Industry Overview

7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d) 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)

1 INTRODUCTION Objective of the Study This Executive Summary of the Independent Market Research (“Executive Summary”) Report has been prepared in conjunction with the listing of FoundPac Group Berhad on the Main Market of Bursa Malaysia Securities Berhad. The objective of this Executive Summary report is to provide an independent view of the industry and market(s) in which FoundPac Group Berhad operates in and to offer a clear understanding of the industry and market dynamics. Rationale and Scope of Work FoundPac Group Berhad is principally involved in the design, development, manufacturing, marketing and sale of precision engineering parts for integrated device manufacturers (“I OMs”) (also known as semiconductor manufacturers), outsourced semiconductor assembly and test companies (“OSATs”) or PCB design houses, fab-Iess semiconductor companies and/or other channel partners. FoundPac Group Berhad mainly designs and manufactures stiffeners, test sockets and hand lids, and these parts are used to facilitate the testing of integrated circuits. The scope of work for this Executive Summary report will thus address the following two (2) areas: (i) The Electronics, Semiconductor and PCB industries, which are the broader sectors in which FoundPac Group Berhad operates, and which the outlook and prospects of stiffeners, test sockets and hand lids are directly tied to; and
(ii) The Precision Engineering Part industry in Malaysia, specifically focusing on precision engineering parts for the Electronics, Semiconductor and PCB industries such as stiffeners, test sockets and hand lids. This is the industry FoundPac Group Berhad operates in and is a sub-sector of the Electronics and Semiconductor industries.

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2 DEFINITION AND SEGMENTATION The semiconductor industry encompasses companies involved in the design, fabrication and processing as well as marketing and sale of semiconductor chips or semiconductor integrated circuits (“ICs”). An IC is an assembly and integration of more than one (1) semiconductor device on a single thin semiconductor material (i.e. “wafer”). There are two (2) types of semiconductor devices, namely active and passive components. Active semiconductor devices refer to components with the ability to control electric current, and examples of these components include diodes and transistors. On the other hand, passive semiconductor devices are supplementary components to active semiconductor devices which are incapable of manipulating electric current flow and do not require electric current to function. Passive semiconductor devices include electronic components such as resistors and capacitors. These semiconductor devices are mounted on a base known as a printed circuit board, consisting of a thin semiconductor material (i.e. “wafer”) with pre-defined conductive copper tracks which enable semiconductor devices to be soldered onto its surface. The birth of the semiconductor industry can be traced back to 1906 when it was discovered that two (2) electrical meshes placed between two (2) electrodes in a vacuum could amplify electrical current and act as a switch. This technology was known as a vacuum tube, and was widely used in radios and telephones during the time. The vacuum tube technology also enabled the first digital computer, called Electronic Numerical Integrator and Computer (“ENlAC”), to be built in 1946 for the United States Army’s Ballistic Research Laboratory. ENIAC weighed 30 metric tonnes and comprised 100,000 parts including 18,000 vacuum tubes. Ultimately however, vacuum tube technology consumed an immense amount of power and had to be replaced frequently. Solid-state devices emerged in 1948 with the introduction of transistors by a team of scientists at the American Telephone and Telegraph Company’s Bell Laboratories. Solid-state devices are electronic components in which electrons are confined within a solid material. While this technology substantially reduced the power required to generate these electronic circuits, the solid-state electronic components needed to be interconnected using wires and solder, and thus they were susceptible to faulty connections. The solid-state technology later evolved, and ICs were invented when Jack Kilby, an engineer in Texas Instruments Inc., introduced the idea of integrating these components within a single flat block of semiconductor material such as silicon or germanium, allowing electronic circuits to be even more compact in size. Almost simultaneously, Robert Noyce also developed another version of IC from semiconductor materials. Robert Noyce was one of the founders of Intel Corporation, one of the largest global semiconductor companies today, and it was his IC technology which was utilised in the personal computers manufactured by Intel Corporation. Intel Corporation created the first commercially available microprocessor in 1971, and the first microcomputer in 1972. Prior to that, Texas Instruments Inc., which was then focused on developing equipment for the seismic and defence industries, had built the first IC or chip-based computer for the United States Air Force in 1961. Today, ICs can have up to and over 20 million semiconductor devices integrated into a single electronic circuit, and are progressively reducing in size and increasing in performance. The range of applications for ICs in the industry has also broadened dramatically over the last decade, and they now play an essential role in almost every aspect of our lives. At present, the applications for ICs are no longer limited to computers, industrial or scientific equipment, and military and aerospace hardware, but also extends to electronic products which form an integral part of the society today. ICs are technology enablers for electronic products used in various industries such as consumer electronics, information and communications technology (“ICT”), automotive, medical and manufacturing. Hence, the semiconductor industry is highly correlated to the growth of the electronics industry as the demand for electronic products reflects the market for its raw materials, namely ICs. In the past, the semiconductor industry comprised IDMs, which are typically brand owners or intellectual property owners of ICs that are used in various electronic products. These IDMs were vertically integrated, where their principal activities involved the design, fabrication, assembly, packaging, marketing and sale of ICs, as well as the manufacturing of equipment and tools required in the 3 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
manufacture of ICs. Over the years, as contract outsourcing partners began to emerge, many of these IDMs began to outsource activities such as assembly and packaging as well as IC manufacturing, placing greater emphasis on design and fabrication in order to achieve economies of scale and reduce manufacturing costs. Examples of IDMs include Intel Corporation, Freescale Semiconductor Inc., and Samsung Electronics Co. Ltd. For the most part, IDMs are involved in the design of their own ICs, although there may be instances where they outsource the IC design process to IC design houses which are able to develop innovative IC design solutions. In turn, some IDMs provide these IC design houses with fabrication services. Thus, the IC design houses rely on IDMs to fabricate their IC design solutions due to the capital intensive nature of the IC fabrication process. As companies solely involved in IC fabrication such as Taiwan Semiconductor Manufacturing Company Limited, Semiconductor Manufacturing International Corporation and United Microelectronics Corporation, commonly known as “foundries”, began to emerge, this provided the more established IC design houses with the opportunity to partner with these foundries in growing their business further in the semiconductor industry. The business model of these IC design houses, in which the IC fabrication process is outsourced, is commonly known as the “fab-Iess” business model. Some of the key fab-Iess semiconductor device companies include, but are not limited to, Qualcomm Technologies Inc., Semtech Corporation, Nvidia Corporation, and Advanced Micro Devices Inc. (“AMD”). With the emergence of fab-Iess semiconductor companies, IDMs are increasingly faced with cost pressures as these fab-Iess semiconductor companies have lower capital expenditure and are able to reduce product prices. In light of adapting to changing industry requirements, an increasing number of IDMs are shifting towards outsourcing most or part of their fabrication process to foundries to reduce fixed costs in order to increase competitiveness. Companies which are still involved in the design of ICs and outsource a significant part of their fabrication activities to foundries are known as “fab-lite” companies. Examples of these fab-lite companies include Texas Instruments Inc., Infineon Technologies AG, Avago Technologies Limited and Analog Devices Inc. Today, ICs are progressively reducing in size and increasing in performance. As a result, there is a growing trend towards producing PCBs with higher densities at a faster speed, leading to a growing need for higher precision in the machining of interlayer connection holes within the PCBs. This caters to the expanding range of applications for ICs over the last decades as the end-products now play an essential role in almost every aspect of our lives. Value chain of the electronics and semiconductor industries Presently, these three (3) types of semiconductor industry players, namely IDMs, fab-Iess companies and fab-Iite companies, form the backbone of the semiconductor industry. All three (3) types of companies are involved in the design of semiconductor solutions. These design solutions are then fabricated in­house or by a foundry. Fabrication typically refers to the manufacturing of ICs where semiconductor devices are formed on a semiconductor wafer, which is a thin silicon-based material, based on a pre­defined circuit pattern. Once fabricated, ICs are then sent for assembly, packaging and testing. The assembly process is necessary to protect the ICs and enable the dissipation of heat from the ICs, as well as facilitate the integration of ICs into electronic systems to manufacture electronic products. After the assembly process, the products created will be packaged in a plastic moulding or ceramic case. Thereafter, the final products manufactured will undergo a series of testing. IDMs generally engage OSAT companies to undertake this process. Electronic product companies are ultimately the customers of the semiconductor industry players and examples of these companies include mobile and wireless device companies, automobile manufacturers, as well as other consumer electronic product manufacturers. These companies may also engage electronic manufacturing service providers to undertake the manufacturing, assembly, packaging and/or testing of the final electronic products. Most IDMs ceased the manufacturing of equipment and tools used in their manufacturing processes when engineering support companies specialising in manufacturing such equipment began to emerge in the 4 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
industry. Different equipment and tools are required at each stage of the value chain. At the design and development stage, design automation tools and equipment supplies are required by IDMs in the design of ICs. Industry players involved in the fabrication stage also require the necessary automated equipment for the manufacture of ICs. The OSATs require precision engineering parts such as stiffeners, test sockets and hand lids, automated test equipment (“ATE”) and other equipment and tools to facilitate their testing services, as well as equipment to undertake assembly and packaging services. The manufacturing of electronics and semiconductor products has become an automated process where precision, speed and quality are critical success factors. As such, the required equipment and tools are regarded as highly important components in the manufacturing process as they allow industry players to meet these three (3) success factors. Due to the intense competition present amongst semiconductor manufacturers, industry players must meet the stipulated delivery time while ensuring the quality of products manufactured. Thus, the testing of semiconductor devices is an important process, and is carried out using ATE and various precision engineering parts such as stiffeners, test sockets and hand lids. FoundPac Group Berhad is principally involved in the design, development, manufacturing, marketing and sale of precision engineering parts for the electronics and semiconductor industries and as such, this is the segment which will be of interest in this report. Value Chain of the Electronics and Semiconductor Industries (Global), 2015
Notes: 1. l1li Industry segment in which FoundPac Group Berhad is principally involved in.
2. Companies involved in the above value chain may have overlapping principal activities and thus, may have multiple roles in the semiconductor value chain.
3. Although precision engineering part suppliers’ products are used by GSAT companies to facilitate their testing services, precision engineering part suppliers may also sell these products to IDMs, fab-Iess and fab-lite companies, for onward supply to the GSAT company.

