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AEM needs talent, supply chain management to fuel expansion in Malaysia, Singapore and now US

Test innovation manufacturer AEM Holdings Ltd is among the vanguard of the critical semiconductor manufacturing sector, which has proven to be resilient even in the face of COVID-19 as exploding maker and consumer demand for chips from the electronics and automotive industries, in particular, have seen the space achieve new heights, even with noticeable supply shortages since the pandemic.

Slowing economic growth and surging inflation appear to be slowing consumer demand and corporate expenditure recently, but demand has remained robust with global semiconductor sector sales growing 32.4% year-on-year (3.4% month-on-month) to US$52.5 billion last February – owing largely to a big jump in chip orders in 2020 and 2021 as scores of businesses digitalized faster to survive and people embraced online activities in vast numbers.

Singapore and the state of Penang in Malaysia, have both been a vital link in the semiconductor manufacturing supply chain for quite some time, and the Southeast Asian production hubs have a number of notable companies growing fast that cover the spectrum of chips, components and testing capacities for their semiconductor clients.

But snarled supply chains and a dearth of mission-capable talent to keep pace with the growth have been impacting all parts of the chip ecosystem, as test innovator AEM is finding out. The company is expanding its R&D footprint in Singapore, Penang, and in the US. New facilities in Singapore will go online by end-Q3 2022 to complement new sites in the US and Penang, where AEM will be doubling its headcount as part of 300 new jobs to support the expansion – including roles for technicians, engineers, customer support, and supply chain management.

“Malaysia has attracted many large world-class companies to Penang, because this is a big hub for the semiconductor industry, electronics as well,” said Juha Arola, AEM Chief Operating Officer, when catching up with Tech Wire Asia at SEMICON Southeast Asia 2022 in Penang. “That’s why we grow the manufacturing here, but we also want to grow a bit more R&D as well. The main growth in R&D will be in Singapore.

Senior Reporter Johanan Devanesan interviewing the COO of AEM Juha Arola, discussing their expansion into Malaysia, Singapore and the US market, as well as the chip supply crunch within the industry.

“We just leased 365,000 square foot facility on the [Malaysian] mainland, so that will make sure that Malaysia and Penang become our major hub for manufacturing,” Arola continued, while acknowledging the severe talent crunch all of the semiconductor manufacturing supply chain is experiencing – which is why many of the biggest chip players at SEMICON Southeast Asia were heavily involved in innovative recruitment techniques to attract the interest of regional young people that they could train from scratch to fill specialized roles.

“The challenge everybody has right now is to find the talent, so we are going to engage more with educational institutes, and then hire fresh graduates – we get them in and we’ll train them. Because our tools are very specific, it’s not really easy to study what we actually do.”

“We bring in our staff very early, because it takes many months to train one person in what we do,” Arola explained. “One of these [test] tools that we build can take 3000 to 6000 hours, to build one. So with that kind of long, long build times, the training takes a long time as well.”

Malaysia and Singapore are strategically positioned in the heart of the semiconductor manufacturing and supply hub in Southeast Asia, with a large potential for talent to deliver the sort of technologies and solutions needed for advanced, integrated semiconductor test requirements.

But many AEM customers, some of the biggest chip companies in the world, are based in North America – fueling AEM’s drive to grow its US presence. “We are growing in San Diego, California and Chandler, Arizona,” according to Arola. “It’s not very big, but it is to be close to our largest customer.”

Arola joined AEM last year from electronics firm CEI, which has been acquired by AEM. He mentions how hungry demand from the electronics trade has caused semiconductor production lead times to stretch tremendously in the intervening pandemic years,  necessitating the need supply chain oversight and driving hiring for supply chain management specialists.

“We see it can be up to two years. Sometimes you can place the order for semiconductors, and they [chipmakers] confirm the order one or two years later,” elaborated Arola, adding that since “lead times are extremely long, we have to be really skilled and have a great relationship with the distributors and the manufacturers.”

The AEM COO says helping their clients forecast demand better and managing those relationships has been “really challenging” in the past couple of years, but expects shifting economic factors to turn that situation around by 2023.

“I believe that within this next year, we will likely see that lead times should start reducing as the demand is expected to lower a little bit. That’s my expectation,” confirmed Arola. “So 2020, ’21, ’22 – very bad years in terms of supply chain and availability. I think 2023 will be the year where it starts improving. But it depends on the global economy.”