Malaysians move to stay competitive
By Brian Carroll -- Furniture Today, August 5, 2002
KUALA LUMPUR , Malaysia — KUALA LUMPUR , Malaysia — Malaysia's furniture manufacturers are scrambling to stay competitive in the face of stiffening competition from China and, more recently, from Vietnam.
Labor and raw material costs are significantly less in both China and Vietnam, causing an exit of production from this No. 7 U.S. source of imported furniture.
Last year, the United States brought in $414 million of Malaysian-made furniture, a 10% drop from 2000, when the figure was $461 million.
The Malaysian Furniture Industry Council is predicting a rebound in total exports this year. In 2001, Malaysian furniture makers exported a total of $1.2 billion. The MFIC projects the total to hit between $1.5 and $1.6 billion in 2002, a 25% gain. In 2001, exports were off 25% compared to 2000.
Paul Wang, MFIC executive director, said Malaysian companies can cut as much as 60% of their operating costs by shifting manufacturing to China or Vietnam. So far, however, fewer than 50 of MFIC's 500 member companies have made that shift.
Industry and government leaders for a decade have called for more sophisticated and original designs to bring to the world market. Malaysia remains largely derivative, with buyers bringing designs to Malaysian factories and looking to them for mostly promotionally priced goods.
A major problem facing Malaysia's furniture industry is its dependence on Taiwanese investment. Estimates have Taiwanese ownership or financial backing accounting for between one-quarter and one-half of all Malaysian furniture exports. It is primarily Taiwanese owners and investors that have been moving into southern China and, to a lesser extent, Vietnam.
Many Taiwanese factory owners already have production set up in China and/or Vietnam. Promotional powerhouses Kimble and Yeh Brothers, both of which have production in Malaysia, China and Vietnam, are examples.
The flight from Malaysia also is evident in the migration of major U.S. furniture chains, which increasingly are setting up buying operations in China and closing up shop in Malaysia, according to the New Straits Times Press newspaper published here.
Malaysia still has advantages, however, particularly its long history of woodworking and its mature, highly skilled labor force. Perhaps an even greater advantage is the country's timber production, especially of rubberwood. The indigenous species is in great demand globally.