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3 THE ELECTRONICS, SEMICONDUCTOR AND PRINTED CIRCUIT BOARD (“PCB”) INDUSTRIES Introduction The outlook and prospects of stiffeners, test sockets and hand lids is directly tied to the electronics, semiconductor and PCB industry, as the demand for stiffeners, test sockets and hand lids is positively correlated to, and hence grows in tandem with the growth in the electronics, semiconductor and PCB industry. As industry data for stiffeners, test sockets and hand lids is not publicly available, the growth prospects of the electronics, semiconductor and PCB industry will be used as an indicator for the growth prospects of stiffeners, test sockets and hand lids. The global semiconductor industry has significant economic contribution to most regions around the world, with significant interlinkages to the global electronics industry. The electronics and semiconductor industries emerged from the invention of transistors in the 1940s and since then, its technology has been constantly evolving in terms of speed, performance and size of semiconductor devices in order to meet the increasing demand for lighter and more powerful semiconductor devices. For instance, the advancement of IC technology can be illustrated through the evolution of computers. From the first IC­based mainframe computer developed by Texas Instruments Inc. for the United States Air Force in 1961. About a decade later, when the first microprocessor was developed by Intel Corporation, computers were able to be mass produced and made commercially available to consumers. Over the years, computers have progressed in terms of performance and reduction in weight and size, and today, there are not only desktops, but also notebooks/laptops and tablets available in the market. Being the point of origination of electronics and semiconductors, and home to most large semiconductor industry players such as Texas Instruments Inc., Intel Corporation and Freescale Semiconductor Inc., United States has one of the oldest and most established electronics and semiconductor industries. The Asia Pacific region has also been expanding, with global semiconductor industry players emerging in Japan and Korea such as Toshiba Corporation and Samsung Electronics Co. Ltd. Electronic product companies are ultimately the customers of the electronics manufacturing industry and examples of these electronic product companies include mobile and wireless device companies, telecommunication equipment manufacturers, and consumer electronic product manufacturers. Hence, the PCB industry is highly correlated to the growth of the electronics industry as the demand for electronic products reflects the market for its electronic components, inclUding PCBs. In the context of Malaysia, the booming global electrical and electronic (“E&E”) industry has spurred the growth of the domestic electronics and semiconductor industry. The E&E industry is the largest manufacturing sub-segment of Malaysia’s economy, contributing 5.60% of Malaysia’s total GOP in 2015. The year 1969 was a significant milestone in the history of the electronics and semiconductor industry in Malaysia, as the Penang Development Corporation was established to promote foreign direct investments (“FDI”) in the Free Industrial Zone (then known as Free Trade Zone) in Penang. Beginning in 1972, major electronics and semiconductor industry players began setting up manufacturing facilities in the Free Industrial Zone in Penang. Among the first few multinational electronics and semiconductor industry players to set up manufacturing facilities in Malaysia were Intel (M) Sdn Bhd, Advanced Micro Devices Products Sdn Bhd and Clarion (M) Sdn Bhd. Many of these companies still operate their manufacturing facilities in Malaysia, and other major multinational electronics and semiconductor industry players have since established manufacturing facilities in Malaysia. The electronics and semiconductor industries in Malaysia have been developing since its early years, as the country offers global industry players lower labour costs, competent and skilled engineers and technicians as well as a stable political environment. As talent within the industry began to grow, local Malaysian companies began to emerge as OSATs and engineering support companies such as electronic equipment manufacturers, ATE manufacturers and electronic manufacturing service (“EMS”) providers. 6 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
These local companies began to grow to support the multinational electronics and semiconductor industry players, and some of these local companies have also expanded overseas to support the manufacturing facilities of their multinational clients located in other parts of the world. In the 1990s, the electronics and semiconductor industries in Malaysia began to evolve to include design and development activities as local engineers developed technical capabilities in design and engineering, and local companies ventured into the design of their own proprietary equipment. At present, Malaysia’s ability to develop human talent with technical capabilities and skills to undertake activities in various segments of the electronics and semiconductor value chain has provided a strong foundation for its electronics and semiconductor industries. The development of the electronics and semiconductor industries in Malaysia has transformed Malaysia into a major player in the global electronics industry. Malaysia has built a reputation as a producer and assembler of parts and components of manufactured E&E products with good product quality, as can be seen by the continuous demand from export markets such as United States and Singapore. Malaysia’s exports of E&E products contributed about 44.43% of total manufactured exports in Malaysia, and was valued at RM277.92 billion in 2015, growing from RM231.23 billion in 2012. Meanwhile, a total of 93 projects were approved in the E&E industry in Malaysia in 2015, amounting to investments worth RM8.93 billion. A significant percentage of these investments were FDls (91.83%), and FDls in the country for the E&E industry grew from RM3.30 billion in 2012 to RM8.20 billion in 2015. The Global Electronics, Semiconductor and PCB Industry Electronics Industry The global market for electronic products is estimated to have grown from USD1.79 trillion (RM6.31 trillion1) in 2009 to USD2.50 trillion (RM8.18 trillion2) in 2014, registering a CAGR of 6.91% during this period. Of the total worldwide electronic product sales, computers and other consumer electronics comprised the largest proportion, at an estimated 36.50%. Meanwhile, telecommunications, radio and radar equipment comprised 21.20%, control and instrument equipment comprised 7.20%, medical and industrial equipment comprised 4.70%, office equipment comprised 0.60%, and the remaining 29.80% of electronic product sales consisted of other semiconductor components. The global market for electronic products is estimated to have reached USD2.60 trillion (RM1 0.16 trillion3) in 2015, registering a CAGR of 6.42% between 2009 and 2015. [The rest of this page is intentionally left blank] 1 Exchange rate from USD to RM in 2009 was converted based on average annualexchange rates in 2009 extracted from published information from Bank Negara Malaysia at USD1 =RM3.5236. 2 Exchange rate from USD to RM in 2014 was converted based on average annualexchange rates in 2014 extracted from published information from Bank Negara Malaysia at USD1 =RM3.2736. 3 Exchange rate from USD to RM in 2015 was converted based on average annualexchange rates in 2015 extracted from published information from Bank Negara Malaysia at USD1 =RM3.9073.
7 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
Electronic Product Sales and the Breakdown of Electronic Product Sales by Region (Global), 2009­2015(e)
Notes: 1. Electronic product sales refer to the sales of selected electronic products for electronic data processing, office use, control and instrumentation equipment, medical and industrial equipment, communications and radar equipment, telecommunication, semiconductor components as well as other consumer electronics including video equipment, audio equipment and personal consumer electronics (e.g. electronic watches, musical instruments, and clocks).
2. (e) Estimate

