
 NATIONAL INDUSTRY 4.0
56 POLICY FRAMEWORK

REGULATORY FRAMEWORK & INDUSTRY ADOPTION

R3
STRATEGY
Improve data integrity, standards, sharing security to facilitate
seamless integration of value chains and support intra-ministerial
analysis to chart effective Industry 4.0 programs

RATIONALE
A significant barrier to enabling seamless digital flows along manufacturing and supply chains is the lack of
standards, inter-operability and governance for both data and intellectual properties.
Issues with data integrity and inter-operability can also affect intra-ministerial coordination and effective analysis in
identifying program and regulatory priorities.
This will require both the development of standards and security protocols and integration especially across
government ministries and agencies.
This strategy supports strategy I2, the digitalisation and integration of government processes into manufacturing
supply chains.

STRATEGIC OUTCOMES

Integrated, standardised, secure and trusted data ecosystem that enables seamless data flows throughout major manufacturing
and supply chains

Better understanding and analysis of priority issues across initiatives, ministries and agencies, driving more effective programs
and regulatory support

ACTION PLANS/PROGRAMMES
To identify and implement effective and streamlined, standardised data, regulation and compliance protocols within and between
government ministries and agencies

To collaborate with businesses to ensure suitable standards are in place for privacy of data, including appropriate handling,
ownership and storage

To create a manufacturing industry data depository that will enable sharing and analyses across all government ministries and
agencies

To establish a set of cybersecurity and IoT security guidelines for Industry 4.0 as part of Malaysia’s broader development of
cybersecurity capabilities
57
 NATIONAL INDUSTRY 4.0
58 POLICY FRAMEWORK

UPSKILLING EXISTING & PRODUCING FUTURE TALENTS

S1
STRATEGY
Enhance the capabilities of the existing workforce through national
development programmes specially designed for specific
manufacturing sectors and support re-skilling and re-deployment.

RATIONALE
The transition to smart manufacturing business models, technologies and processes is rapidly changing the required skillsets for
the existing workforce. Many firms, especially SMEs, will require more structured and up-to-date training and skill development
avenues for developing and maintaining world-class practices and capabilities within their workforce, including experts with
advanced Industry 4.0 knowledge.

This strategy aims to both upskill the existing workforce and mitigate the potential impact on jobs.

STRATEGIC OUTCOMES

Increase in overall labour productivity due to upskilling and reskilling of the existing workforce

Increase in number of high-skilled and multi-skilled workers with high wages in the manufacturing industry

Mitigation of the number of potential job losses as a result of automation and technology adoption

ACTION PLANS/PROGRAMMES
To create an Industry 4.0 Talent Competency & Technology Mentoring Programme to drive broader workforce development
initiatives in line with specific sector requirements

To establish an Expert Certification Programme in Industry 4.0 areas

To develop tailored training courses for the re-skilling of transitioning employees

To enhance classroom programs for rapid upskilling programs by using augmented or virtual reality (AR/VR)

To enable the availability of data on Industry 4.0 talent and labour pools for the government, academia and industry (in order to
chart future action plans)
 59

UPSKILLING EXISTING & PRODUCING FUTURE TALENTS

S2
STRATEGY
Ensure the availability of future talent by equipping students with
the necessary skillsets to work in the Industry 4.0 environment.

RATIONALE
Ensuring the pipeline of future talents in the manufacturing sector is important as advances in manufacturing
techniques and processes require a higher skilled and educated workforce.
The focus on technical vocational education & training (TVET) and STEM (science, technology, engineering,
mathematics) education will be of priority as this will ensure a continuous supply of highly qualified talent.
There is also a need to raise the profile of the high technology manufacturing industry and firms as attractive work
and career places and employers of choice. This will be key to attract more students to STEM subjects.

STRATEGIC OUTCOMES

Continuous availability of Industry 4.0 talents for Graduates equipped with relevant and practical
the manufacturing industry Industry 4.0 skills

Increased number of TVET & STEM students Increased industry-academia collaboration

ACTION PLANS/PROGRAMMES
To boost support for TVET & STEM education programmes, in part by increasing funding for vocational education and training
programmes

To integrate theory and practical Industry 4.0 applications into tertiary education curricula, including structuring industry
placement opportunities

To promote manufacturing as a preferred destination for high-skilled jobs to overcome public perception issues and attract both
skilled labour and university graduates

To enhance and increase the capacity and capabilities of educators, trainers and instructors in the manufacturing related
education sectors
 NATIONAL INDUSTRY 4.0
60 POLICY FRAMEWORK

ACCESS TO SMART TECHNOLOGIES & STANDARDS

T1
Establish digital/technology labs and collaborative platforms,
especially public-private partnerships (PPP), to create awareness
and understanding, foster the adoption of new technologies, and
STRATEGY facilitate the transfer of knowledge.

RATIONALE
Digital/technology labs by manufacturing leaders create showcases for local companies, especially SMEs, to understand
available and best-in-class technologies, practical use cases, and engage in collaborative deployment efforts.
Public-private partnerships (PPP) are proven concepts to help expedite the adoption of new technologies in priority areas.
The Government intends to work with local and global leaders to establish more digital & technology labs and collaboration
platforms through PPP arrangements.

