Chairman Statement

2016 Annual Report

CHAIRMAN’S STATEMENT
On behalf of the Board of Directors of Malaysian Pacific Industries Berhad (“MPI” or “the Company”), I am pleased to present the Annual Report and Financial Statements of the Group and of the Company for the financial year (“FY”) ended 30 June 2016 (“FY 2016”). BUsINess eNVIRoNMeNt FY 2016 had been a challenging year globally with the oil price plummeting and the China economy slowing. We also saw an unprecedented surge of massive consolidation and mergers & acquisitions (“M&A”) activities in the technology industries involving both our customers and competitors. Global semiconductor sales in 2015 recorded a 1.9% decline and this has spilled over to the first half of 2016. The dedicated workforce, proactive measures to focus on value-added technologies and our excellent record of quality service have enabled our Group to achieve a satisfactory performance for the FY.
fINANcIAL ReVIeW
Revenue for FY 2016 was RM1.5 billion, 5% higher than the previous FY. Profit attributable to the Group was 45% higher at RM157.5 million as compared with RM108.5 million in the previous FY. Consequently, earnings per share improved significantly to 82.9 sen against 57.1 sen recorded for the FY ended 30 June 2015. Healthy cash flow generated from operations has contributed  to the strong net cash position of RM284 million. This has enabled the Group to continue to invest in new plant and equipment for future growth amounting to RM125.1 million, reduce debts by RM59.7 million, and pay a total dividend of RM43.7 million to the shareholders of the Company.
PRosPects
In the coming year, the global economy will continue to face many uncertainties. The United States of America’s economy is gradually improving, but the rest of the world is still struggling, China in particular.  Global semiconductor sales are forecasted to decline for a second consecutive year in 2016, further consolidation and M&A in the industry are expected, and the push for ‘Made in China 2025’ will continue to impact the semiconductor supply chain in the region.  At MPI, we shall continue to develop the right technology from our leading position, and innovate to address the right markets to create growth momentum going forward. This is key to the future.
dIVIdeNd
The Company has declared and paid a first and second interim single tier dividends totalling 23 sen per share during FY 2016. This is 15% higher than the total dividends of the last FY. The Board does not recommend any final dividend for FY 2016.
AcKNoWLedgeMeNt
On behalf of the Board, I warmly welcome Mr Manuel Zarauza who joined the Company as Group Managing Director on 8 August 2016. I would also like to extend our sincere thanks and appreciation to Mr Peter Yates, our Group Managing Director who retired on 8 August 2016, for his past services and contributions to the Group. Our appreciation goes also to our valued customers, business associates, vendors, financiers, shareholders and the Government for their continuous support and confidence in the Group. Lastly, my heartfelt appreciation goes to each and every Board members, management and staff for their contribution, commitment and dedicated service. dAtUK KWeK LeNg sAN Chairman MALAYSIAN PACIFIC INDUSTRIES BERHAD
GROUP MANAGING DIRECTOR’S REVIEW
INdUstRY ReVIeW
The financial year (“FY”) ended 30 June 2016 (“FY 2016”) was another year of substantial improvement in profitability for Malaysian Pacific Industries Berhad. Revenue increased by 5%, supported by a strengthening US Dollar (“USD”), and profit attributable to equity holders increased from RM108.5 million to RM157.5 million. Nevertheless, this has been a challenging year for the Group. Demand from the smartphone industry fell substantially, and the Semiconductor Industry Association has reported that worldwide semiconductor revenues declined overall by 4.9%. In this negative environment, the Group’s improvement in performance was not only due to a stronger USD, but also due to our continuing focus on higher margin added-value business, a diverse portfolio including automotive and industrial products, and rigorous productivity programmes to drive down cost.
oPeRAtINg segMeNt ReVIeW