Asia constituted more than half (i.e. 56.70%) of the global electronics market size, of which a majority of sales was estimated to be from PRC. North America contributed about 21.00% to the total market size, while Europe contributed about 18.40% to the total market size. Estimated Breakdown of Electronic Product Sales by Region (Global) “O-th~….. ers, I <-: -:. 3.90% i North . Europe, .:.: America, -: 18.40% ::::.~ 21.00% ~

7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
Meanwhile, global production of electronic products is estimated to have grown, in terms of manufacturing value, from USD1.86 trillion (RM5.69 trillion4) in 2011 to USD2.22 trillion (RM8.67 trillion5) in 2015, registering a CAGR of 4.52% during this period. Global manufacturing value of electronic products is estimated to reach an estimated USD2.27 trillion (RM8.87 trillion6) in 2016. Electronic Product Manufacturing Value (Global), 2011-2016(f) 2.50 CAGR (2011-2015(e»: 4.52% C-CAGR (2011-2016(f»: 4.06o/~
o -=(J.­::J~2.00 —-~ “t:Jo ecnQ.::> (J­.-ellc:: ::J1.50 0­~~ (J eIlC»-c::w’e-::J100 Ill_ .Q(J o IIIa’5c:: III 0.50 ~ 0.00 2011 1. Electronic products include AV equipment, communication devices, computer and information terminals, other electronic equipment, electronic components, display devices and semiconductor devices.
2. (e) Estimate
3. (f) Forecast

Semiconductor Industry The semiconductor industry is highly correlated to the demand for electronic products, and the growth of the industry over the last two (2) decades has been primarily driven by continuous demand for personal computers and other consumer electronic products. Despite several troughs occurring over the last two (2) decades, global semiconductor sales have proven to be resilient with speedy recoveries occurring in the following years, with each recovery pushing semiconductor sales higher than previous peaks. Overall, the global semiconductor industry registered a CAGR of 7.73% between the period 1990 and 2015, indicating the sustainability of the industry’s growth in the long term. Semiconductor sales grew from USD50.03 billion (RM135.26 billion?) in 1990 to USD321.80 billion (RM1.26 trillion8) in 2015. 4 Exchange rate from USD to RM in 2011 was converted based on average annualexchange rates in 2011 extracted from published information from Bank Negara Malaysia at USD1 =RM3.0594. 5 Exchange rate from USD to RM in 2015 was converted based on average annualexchange rates in 2015 extracted from published information from Bank Negara Malaysia at USD 1 =RM3.9073. 6 Exchange rate from USD to RM in 2016 was converted based on average annualexchange rates in 2015 extracted from published information from Bank Negara Malaysia at USD 1= RM3, 9073. 7 Exchange rate from USD to RM in 1990 was converted based on average annualexchange rates in 1990 extractedfrom published information from OANDA Corporation at USD1 =RM2.7035. 8 Exchange rate from USD to RM in 2015 was converted based on average annualexchange rates in 2015 extractedfrom published information from Bank Negara Malaysia at USD1 =RM3.9073.
9 2012 2013 2014 2015(e) 2016(f) 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
Semiconductor Sales (Global), 1990 -2018(f) 400 350 III 300 Q) . ~ ;” . ~. … 2500 __ .. oc .~ g 200 c= 0.0 ~~ 150 Q)::::>1/)-…. i5 100.0 o a
50 Iud I

The semiconductor industry is typically cyclical, characterised by periods of growth and decline caused by variations in supply and demand for semiconductors and economic cycles. The global semiconductor industry rose steadily in the early 1990s, driven by the widespread adoption of computers in businesses and homes during the period. This growth was augmented by the introduction of the Windows 3.0 operating system in 1990, which was the first operating system to gain popularity due to its ease of use, improved graphics and increased virtual memory. In 1995, the growth in demand for personal computers propelled when the Windows 95 operating system was introduced. Windows 95 enhanced compatibility and user-friendliness, as well as marked the change from 16-bit to 32-bit computers that enabled better performance processors. Accordingly, the semiconductor industry experienced a strong spike in sales of 41.87% between 1994 and 1995. The market for personal computers entered into a correction phase in 1996 as inventories of computer parts were excessive due to the accelerated trend of office automation and personal computers in the previous years. As a result, the industry experienced a decline of 4.63% between 1995 and 1996, though the industry recovered the following year. During the Asian financial crisis in 1998, the market fell by 8.15% in the year but quickly rebounded with a growth of 15.69% in 1999. As a result of the Internet boom in 2000, the semiconductor industry increased significantly by 38.31 % from 1999 to 2000 due to the expanding demand from the computer and telecommunication industries. However the semiconductor market once again underwent a market correction of excess inventory stocks for semiconductors in 2001 and 2002, causing a slowdown in those years. Nevertheless, the market recovered in 2003 with a year-on-year growth of 17.75% from 2002 and has since illustrated an upward trend, save for declines in 2008 and 2009 due to the global financial crisis, from which the industry recovered strongly with a growth of 31.82% in the following year of 201 O. In 2012, the semiconductor industry experienced a dip of 2.63% due to the fall in demand for personal computers. This was exacerbated by the onset of the European financial crisis which lowered consumer spending on personal computers and other consumer electronics such as mobile phones and televisions which are one of the largest components of electronic product sales. Meanwhile, the global semiconductor industry continued to face challenges of decreasing average selling prices from suppliers in the PRe. Nevertheless as the European economy recovered and with the substantial rise in demand 10 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
for mobile and wireless devices such as smartphones and tablets, the semiconductor industry rebounded and grew to USD296.68 billion (RM934.87 billion9) in 2013. The semiconductor industry posted all-time high sales of USD322.40 billion (RM1.06 trillion10) in 2014, due to the increase in demand for consumer electronics, particularly for smartphones and tablets. Consumer spending on smartphones is projected to increase predominantly in emerging markets, due to the declining average selling prices of smartphones and introduction of new products from major mobile and wireless device brands such as Apple and Samsung. In addition, this growth is also expected to be fuelled by emerging consumer electronic products such as smart watches, three (3)-dimension printers, Ultra High Definition (“Ultra HD”) television displays, and health and fitness devices. The healthy CAGR illustrated by global electronics and semiconductor sales is driven by the importance of electronic products in various applications and industries today, whereby the range of applications for electronics has broadened dramatically over recent decades, and electronic products developed today play essential roles among consumers. In addition, rapid technological advancements within the electronics industry have driven, and are also expected to continue, to promote new product advancements in the market as electronics manufacturers need to ensure their products remain competitive and are not obsolete. Consumers are highly receptive to these new product introductions, resulting in relatively shorter product lifecycles for most electronic products, especially consumer electronics such as mobile and wireless devices. As a result, new and enhanced versions of products are constantly introduced to the market, and these new introductions have been the key driving factor for electronics and semiconductor sales. The global semiconductor industry is forecast to grow from USD337.70 billion (RM1.32 trillion11 ) in 2016 to reach USD376.60 billion (RM1.47 trillion12) in 2018, registering a CAGR of 5.60% during the period. The Electronics, Semiconductor and PCB Industry in Malaysia The electronics industry in Malaysia is driven by the global demand for electronic products. Electronics Industry The E&E industry, of which the electronics industry is a sub-sector, has been acknowledged as a pillar of Malaysia’s economy as it is one of the largest economic sectors in the country. The E&E industry has been acknowledged as a pillar of the nation’s economy, as it is one of the five (5) largest economic sectors in the country and contributes to about a third of the nation’s export income. The industry accounted for 5.60% of Malaysia’s GDP in 2015, where its GDP was valued at RM64.80 billion, growing at a CAGR of 9.67% from RM44.80 billion in 2011. 9 Exchange rate from USD to RM in 2013 was converted based on average annualexchange rates in 2013 extracted from published information from Bank Negara Malaysia at USD1 =RM3.1511. 10 Exchange rate from USD to RM in 2014 was convertedbasedonaverageannualexchangerates in 2014extractedfrompUblished information from Bank Negara Malaysia at USD1 =RM3.2736. 11 Exchange rate from USD to RM in 2016 was convertedbasedonaverageannualexchangerates in 2015extractedfrompUblished information from Bank Negara Malaysia at USD1 =RM3.9073. 12 Exchange rate from USD to RM in 2018 was convertedbased on average annualexchange rates in 2015 extracted from pUblished information from Bank Negara Malaysia at USD1 =RM3.9073.
11 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
Economic Statistics (Malaysia), 2011-2015  E&E Industry Contribution to  National GOP  E&E Industry GOP  National GOP  Year  (RM billion)  (RM billion)  (%)  2011  864.90  44.80  5.18