STRATEGIC OUTCOMES
Access for local companies, especially SMEs, to key enabling Industry 4.0 technologies and partners

Stronger collaboration in deploying new technologies across value chains

Public-private partnership platforms for industry, academia, government and other stakeholders to work for a targeted outcome
in Industry 4.0

ACTION PLANS/PROGRAMMES

To support leading global and local industry leaders to establish digital/technology labs that showcase the potential applications,
benefits and proof of concept of new technologies for industry adoption

To create public-private partnerships and collaborative programs for manufacturing activities that foster digital adoption,
collaborative deployment and development of local capabilities, especially in priority sectors and technologies

To provide SMEs and local firms with open access to smart manufacturing research, tools and technologies and help them
understand what can be applied in the early stages of adoption
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ACCESS TO SMART TECHNOLOGIES & STANDARDS

T2
STRATEGY
Establish and implement standards for systems interoperability for
smart manufacturing and Industry 4.0 technologies.

RATIONALE
Standards and interoperability of systems are important to facilitate a wide-spread adoption of Industry 4.0
technologies and processes, especially given the need for collaboration and integration along manufacturing
and supply chains. These standards need to be understood, well documented, and allow Malaysian-based
manufacturing firms to integrate both within local and global production networks and supply chains.

STRATEGIC OUTCOMES

Standardisation for interoperability of Industry 4.0 technologies and processes

Seamless integration and interoperability in local and global manufacturing and supply value chains

ACTION PLANS/PROGRAMMES

To establish an inventory of Industry 4.0 related standards – consolidate, develop, harmonise, align with global standards, and
enact

To address interoperability barriers by implementing appropriate and advanced industry standards, in close consultation with the
industry
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62 POLICY FRAMEWORK

ACCESS TO SMART TECHNOLOGIES & STANDARDS

T3
Intensify Research, Innovation, Commercialisation and
Entrepreneurship (RICE) programmes and activities in specific
Industry 4.0 technologies and processes that support and advance
STRATEGY priority sectors.

RATIONALE
Growth opportunities in the manufacturing sector will need to be supported by technological innovation from
both private and public research communities. Sustained growth in the manufacturing sector will require
proactive investments in advancing and enabling Industry 4.0 technologies and processes.
A further step up in Malaysia’s innovation capabilities will be important to propel priority sectors and
technologies and reinforce Malaysia’s position as preferred high-tech manufacturing destination.

STRATEGIC OUTCOMES

Increase in capacity and capability of Malaysian firms, start-ups, universities and research institutes in Industry 4.0 technologies

Production and commercialisation of high value and innovative products and services

Position as primary destination for the high-tech industry

ACTION PLANS/PROGRAMMES

To prioritise technology development programmes on Industry 4.0 that strengthen the overall research, innovation,
commercialisation and entrepreneurship capacity and provide solutions for priority sectors

To improve understanding by and access for manufacturing firms of existing Industry 4.0 research facilities and ongoing
research and development

To create technology development and experimentation labs for collaborative Industry 4.0 technology and solution development
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 NATIONAL INDUSTRY 4.0
64 POLICY FRAMEWORK

IMPLEMENTATION APPROACH

The strategies and

actions plan outlined
in the previous pages
require a
collaborative effort
across multiple
stakeholders and
organizations. Not a one stop
To accelerate or solution
improve the intended Although all efforts
Multi-ministries have been taken to One size fits all – breadth and depth
outcome of these
jurisdictions incorporate all possible This documents provides broad strategies and
actions, a number of interventions, this policy
The strategies and action plans. It is premised upon the principle
factors must be framework is not a that each sector within the manufacturing
action plans in this
taken into solution to all. industry has different level of readiness in
policy framework is
consideration to a systemic solution embracing and adopting to Industry 4.0. Further
identify the most for the work is required to customise these
efficient and manufacturing recommendations for each sector depending
effective industry and its on their needs and priorities.
implementation associated services.
approach. This
includes but not
limited to:
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Solutions for the SMEs

Majority of the manufacturing firms are SMEs. They typically have lower
levels of collaboration with research, reduced access to high performing
graduates, and less revenue to invest resources in strategic planning.
However the agility and specialisation of SMEs will be critical in achieving the
Differentiating circumstances 10-year vision for the manufacturing sector. In implementing the suggested
In recognising the best practices among manufacturing actions, it is important to ensure solutions are valuable and accessible to
ecosystems such as Germany and Japan, it is acknowledged SMEs, and that the research community and larger businesses are greater
that the needs and the driving factors of these countries are incentivised to collaborate with SMEs.
very much different from Malaysia’s. An exact replication of
their successful systems would not work that well in
Malaysia’s context due to these differences. As such, each
manufacturing sector needs to consider which elements of Transforming Malaysia manufacturing sector is not a short-term
these international benchmarks could be adopted. process, with many industries having experienced significant
challenges for decades. Regardless of the actions of the sector over
the next few years, a supportive policy environment is required over
the next decade to provide businesses with stability and allow them to
execute these long-term strategies.