United States of America (“USA”) segment sales, representing 22% of the Group’s revenue, increased by 12.6%. Sales of the first and second quarters of FY 2016 were particularly strong, supported by robust sales of Molded Interconnect System ultra-thin micro-leadframe packages (“MLP”) devices for Radio Frequency (“RF”) front-end modules for the world’s leading smartphones and tablets. However, this business fell substantially in the second half of the year. The effect was partially offset by the steady growth in the USA automotive business (specifically custom sensor devices) throughout the year. We believe there is further opportunity for growth in this region and are currently adding significant sales resources to realise the potential. Asia sales, representing 53% of the Group’s revenue, declined slightly by 1%. This segment is heavily dependent on the smartphone and tablet industry. Unit volume shipments into leading smartphone brands declined heavily from the previous year. Ultra-thin MLP sales were particularly badly affected, and efforts have been focused on finding new customers to further diversify the customer base. The tough market brought significant downward price pressure, and margins were sustained by re-designing our so-called X3 range around a new low-cost bill of materials. Nevertheless, we do anticipate continuous price pressure in this market segment. European sales, representing 25% of the Group’s revenue, were up by 12%. This improvement is very encouraging and came from increasing sales to European automotive customers where our reputation is strong. Growth in this sector is expected to be steady and consistent, and provides a strategic counterbalance to the Group’s position in smartphones and wearables, where growth can be very dramatic, but as we have seen this year, it can also be subject to the fluctuations typical of consumer  markets.
oPeRAtIoN ReVIeW
Carsem (M) Sdn Bhd comprises the two Ipoh plants, S-site and M-site, with S-site focusing on MLP and Test, and M-site focusing on high-density leaded products. Industry demand for these leaded products has been disappointing this year and selling prices have been under pressure. However, consistent with our added-value strategy, momentum has been building in custom leaded automotive sensors which will continue strongly into future years. With this richer product mix, and with the productivity improvements implemented via our i-manufacturing programme, we see steady improvement in margins in this business. S-site sales of added-value MLP were very strong in the first half year, but saw significant falls when worldwide demand for leading smartphones fell from January onwards. The second half year ramp of a new flipchip product helped to offset this  effect, once again illustrating the benefits of a diverse portfolio. Following a record FY ended 30 June 2015, in which sales rose by 27%, Carsem Semiconductor (Suzhou) Co., Ltd (“Carsem Suzhou”) saw demand fall this year from USA and Asian customers serving the smartphone market. Utilisation fell sharply to about 60% of capacity, and activities focused on cost saving and on broadening the customer base. A major win was secured from a leading consumer sensor producer for a range of sensors which has been ramping in volume through the second half year. New wins from European, USA and Chinese customers have been secured, serving a range of Internet of Things (“IoT”) and RF applications. Carsem Suzhou is well-placed to resume its solid growth record in the coming years. Dynacraft Industries Sdn Bhd (“Dynacraft”) has had another successful year of increasing profits. This is now the second full year since exiting the stamped leadframe business, and it is pleasing to see healthy performance being maintained even in a challenging market, with many customers reducing leadframe inventory levels early in the year. As an upstream supplier, Dynacraft provides us with a leading indicator of semiconductor market trends, so the pick-up in sales of 18% in the second half year is positive news. ReseARcHANd deVeLoPMeNt Carsem Technology Centre has identified the following technology drivers as critical to the future growth markets of IoT, Automotive and Power: 1. Interconnect scaling – Managing interactions between silicon, package, and board, which includes both footprint and signal path.
2. Form Factor – Meeting Form, Fit & Function boundary conditions of the system, which includes ultra-thin and reduced footprint solutions.
3. Power Delivery – Dissipation of heat coupled with Power efficiency.
4. Sensing – Interaction between people, environment, and systems.
Product developments from these drivers include the next generation of ultra-thin X4 packages, Fan-out capability, Cu Clip using Cu Metallization, RF modules including SAW filters, Fingerprint sensors, and custom automotive Microelectromechanical Systems packaging. oUtLooK The Semiconductor Industry Association is currently forecasting a decline of 3% this coming year. The smartphone industry appears to be saturating, high volume IoT applications have yet to emerge, and automotive growth will always be gradual. However, we believe there are pockets of growth even in the short term, and we are investing in our international sales organisation to target these, and to build the relationships on which we can build long term growth. Despite the short-term industry decline, we therefore believe the Group can maintain its revenue position by offering differentiated technology in expanding markets. We therefore expect the performance of the Group to be satisfactory in the FY ending 30 June 2017. MANUeL ZARAUZA BRANdULAs Group Managing Director