GDP data is at constant 2010 prices Source: Department of Statistics Malaysia Over the years, Malaysia has built a reputation as a producer and assembler of parts and components of manufactured goods with good product quality. This has led to continuous demand for Malaysia’s E&E products from various end-user industries such as consumer electronics, telecommunications and automotive for both the domestic and export markets. In light of this, Malaysia’s exports of E&E products grew from RM231.23 billion in 2012 to RM277.92 billion in 2015. Meanwhile, a total of 93 projects were approved in the E&E industry in Malaysia, amounting to investments worth RM8.93 billion in 2015. A significant percentage of these investments in 2015 were FDls (91.83%), and FDls in the E&E industry in the country grew from RM3.30 billion in 2012 to RM8.20 billion in 2015. Investments and Export Values (Malaysia), 2012-2015 Total Investments (including FOI) Year No. of Projects (RM billion E&E Product Export  FOI  Value  RM billion)  RM billion)
2012  112  :  3.99  2013 2014  118 96  I :  9.81 11.15  2015  93  i  8.93  ,
3.30 i 231.23 i 8.50 i 236.98 : 10.40 , 256.14 : 8.20 : 277.92 I Source: Malaysian Industrial Development Authority (“MIDA’), Department of Statistics Malaysia Semiconductor Industry The semiconductor industry in Malaysia grows in tandem with global semiconductor market trends. Overall, the semiconductor industry in Malaysia witnessed positive growth over the last six (6) years, boosted by the increasing production of E&E products during the same period. Production of ICs grew from 23.28 billion units in 2009 to 24.25 billion units in 2015, registering a CAGR of 0.69% between 2009 and 2015. During the same period, Malaysia’s production of other semiconductor components also increased, from 44.16 billion units in 2009 to 47.32 billion units in 2015, growing at a CAGR of 1.16%. Production of les and Semiconductor Devices (Malaysia), 2009-2015 Product  Year  CAGR  million units)  2009  2010  2011  2012  2013  2014  2015  (2009 -2015)  l_lg~  . .._L._._?~d?_~J …._}J!!.9_Q?~  ~~,?§5U  ~9,3~}_~ __}~&8_~.L __?’Ml-.1~1  2~~~~:3_~  9:l?~~o_;  : Semiconductor:  :  .  :  ;  :  :  :  ,  i d~vices including: dIodes and  .  44 156: ”  52181  50,470  i,  55884: 54643· ,’: 51,594  47320 i ‘;  1.16%

Source: Department of Statistics Malaysia 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
The Government of Malaysia (or the Government) plays an active role in driving the electronics and semiconductor industry, with aims of growing gross national income (“GNI”) contribution from the semiconductor industry by an additional RM53.40 billion by 2020. In an effort to reach this goal, the Government of Malaysia intends to shift the local semiconductor industry further up the value chain through emphasis on mature technology fabrication and expanding into advanced packaging and design of ICs, as well as’ supporting the growth of substrate manufacturers. In summary, among some of the Economic Transformation Programme (“ETP”) initiatives which are expected to drive the growth of the semiconductor industry in Malaysia include: • Executing a Smart Follower Strategy for Mature Technology Fabrication Semiconductor fabrication plants are high value-added manufacturing plants which anchor the entire semiconductor chain, and the Government of Malaysia estimates that the establishment of this segment of the semiconductor industry in Malaysia would provide an incremental GNI of RM4.20 billion, alongside creating 6,500 jobs. The Government intends to pursue a smart follower strategy in which emphasis is placed on establishing fabrication plants which use mature technology (i.e. defined as 90 nanometer or larger transistor feature size) and are focused on niche applications (e.g. analog, power).
• Developing Assembly and Test using Advanced Packaging Technology Despite the fact that Malaysia’s semiconductor assembly and test segment is an established industry, very few firms offer advanced packaging services such as bumping or wafer level packaging. The Government of Malaysia intends to provide financial assistance to selected local assembly and test companies to bring advanced packaging services to Malaysia, and the learnings from this can be applied to other industry players in Malaysia. The Government aims to attract foreign companies to establish advanced semiconductor packaging services in Malaysia.
• Developing Ie Design Firms The Government of Malaysia is committed to identifying and encouraging IC design firms to set up in Malaysia, with the intention for 50 additionallC design firms to be set up by 2020. Amongst some of the initiatives the Government is working on in order to meet this target are shared services and laboratories for electronic design automation, prototyping and testing, financial assistance to train local talent and incentives for multinational companies (“MNCs”) to outsource IC design to local IC design companies.
• Increasing the Number of Silicon Producers The growth of the core semiconductor industry value chain is expected to increase Malaysia’s silicon production from 6,000 metric tonnes to 170,000 metric tonnes by 2020. The Government intends to establish one (1) MNC and two (2) domestic silicon manufacturers each year till 2020 to achieve this target. At present, Tokuyama Corporation has invested approximately RM3.00 billion to build its first polycrystalline silicon plant in Sarawak, and a further RM3. 70 billion to build a second plant in Sarawak with a capacity of 13,800 metric tonnes.

As the Government continues to drive and support the growth of the semiconductor industry, the growth prospects for the semiconductor industry in Malaysia appear to be positive. Moreover, the semiconductor industry in Malaysia is also expected to benefit from increasing worldwide demand. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
PCB Industry The electronic component industry is used as a growth indicator for the PCB industry, as it is the broader industry segment of the PCB industry. The size of the electronic component industry can be measured based on the manufacturing sales value of electronic components (including PCBs). Between 2010 and 2014, the electronic component manufacturing sales value in Malaysia grew at a CAGR of 8.17%, increasing from RM69.44 billion in 2010 to RM95.07 billion in 2014. Electronic component manufacturing sales value in Malaysia is estimated to have grown to RM111.59 billion in 2015. Electronic Component Manufacturing Sales Value (Malaysia), 2010 -2015(e)’ 120 C) I::.;: :J100-CJ~ ~s:::: :J 0 s::::= 80 co=::a:..c -::a:
1::0:::Gl_ 60 I:: Gl o :J0.._ E~ o til 40U GlCJ­.- coSCI)…20 CJ -Gl iii 0
2012 2013 2014 2015(e) Notes: 1. * Includes the manufacture of electrical capacitors, resistors, printed circuit boards, display components, diodes, transistors and similar semiconductor devices, electronic integrated circuits micro assemblies and other components for electronic applications.
2. (e) Estimate

Source: Department of Statistics Malaysia [The rest of this page is intentionally left blank] 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
Malaysia’s exports of PCBs recorded a trade value of USD1.59 billion (RM5.19 billion13) in 2014, having grown from USD845.97 million (RM2.72 billion14) in 2010 at a healthy CAGR of 17.00%. PCB Exports (Malaysia), 2010-2014 Year USD (million) RM (billion) 2010 845.97 2.72 2011  902.60  !  2.76  2012  1,417.93  ;  4.38  :  2013  1,536.79  4.84  ; :  2014  1,585.36  5.19  , i  CAGR (2010-2014)  .  17.00%  1  Note:
Exchange rates from USD to RM from 2010 to 2014 were converted based on annualaverage exchange rates in the respective years, as extracted from Bank Negara Malaysia. Source: United Nations Comtrade database According MIDA, a total of 93 projects were approved in the E&E industry in Malaysia, amounting to investments worth RM8.93 billion in 2015. In 2014, there were RM11.15 billion worth of investments, of which RM5.84 billion were for electronic components, RM3.12 billion for industrial electronics, RM1.81 billion for electrical products and the balance of RM380.00 million were for consumer electronics. In the electronic components sector, most of the projects approved were for the production of semiconductor devices, PCBs and optoelectronics devices. Out of the RM5.84 billion worth of investments, the biggest investment of RM3.20 billion was for the expansion of a wafer fabrication plant owned by a wholly foreign­owned company, with a further RM1.50 billion invested into the production of PCBs, also by a wholly foreign-owned company. These projects are expected to generate around 2,963 jobs. In addition, PCB companies that fall within MIDA’s list of qualified high technology companies which are involved in activities promoted by MIDA, or in the production of products promoted by MIDA, in areas of new and emerging technologies, will be granted tax incentives by the Government of Malaysia, thereby further driving the growth of the local PCB industry. [The rest of this page is intentionally left blank] 13 Exchange rate from USD to RM in 2014 was converted based on average annual exchange rates in 2014 extracted from published information from Bank Negara Malaysia at USD1 = RM3.2736. 14 Exchange rate from USD to RM in 2010wasconverted basedonaverageannualexchangerates in2010extractedfrompublished information from Bank Negara Malaysia at USD1 =RM3.2182.
15 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
Industry Drivers Importance of electronic products in multiple industries The range of applications for electronics and semiconductors has broadened dramatically over the last couple of decades, and electronic products developed today play essential roles in consumer retail, medical, manufacturing and telecommunications industries. Many of these industries cannot function without the use of electronic equipment. For instance, the medical industry requires the use of electronic medical equipment to perform diagnosis, monitoring and treatment of patients. The manufacturing industry today also largely consists offully or semi-automated manufacturing facilities, and thus electronic machinery and equipment form an integral component of manufacturing activities. Consumer electronics such as mobile and wireless devices, televisions and home appliances are now the largest contributors to electronic product sales, comprising 36.50% of total electronic product sales worldwide. Mobile and wireless devices, which comprise mobile feature phones, smartphones and tablets have become a necessity as a means of communication and connectivity. In 2013, the penetration of mobile phones reached 73.00% of the global population, while smartphones had a 22.00% penetration rate. While mobile cellular subscriptions illustrated a healthy growth of 214.30% in a span of nine (9) years between 2007 and 2015, active mobile broadband (which enables the use of smartphones and tablets) grew almost six (6) times faster with a growth of 1,194.00% during the same time period, from 268.00 million subscriptions in 2007 to 3.20 billion subscriptions in 2015 and thus, much of the growth of the electronics and semiconductor industry is expected to be driven by the rapidly increasing uptake of smartphones and tablets. Further, computers have become one of the most used technological items today. Computers enable information technology (“IT’) which is the application of computers and other equipment to store, retrieve, transmit and manage digital data. As an increasing volume of digital data is managed and stored globally, IT is increasingly integrated with consumers’ lifestyle and business operations. In other words, consumers and businesses have become increasingly dependent on computers for connectivity as well as to perform daily tasks such as accessing information and preparing business documents. The market potential for computers can be depicted through total worldwide IT expenditure, which is valued at USD3.70 trillion (RM11.66 trillion15) in 2013, an increase of 15.63% from USD3.20 trillion (RM11.28 trillion16) in 2009. Rapid technological advancements drive electronics and semiconductor sales Moving forward, it is expected that the number of electronic products which are integrated with the lifestyle of today’s society will only increase further. Rapid technological developments within the electronics and semiconductor industry will also continue to promote new product advancements in the market as industry players need to ensure their products remain competitive and are not obsolete. The electronics and semiconductor industries have seen developments in terms of performance, size and technology of various products. For instance, computers which have transformed from when they IJI.ere first introduced in 1961 as mainframe computers, to the current portable size of notebooksllaptops today. Even just within the last few years, new computer models are constantly introduced to the market with advancements made in terms of its processor performance and reductions in lJI.eight and size. Likewise, mobile phones have experienced similar advancements in the 21 st century, in terms of design, performance, features and reductions in weight. Mobile phones are no longer just a telecommunication tool for making telephone calls and sending and receiving messages; more advanced smartphones now have functions for Internet access, photography, data storage, entertainment and social media networking. 15 Exchange rate from USD to RM in2013wasconverted basedonaverageannualexchangerates in 2013extractedfrompublished information from Bank Negara Malaysia at USD1 =RM3.1511. 16 Exchange rate from USD to RM in2009wasconverted basedonaverageannualexchangerates in 2009extractedfrompublished information from Bank Negara Malaysia at USD1 =RM3.5236.
16 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
Consumers are highly receptive to these new product innovations, resulting in relatively shorter product IifecycIes for most E&E products, especially consumer electronics. As a result, new and enhanced versions of products are constantly introduced to the market, and these new introductions have been the key driving factor for electronics and semiconductor sales. One of the most prevalent trends in the electronics and semiconductor industries is the rise of mobile and portable engineering designs which promote convenience. With the increase in demand for mobile and wireless devices, industry players are constantly developing newer electronic and semiconductor components to meet market requirements for smaller and more lightweight products. In addition, this trend has also led to greater demand for wireless-enabled electronic components (e.g. Wi-Fi connection and Bluetooth adaptors) and power management ICs (e.g. batteries). This is expected to result in a further increase in the demand for semiconductor devices for the manufacture of these electronic components, thus further driving the growth of the industry. [The rest of this page is intentionally left blank] 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
4 PRECISION ENGINEERING PART INDUSTRY IN MALAYSIA Introduction Precision engineering parts refer to parts used in the electronics and semiconductor industry which require high level of precision in the manufacturing process. Stiffeners, test sockets and hand lids are examples of precision engineering parts used during the testing of ICs. A stiffener acts as a docking mechanism, and it ensures that PCBs, on which the ICs are affixed, remain rigid and firm in its position during testing of the ICs. During the manufacturing, assembly and testing of PCBs, the use of stiffeners will provide a flat and strong base. Stiffeners offer added mechanical strength, rigidity and support as the PCB can be firmly fastened onto the stiffener, enabling it to be moved or transported more easily and with less likelihood of damage, bending or sagging. A more rigid PCB will also allow efficient and maximum delivery of current across it. A stiffener’s configuration and material (be it ferrous or non-ferrous) can be customised to suit the PCB and its usage. Test sockets are placed on PCBs and are configured to receive and protect the leads/ balls of an IC, while hand lids are used during the setup of manual test to secure a device under test (“OUT”) in place. Test sockets and hand lids are used for the testing of finished and semi-finished IC devices, to test for failures or to verify processing power and performance. Test sockets and hand lids compress and secure the device onto a load board for testing, and are typically used in semiconductor companies, IC packaging foundries and test handler companies. The test socket is customised to fit the OUT as well as the load board. As an illustration to the level of precision required in the manufacturing of these parts, the manufacturing of test sockets in particular involves the drilling of 80 micron17 diameter holes with a hole pitching, i.e. distance between the center of two (2) holes, of 125 micron. As such, the precision engineering part industry in Malaysia remains a niche and specialist industry, with only a handful of industry players which can undertake the entire process of designing and manufacturing precision engineering parts for testing process. Key Demand Drivers Strong global demand for electronic products supports and increases demand for precision engineering parts Historically, Malaysia’s E&E industry has been acknowledged as a pillar of the nation’s economy, contributing to more than a third of the nation’s export income. Malaysia’s reputation as a producer and assembler of parts and components of manufactured goods with good product quality has led to continuous demand for Malaysia’s E&E products from various end-user industries such as consumer electronics, telecommunications and automotive for both the domestic and export market. In light of this, Malaysia’s exports of E&E products increased by 20.19% from RM231.23 billion in 2012 to RM277.92 billion in 2015. 17 Also known as micrometre; 1 micron is equal to one thousandth ofa millimetre, or 0.001 mm. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
The global market for E&E products is estimated to have grown from USD1.79 trillion (RM6.31 trillion18) in 2009 to an estimated USD2.60 trillion (RM1 0.16 trillion19) in 2015, registering a CAGR of 6.42% during this period. In line with the growth of the E&E market worldwide, global semiconductor sales also depicted a positive growth trend, growing at a CAGR of 6.57% from USD219.69 billion (RM774.1 0 billion20) in 2009 to USD321.80 billion (RM1.26 trillion21 ) in 2015. A major driving factor of the growth of the global demand for the electronics and semiconductor industries is the rapid technological advancement of electronic products in the market. Rapid technological developments within the electronics and semiconductor industries have, and will continue to, propel the introduction of new product advancements to the market as industry players need to ensure their products remain competitive and are not obsolete. Supported by healthy economic conditions, consumers are also highly receptive to these new product introductions, resulting in relatively shorter product lifecydes for most E&E products, especially consumer electronics. As a result, new and enhanced versions of products are constantly introduced to the market, and these new introductions have been the key driving factor of electronics and semiconductor sales. These shorter product lifecycles have led to semiconductor industry players reducing turnaround periods of semiconductor manufacturing, by introducing new products quicker, in order to remain relevant with the latest products in the market. As such, precision engineering parts (including stiffeners, test sockets and hand lids) which are customised to fit the device that is to be tested, have to be constantly manufactured to allow for the testing of new ICs that have been developed. As a supporting industry to the electronics and semiconductor industries, the precision engineering part industry in Malaysia is supported by the strong prospects of the electronics and semiconductor industries. The precision engineering part industry also stands to benefit from the importance of E&E products in multiple industries, and increased E&E product sales as a result of rapid technological changes and rising consumer income levels. Government support and initiatives in light of promoting the E&E and related industries The Government of Malaysia plays an active role in driving the E&E industry. Government bodies such as MIDA facilitate the provision of land, infrastructure and financial incentives to existing MNCs to encourage expansion while simultaneously attracting new foreign firms to set up operations in Malaysia. Under the 10th Malaysia Plan (“10MP”), the Government aimed to shift the E&E industry further up the value chain through the development of existing talent and technological capabilities. These efforts continued to be intensified in the 11 th Malaysia Plan (“11 MP”) through the following initiatives: • Encouraging existing sectors to move up the value chain by focusing on high value, knowledge incentive activities which require skilled workers;
• Minimising human capital gaps in the country, through the establishment of an Industry Skills Committee, which will serve as a platform to gather information from the different sectors, and identify the human capital requirements for future human capital planning;
• Incentivise pioneers and develop workforce skills and capabilities in catalytic sub-sectors in the E&E industry to promote development of frontier products;
• Improving access to financing through encouraging financial institutions to engage in panels of experts when evaluating business and innovation projects in new areas; and