 

2015 Annual Report

CHAIRMAN’S STATEMENT
on behalf of the Board of Directors of Malaysian Pacific Industries Berhad (“MPI” or the “company”), I am pleased to present the annual report and Financial statements of the group and of the company for the financial year (“Fy”) ended 30 June 2015 (“Fy 2015”).
BusIness enVIronMent
During FY 2015, global economic conditions have been challenging, with inconsistent growth across the world’s major economies. The United States of America has experienced steady growth; China, the world’s second largest economy, has been slowing down; and the Eurozone has been tackling persistent debt problems. Taken together, these factors have contributed to the US Dollar (“USD”) gaining strength against most major currencies, but have also led to a slump in commodity prices. Despite this challenging environment, demand for electronics has remained resilient, and the global semiconductor industry posted its highest-ever sales in 2014, topping USD335 billion for the first time across all regions and products. The Group’s strategy has been to align with the industry’s higher growth segments, and mobile interconnectivity, sensors, Internet-of-Things and custom automotive products were key growth drivers for the year. With the benefit of the stronger USD and lower commodity prices, this growth has enabled the Group to increase revenue and achieve improved profits for the FY.
FInancIaL reVIeW
Revenue for FY 2015 was RM1.4 billion, 8% higher than the previous FY. The profit attributable to the Group was higher at RM108.5 million from RM45.1 million in the previous FY. Consequently, earnings per share improved significantly to 57.1 sen against 23.9 sen recorded for FY ended 30 June 2014.
Healthy cash flow generated from the operations has enabled the Group to invest RM176.5 million into new plant and equipment for future growth, reduce debts by RM12.2 million and pay a total dividend of RM38 million to the shareholders of the Company.
ProsPects
The semiconductor industry is forecasting modest growth for 2015 after a record year in 2014. With anticipated slower growth in the global economy, the Group will continue to fine tune the business portfolio, product innovation and cost reduction initiatives to maintain the Group’s competitiveness.
DIVIDenD
The Company has declared and paid a first and second interim dividend totalling 20 sen per share tax exempt during FY 2015. The Board does not recommend any final dividend for FY 2015.
acKnoWLeDgeMent
On behalf of the Board, I warmly welcome YBhg Dato’ Mohamad Kamarudin bin Hassan and Ir. Dennis Ong Lee Khian who joined the Board as Independent Non-Executive Directors during the FY.
I would also like to extend our sincere thanks and appreciation to Mr Tan Keok Yin, our Independent Non-Executive Director who retired at the Company’s Fifty-third Annual General Meeting in October 2014, for his past services and contributions to the Group.
To our valued customers, business associates, vendors, financiers, shareholders and the Government, I take this opportunity to convey our appreciation and gratitude for their continuous support and confidence in the Group.
Lastly, my heartfelt appreciation goes to each and every Board members, management and staff for their contribution, commitment and dedicated service.
DatuK KWeK Leng san
Chairman
GROUP MANAGING
DIRECTOR’S REVIEW
InDustry reVIeW
The financial year (“FY”) ended 30 June 2015 saw substantial improvement in profitability for Malaysian Pacific Industries Berhad. Revenue increased by 8%, supported by a strengthening US Dollar (“USD”), and profit attributable to equity holders increased from RM45.1 million to RM108.5 million. This solid improvement in performance is a result of improved asset utilisation, systematic cost-down programmes and our continuing focus on higher margin business, particularly ultra-thin micro-leadframe packages (“MLP”) where this year, we have been independently acknowledged as the world’s leading volume provider.
oPeratIon reVIeW
Carsem Semiconductor (Suzhou) Co., Ltd (“Carsem Suzhou”) had a very strong year, with combined shipments to all segments rising by 27% (in USD) as compared with the previous FY ended 30 June 2014 (“FY 2014”). The plant is running at high utilisation levels, and we have continued to invest in capacity for ultra-thin MLP assembly and test, especially for added-value applications such as multi-die, Radio Frequency (“RF”) and copper clip. This has been our first year of significant penetration into the China smartphone/tablet market, and whilst we did see the impact of the widely-publicised loss of market share from the two leading global brands, the consequent lower demand has been compensated by gains in new markets. In contrast to MLP, take-up of our new range of Land Grid Array has been slow, although the final quarter saw a breakthrough in winning business from the global leader in consumer sensors which brings an important opportunity for the coming year.