18 Exchange rate from USD to RM in 2009 was convertedbasedonaverageannualexchangerates in 2009extractedfrompublished information from Bank Negara Malaysia at USD 1= RM3.5236. 19 Exchange rate from USD to RM in 2015 was convertedbasedonaverageannualexchangerates in 2015extractedfrompublished information from Bank Negara Malaysia at USD1 = RM3.9073. 20 Exchange rate from USD to RM in 2009 was converted based on average annual exchange rates in 2009 extracted from published information from Bank Negara Malaysia at USD1 =RM3.5236. 21 Exchange rate from USD to RM in 2015 was converted based on average annual exchange rates in 2015 extracted from published information from Bank Negara Malaysia at USD1 =RM3.9073.
19 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
• Encouraging manufacturers to undertake research and development (“R&D”) and innovation activities by leveraging on existing research institutions, as well as increasing strategic alliances with developed countries in the field of technology, innovation and R&D. Additionally, the Ministry of International Trade and Industry (“MITI”) and Malaysia External Trade Development Corporation (UMATRADE”) actively promote local electronics manufacturers. These agencies offer tax incentives to foreign companies by encouraging them to utilise the services of local manufacturers, including EMS or electronic contract manufacturing providers. As a result of these policies, Malaysia’s FDls grew from RM3.30 billion in 2012 to RM8.50 billion in 2013. While the country has focused on assembly in the lower end of the value chain in the past, the Government nowaims to revitalise the industry by focusing on higher value-added activities such as R&D, design and manufacturing, in an effort to maintain growth and compete effectively against other nations globally. This is particularly seen in the Government’s plans under the ETP. Under the ETP, the Government intends to grow the E&E industry to increase its GNI contribution to RM53.40 billion by 2020, create an additional 157,000 highly skilled and medium skilled jobs and place more emphasis on the development of regional clusters in the Northern Corridor, Klang Valley, Johor, Sabah and Sarawak. The achievement of RM53.40 billion GNI is expected to be accomplished via the execution of a total of 20 entry point projects (“EPPs”) in the semiconductor, solar, light emitting diodes (“LED”), industrial electronics and home appliances sector. Particularly in the semiconductor sector, the ETP outlines several EPPs, including building a strong foundation in the areas of mature technology fabrication, expansion into advanced packaging and design of ICs, promoting the growth of substrate and silicon manufacturers, building a test and measurement hub, and growing automation equipment manufacturing. The Government’s plan to develop the industrial electronics and home appliances sector involves moving towards developing the testing and measurement sector which will, in turn, benefit the precision engineering part industry, particularly precision engineering parts which are manufactured for testing processes such as stiffeners, test sockets and hand lids. The outlook for the precision engineering part industry in Malaysia is positive in line with the Government’s plan under the 11 MP and ETP to further spur the E&E industry and other industries involved in the semiconductor industry value chain. Increase in outsourcing to engineering support companies, and relocation of manufacturing activities to lower cost countries With the rapid advancement in products developed in the semiconductor industry, semiconductor manufacturers, OSATs and PCB design houses are able to focus on their core business activities while leaving the manufacturing, enhancement and adaptation of supporting equipment and parts, including precision engineering parts, to precision engineering part industry players. This has allowed semiconductor manufacturers, OSATs and PCB design houses to remain competitive in the industry by managing cost effectiveness and limiting capital expenditure. Furthermore, semiconductor manufacturers and OSATs are increasingly relocating their manufacturing facilities to lower cost countries within Asia in order to achieve better cost effectiveness and economies of scale. This is due to the substantially lower operating costs as well as the availability of talent in these markets. The shift towards the Asia region also has an added benefit of allowing semiconductor manufacturers and OSATs to tap into the growing demand for electronic products in Asia. In light of this, precision engineering part industry players have also emerged in Malaysia in order to cater to the growing need of the market. As such, the outsourcing and relocation trend has, and is expected to continue to, support the growth of the precision engineering part industry in Malaysia. 20 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
Supply Conditions and Dependencies Availability of skilled personnel The precision engineering part industry is faced with rapid technological developments and thus, one of the key supplies of the industry is the talent involved in the design and engineering of precision engineering parts. As such, it is necessary to hire personnel with the required technical skills and engineering capabilities. Generally, Malaysia has an adequate supply of skilled personnel with backgrounds in E&E, where employment in the E&E industry grew from 296,870 persons in 2008 to 471,672 persons in 2014. This has been largely driven by the 1OMP where efforts have been undertaken to form industry and academia collaborations, especially in the areas of R&D and training, in an effort to develop centres of engineering, as well as to develop state level skills training centres and co-funding post graduate programmes in critical areas. Moving forward, the 11 MP is expected to intensify these efforts through initiatives undertaken to develop workforce skills and capabilities to undertake R&D and innovation activities. Looking ahead, under the ETP, the Government aims to create an additional 157,000 highly skilled and medium skilled jobs in the E&E industry. Availability of raw materials, supplies and machinery The raw materials and supplies used in the manufacturing of precision engineering parts are primarily ferrous and non-ferrous materials, comprising stainless steel, aluminum and engineering plastic materials. Though these materials and supplies are typically imported, they are generally readily available, and do not experience any major fluctuations in prices. Machinery utilised in the manufacturing of precision engineering parts include, amongst others, computer numerical machinery (“CNC”). These machinery are readily available via imports, largely from the United States, Germany, Taiwan and Japan, from local suppliers and importers. Industry Performance, Size and Growth The precision engineering part industry grows in tandem with the electronics, semiconductor and PCB industry as it is an engineering support industry to the semiconductor industry. The industry size for precision engineering parts can be measured in terms of the revenues of major industry players which are involved in the design, development and manufacturing of precision engineering parts. For the purpose of this report, the precision engineering part industry size in Malaysia has been calculated based on identified local industry players involved in the design, development and manufacturing of stiffeners, test sockets and hand lids, namely AEM Microtronics (M) Sdn Bhd, Esmo Automation (M) Sdn Bhd, FoundPac Group Berhad, Fujim Digital Sdn Bhd, JF Microtechnology Sdn Bhd, Multitest Electronic Systems (Penang) Sdn Bhd and Test Tooling Solutions (M) Sdn Bhd. These local industry players have local manufacturing facilities and are involved in the design, development and manufacturing of precision engineering parts, and other activities. Based on these identified local industry players, the precision engineering part industry size in Malaysia grew from RM35.76 million in 2011 to RM132.51 in 2015, at a CAGR of 38.74%. The growth of the precision engineering part industry is expected to be driven by the continued demand for electronic products, which are supported by the importance of electronic products in multiple industries as well as rapid technological advancements in the electronics and semiconductor industries. 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)