Carsem (M) Sdn Bhd, comprising the two Ipoh plants, is maintaining its high-margin strategy of Added-Value MLP, High Density Leaded products and Test, which together comprise 87% of total sales. Typically, the MLP products support mobile consumer applications such as smartphones and tablets. This year, we have also started to penetrate wearable devices for which our ultra-thin MLP products are ideally suited. The MLP line is running at full capacity, and combined with Carsem Suzhou, Carsem has been recognised by third-party market researchers as the world’s leading volume producer of MLP this year. Business in High Density Leaded has been less robust due to high inventory levels in the supply chain, but we have targeted and won important business in custom automotive sensors this year which are now starting to ramp up. We continue to develop and deploy our so-called i-manufacturing methodology of efficiency and performance improvement through automation, which is highly regarded by top customers.
Dynacraft Industries Sdn Bhd (“Dynacraft”) has had a very good year, this being the first full FY since exiting the loss-making stamped leadframe business in FY 2014. Despite the expected USD revenue fall of 31%, profit increased substantially. Without the loss-making stamped business, and boosted by favourable commodity prices and exchange rate, management has been able to deliver a solid performance by focusing on operational improvements and re­positioning Dynacraft in the market place. Financial and non-financial performance metrics are at record levels, and non-stamped revenues grew by 12%. From here, we see clear growth opportunities in the China market for etched leadframe. The market is poised for growth; whilst local Chinese companies are strong in stamped leadframes, their capacity and experience in etched leadframes are limited. We will continue to invest in growth for this segment.
oPeratIng segMent reVIeW
Asia sales have grown steadily by 10% and now represent 56% of Group revenues. This region was most heavily affected by the Dynacraft stamped leadframe exit, but the revenue loss was offset by the growth in our assembly and test business. This was achieved by re-directing our sales strategy and production capacity to the newer
Chinese smartphone brands, offsetting the effect of the widely-publicised erosion of market share by the industry’s top two leading smartphone brands. We also have a very strong position in RF front-end modules going into smartphones and tablets and are starting to penetrate into wearables.
United States of America segment sales declined by 11% and now represent 21% of Group revenues. This segment was also affected by the Dynacraft stamped leadframe exit. In contrast, sales of ultra-thin MLP into RF front-end module applications in the world’s leading supplier of smartphones/tablets have been very robust this year and are expected to continue into 2016.
European sales were up by 23% and now represent 23% of Group sales. This improvement came from increasing sales to European automotive customers where our reputation is building year by year. Growth in this sector is expected to be steady and consistent, and provides a strategic counterbalance to the Company’s position in smartphones and wearables, which will grow more dramatically but will also be subject to the fluctuations typical of consumer markets.
researcH anD DeVeLoPMent (“r&D”)
Carsem Technology Centre has developed and introduced into production Molded Interconnect System (“MIS”) technology which is designed into the next generation mobile devices.
MIS is able to provide smaller footprint, complexity and superior shielding of RF signals to enable a better performance product while delivering Moisture Sensitivity Level (MSL) level 1 capability that Laminate cannot achieve.
In addition, breakthrough technologies currently under development include superior manufacturing technology in the form of Panel Packaging (PPAK), and the next generation of ultra-thin Quad Flat No-leads, 2.5 mm thin and known as “X4”.
Carsem continues to develop its brand via technical papers in key conferences like Semicon Shanghai Symposium and the industry’s prestigious bi-annual IEEE conference with four papers each respectively. The intellectual property portfolio continues to build up, with two additional patents granted and four applications pending.
outLooK
The Semiconductor Industry Association is currently forecasting modest growth of 2 to 3% this coming year, and customer inventory levels are currently high, signaling a slow start to the year. However, we believe the Group is positioned once again to grow faster than the industry, with strong offerings in the higher-growth segments of mobile interconnectivity, sensors, Internet­of-Things, and custom automotive products. This market position is under­pinned by a strong balance sheet, an internationally respected R&D team, and a sound portfolio of plants, each tuned for cost-effective and profitable growth. We therefore expect the performance of the Group to continue to improve in the FY ending 30 June 2016.
Peter nIgeL yates
Group Managing Director