Precision Engineering Part Industry Size (Malaysia), 2011-2015 2011 2012 2013 2014 2015 Notes: 1. The precision engineering part industry size has been computed based on identified local industry players involved in the design, development and manufacturing of stiffeners, test sockets and hand lids (as listed in Chapter 5-The Precision Engineering Part Industry in Malaysia (Competitive Landscape).
2. Latest available data is as at 2015 as 2015 is the latest year where financial information ofthe identified industry players are available.

Source: Companies Commission ofMalaysia (“CCM’) Due to the global nature of the semiconductor industry, precision engineering part industry players serve their customers worldwide. The global prospects of precision engineering part industry players in Malaysia can be illustrated through the growth in the global semiconductor industry, as data on global precision engineering part industry players is not publicly available. The global semiconductor industry is forecasttogrowfrom USD337.70billion(RM1.32trillion22) in2016toreach USD376.60billion(RM1.47trillion23) in 2018, registering a CAGR of 5.60% during the period. In line with the growth in the semiconductor industry, semiconductor manufacturers, OSATs, PCB design houses and/or other channel partners (or customers of these precision engineering part industry players) will continue to purchase stiffeners, test sockets and hand lids for testing. In addition, semiconductor manufacturers and OSATs are increasingly relocating their manufacturing facilities to lower cost countries within Asia in order to achieve better cost effectiveness and economies of scale. The shift towards the Asia region also has an added benefit of allowing semiconductor manufacturers and OSATs to tap into the growing demand for electronic products in Asia. In light of this, precision engineering part industry players have also emerged in Malaysia in order to cater to the growing need of the market. 22 Exchange rate from USD to RM in 2016 was converted basedon average annualexchange rates in 2015 extracted from published information from Bank Negara Malaysia at USD1 =RM3.9073. 23 Exchange rate from USD to RM in 2018wasconverted basedonaverageannualexchangerates in2015extractedfrompublished information from Bank Negara Malaysia at USD1 =RM3.9073.
22 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
Product/Service Substitution Stiffeners, test sockets and hand lids are essential for performing testing on PCBs and lCs, and as such there is no available substitute for these products. Without proper precision machining of these parts, the precision engineering part will not be able to suit or fit the DUT, resulting in a possible delay and substantial loss in costs to the semiconductor manufacturers and OSATs. In addition, this may also damage the reputation of semiconductor manufacturers and OSATs due to their inability to deliver on a timely basis. Semiconductor manufacturers and OSATs are thus very particular in their selection of precision engineering part manufacturers. Further, owing to the pressures to remain competitive in the industry, semiconductor manufacturers strive to effectively manage cost effectiveness and limit capital expenditure, and thus are expected to continue to purchase precision engineering parts from precision engineering part industry players, as opposed to manufacturing these parts in-house. Reliance and Vulnerability to Imports Data on import for precision engineering parts (i.e. stiffeners, test sockets and hand lids) is not publicly available, and as such imports of precision engineering parts into Malaysia cannot be quantified. Nevertheless, it is noted that the overall semiconductor industry is global in nature, where machinery, equipment and parts used in semiconductor manufacturing are typically sourced globally. This is the case with precision engineering parts, where semiconductor manufacturers, OSATs, PCB design houses and/or other channel partners who are customers of these precision engineering part industry players, may source such parts globally. As there are semiconductor manufacturers, OSATs, PCB design houses and/or other channel partners located in multiple countries worldwide, it is expected that precision engineering parts manufactured in Malaysia will be exported for use in markets where these companies operate. As an illustration, FoundPac Group Berhad exported between 94.00% and 96.00% of its products to foreign markets in North America, Europe and other countries in Asia in the last FYE 30 June 2013, FYE 30 June 2014 and FYE 30 June 2015. Relevant Laws and Regulations Save for the laws and regulations generally applicable to all companies carrying out business activities in Malaysia, there are no special or industry-specific laws and regulations governing the precision engineering part industry. [The rest of this page is intentionally left blank] 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
5 COMPETITIVE LANDSCAPE Overview The precision engineering part industry in Malaysia is a niche and specialist industry within the broader electronics, semiconductor and PCB industry. Industry players in this segment are able to undertake the process of design, development and manufacturing of precision engineering parts for the testing process. Global The precision engineering part industry is global in nature, with semiconductor manufacturers, OSATs, PCB design houses and/or other channel partners (or customers of these precision engineering part industry players) sourcing these products globally. Apart from Malaysia, precision engineering parts are also typically manufactured in the United States, Germany, Singapore, South Korea and Japan. Due to the global nature of the industry, precision engineering part industry players in Malaysia also compete with other foreign precision engineering part industry players in the global market, particularly when they are involved in the exports of precision engineering parts to foreign markets. Some of the foreign precision engineering part industry players in the global market are as listed below: Industry player  Location of head office  , APS Solutions GmbH  Germany United States ; United States ! Ullited States South Korea Singapore Jap; Japan  Everett Charles Technologies LLC  Interconnect Devices, Inc.  Johnstech International Corporation  , Oualmax, Inc.! Oualmax Testech, Inc.  i VA Innovation Pte. Ltd.  : 01110’\.0111 Electronics Co. Ltd.  : Yokowo Co. Ltd.
Note: This list include examples ofcompanies involved in design, development and manufacturing ofprecision engineering parts in the global market, and is not exhaustive.
[The rest of this page is intentionally left blank] 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
Malaysia The competitive landscape in Malaysia comprises both local and foreign multinational industry players. Foreign multinational players have local manufacturing facilities and/ or support services in Malaysia. The industry players that are of interest in this report are companies involved in the design, development and manufacturing of precision engineering parts, particularly stiffeners, test sockets and/or hand lids. A list of identified industry players in Malaysia is shown as follows: Industry Players and Profiles  I  Financial Year  Revenue  Industry Player  I  Productsl Services  End  (RM ‘000)  AEM Microtronics (M) Sdn Bhd  . Stiffeners, test sockets and hand ; lids  31 December 2015  5,454.25
Esmo Automation (M) Sdn Bhd , Stiffeners and test sockets : 31 March 2015 13,315.00 ~-~————————-;-Stiffeners,-iestsockets ancrhand-+—————–+———–~i FoundPac Group Berhad lids : 30 June 2015 34,370.00 : ~————————-i-Fiand-lids andfixtures~preasion–l———–~–+———-~ i Fujim Digital Sdn Bhd ; tooling equipment, machinery i 30 April 2015 1,804.21 : ! ~ parts and related equipment ,i i-JF-MTCrotechn-Qjogy-Sdn·Bhd-···—–‘————————–i—————L———i i (subsidiaryofJFTechnology : Test sockets . 30 June 2015 16,193.05 i : Berhad) ~. MU1titestETectronicSystem-s—-~————————t—————–:————j : (Penang) Sdn Bhd (subsidiary of ‘ , :LTX Credence Sdn Bhd and is ~ Testlyth.andleottrs, contactors and : 31 July 2015 34,900.30 : part of the Xcerra Corporation Inc. ,ana ICS s ware : group)
, : Test-Tooling-Solutions (MfSdn———————-­i BhdlTest Tooling Designs (M) Sdn : Test sockets and hand lids : 30 June 2015 26,468.70 : Bhd
‘Notes:——-·-·–·–·—–·–··–·–·…:··-·—-·–·–.-.-..–…–.–.-.——-.–~—.-..-.-.—-.–..–..-‘-_.__._._…_.__–1 1. This list includes all local industry players who are involved in the design, development and manufacturing of precision engineering parts, particularly stiffeners, test sockets and hand lids that were identified by SMITH ZANDER based on sources available, such as the internet, published documents and industry directories. However, there may be companies that have no online and/or published media presence, or are operating with minimal public advertisement, and hence SMITH ZANDER is unable to state conclusively that the list ofindustry players is exhaustive.
2. The above list was arranged in alphabetical order.
3. Information on products/services are based on SMITH ZANDER’s secondary or desktop research on information made publicly available as at 6 September 2016.
4. Latest available financiais filed with CCM as at 6 September 2016.

Source: CCM [The rest of this page is intentionally left blank] 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
Global Market Share As mentioned earlier, the semiconductor industry is global in nature and thus, precision engineering part industry players serve customers, i.e. semiconductor manufacturers, OSATs, PCB design houses and/or other channel partners, worldwide. These customers require precision engineering parts, including stiffeners, test sockets and hand lids, as components to their testing equipment, or ATE. Similarly, FoundPac Group Berhad also serves customers worldwide, with over 94.00% of sales derived from the overseas market for the past three (3) FYE 30 June. Global revenue from the equipment segment of the semiconductor industry was approximately USD37.00 billion (RM 144.57 billion24) in 2015. The equipment segment of the semiconductor industry consists of all types of equipment used in the manufacture and testing of semiconductor and semiconductor related products; and stiffeners, test sockets and hand lids are included in this segment. Accordingly, FoundPac Group Berhad’s global market share in relation to the equipment segment of the global semiconductor industry in 2015 was 0.02%, based on its revenue of RM34.37 million in the FYE 30 June 2015, computed against the global revenue from the equipment segment of the semiconductor industry of USD37.00 billion (RM144.57 billion24) in 2015. FoundPac Group Berhad’s market share in Malaysia is not applicable as more than 94.00% of the Group’s sales were derived from the overseas market for the past three (3) FYE 30 June. [The rest of this page is intentionally left blank] 24 Exchange rate from USD to RM in 2015 was convertedbasedonaverageannualexchangerates in 2015extractedfrompublished information from Bank Negara Malaysia at USD1 =RM3.9073. 26 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
6 PROSPECTS AND OUTLOOK FOR FOUNDPAC GROUP BERHAD The precision engineering part industry size in Malaysia grew, in terms of the revenues of major industry players which are involved in the design, development and manufacturing of precision engineering parts, from RM35.76 million in 2011 to RM132.51 million in 2015, at a CAGR of 38.74%. Due to the global nature of the semiconductor industry, precision engineering part industry players serve their customers worldwide. The global prospects of precision engineering part industry players in Malaysia can be illustrated through the growth in the global semiconductor industry, as data on global precision engineering part industry players is not publicly available. Despite several troughs occurring over the last two (2) decades, global semiconductor sales have proven to be resilient with speedy recoveries occurring in the following years, with each recovery pushing semiconductor sales higher than previous peaks. Overall, the global semiconductor industry registered a CAGR of 7.73% between the period 1990 and 2015, indicating the sustainability of the industry’s growth in the long term. Semiconductor sales grew from USD50.03 billion (RM135.26 billion25 ) in 1990 to USD321.80 billion (RM1.26 trillion26) in 2015. The global semiconductor industry is forecast to grow from USD337.70 billion (RM1.32 trillion27) in 2016 to reach USD376.60 billion (RM1.47 trillion28) in 2018, registering a CAGR of 5.60% during the period. In line with the growth in the semiconductor industry, semiconductor manufacturers, OSATs, PCB design houses and/or other channel partners (or customers of these precision engineering part industry players) will continue to purchase stiffeners, test sockets and hand lids for testing. The global semiconductor industry has significant economic contribution to most regions around the world, with significant interlinkages to the global electronics industry. The global market for electronic products is estimated to have grown from USD1.79 trillion (RM6.31 trillion29) in 2009 to USD2.50 trillion (RM8.18 trillion30) in 2014, registering a CAGR of 6.91 % during this’ period. Meanwhile, the semiconductor industry in Malaysia also witnessed positive growth over the last five (5) years, boosted by the increasing production of electronic products during the same period. Production of ICs grew from 23.28 billion units in 2009 to 24.25 billion units in 2015, registering a CAGR of 0.69% between 2009 and 2015. During the same period, Malaysia’s production of other semiconductor components also increased, from 44.16 billion units in 2009 to 47.32 billion units in 2015, growing at a CAGR of 1.16%. The growth of the precision engineering part industry is also expected to be driven by the outsourcing of manufacturing, enhancement and adaptation of supporting equipment and parts, including precision engineering parts, by semiconductor manufacturers, OSATs and PCB design houses, to precision engineering part industry players. In addition, semiconductor manufacturers and OSATs are increasingly relocating their manufacturing facilities to lower cost countries within Asia in order to achieve better cost effectiveness and economies of scale. The shift towards the Asia region also has an added benefit of allowing semiconductor manufacturers and OSATs to tap into the growing demand for electronic products 25 Exchange rate from USD to RM in 1990 was converted based on average annual exchange rates in 1990 extracted from published information from OANDA Corporation at USD1 =RM2.7035. 26 Exchange rate from USD to RM in 2015 was converted based on average annual exchange rates in 2015 extracted from published information from Bank Negara Malaysia at USD1 =RM3.9073. 27 Exchange rate from USD to RM in 2016 was convertedbased onaverageannualexchangerates in2015extractedfrompublished information from Bank Negara Malaysia at USD1 =RM3.9073. 28 Exchange rate from USD to RM in 2018 was convertedbased onaverageannualexchangerates in 2015extractedfrompublished information from Bank Negara Malaysia at USD1 =RM3.9073.
29 Exchange rate from USD to RM in 2009 was converted based on average annual exchange rates in 2009 extracted from published information from Bank Negara Malaysia at USD1 =RM3.5236. 30 Exchange rate from USD to RM in 2014 was converted based on average annual exchange rates in 2014 extracted from published information from Bank Negara Malaysia at USD1 =RM3.2736.
27 7. EXECUTIVE SUMMARY OF THE INDEPENDENT MARKET RESEARCH REPORT (cont’d)
in Asia. In light of this, precision engineering part industry players have also emerged in Malaysia in order to cater to the growing need of the market. FoundPac Group Berhad, as one of the industry players in the precision engineering part industry, is well­positioned to benefit from opportunities arising from the growing electronics and semiconductor industries globally. With their track record and technical capabilities, as well as their portfolio of multinational clients, FoundPac Group Berhad is poised to increase its presence in the precision engineering part industry with through establishing sales offices in Europe and the United States, diversifying to serve other end-user industries, expanding production capacity as well as setting up a dedicated design and development team to focus on product development. The continued global demand for electronics and semiconductor products which will positively impact the precision engineering part industry as well as FoundPac Group Berhad’s future growth. [The rest of this page is intentionally left blank]

 

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