 

 

2014 Annual Report

CHAIRMAN’S STATEMENT
BUSINESS ENVIRONMENT
The global economic recovery continued to strengthen in 2014, with growth projected by the International Monetary Fund (IMF) to expand to 3.4% from 3.2% in 2013. However, due to the uneven pace and pattern of world economic growth and prevailing uncertainties, the business environment remains challenging.
The semiconductor industry registered only a modest growth despite the high consumer spending on smartphones and tablets. Despite the challenging environment, the Group achieved higher revenue and improved profitability through the planned shift to higher margin products, stronger US Dollar (“USD”) and lower materials cost arising from declining commodity prices.
FINANCIAL REVIEW
Revenue for FY 2014 was RM1,292 million, 5% higher against the previous FY. The Company’s strategic focus on smartphone/tablet, automotive and IOT (Internet of Things) sustained the growth of the Group. FY 2014 results include the final settlement cost of RM12.8 million in the Amkor patent litigation case. Notwithstanding this settlement, the profit attributable to the Group was higher at RM45 million from RM11 million in the previous FY. Consequently, earnings per share improved significantly to 23.9 sen against 5.7 sen recorded for FY ended 30 June 2013.
Healthy cash flow generated from the operations enabled the Group to invest RM72 million into new plant and equipment for future growth, reduce debts by RM91 million and declare a dividend payout to the shareholders of the Company of RM28 million for FY 2014.

SIgNIFICANT DEVELOPMENT
Amkor Technology, Inc. (“Amkor”) filed a complaint with the International Trade Commission (“ITC”) on 17 November 2003 alleging Carsem (M) Sdn Bhd, Carsem Semiconductor Sdn Bhd [now known as Recams Sdn Bhd (in member’s voluntary liquidation)] and Carsem Inc. (collectively “Carsem Group”) of infringing three of Amkor’s United States Patents. Amkor also filed a civil lawsuit at the District Court on even date alleging Carsem Group of infringing the same three patents which were the subject of the ITC Investigation.
Subsequently, Carsem Group filed a request with the US Patent and Trademark Office (“PTO”) for re­examination of Amkor’s ‘277 patent on 15 September 2012. On 10 January 2013, the PTO issued an Office Action rejecting all 25 claims of the patent on multiple grounds.
After several years of litigation, the parties have, on 23 May 2014, entered into a Settlement Agreement to end all pending proceedings related to the litigation, including a joint motion to rescind the exclusion order issued by the ITC on 4 April 2014. Carsem Group paid Amkor an agreed sum of USD4 million (equivalent to RM12.8 million) for such settlement.
Under the terms of the Settlement Agreement, Carsem Group and Amkor have granted each other and their affiliates, non-exclusive, worldwide licenses to their respective Micro Leadframe (MLF) and Micro Leadframe Package (MLP) patents for a period of 10 years.

PROSPECTS
Going forward, the semiconductor industry is forecast to grow moderately in the coming year. On the other hand, the local operating environment remains challenging as the Malaysian Government continues to embark on subsidy rationalisation such as reduction in petrol subsidy, power tariff hike and impending GST implementation. Therefore, the management will continue to focus on new packages development, strategic business portfolio re-alignment and cost saving projects to maintain the Group’s competitiveness.
DIVIDEND
The Company has declared and paid a first and second interim dividend totalling 15 sen per share tax exempt during the FY under review. The Board does not recommend any final dividend for FY 2014.
APPRECIATION
I would like to express my sincere appreciation to each and every Board members, management and staff for their contribution, commitment and dedicated service.
Our appreciation goes also to our valued customers, business associates, vendors, financiers, shareholders and the Government for their continuous support and confidence in the Group.
DATUk kWEk LENg SAN
Chairman
gROUP MANAGING DIRECTOR’S REvIEW
INDUSTRY REVIEW
The financial year (“FY”) ended 30 June 2014 was a year of improving profitability for Malaysian Pacific Industries Berhad. Revenue increased by 5%, supported by a strengthening US Dollar, and profit attributable to equity holders increased from RM10.9 million to RM45.1 million. Profit would have been even higher if not for the exceptional final settlement cost of RM12.8 million in the Amkor patent litigation case. This improvement in performance is the result of a continuing focus on higher margin business, improved asset utilisation, and a smooth exit from the loss-making stamped leadframe business.
OPERATINg SEgMENT REVIEW
Asia sales grew by 3% and now represent 51% of Group revenues. Whilst this overall proportion has remained steady throughout the year, there have been significant underlying shifts. Further growth in the smartphone and tablet markets, supported by our leading position in added-value Micro Leadframe Package (“MLP”), has helped to fill USA sales also grew by 3%, with a There has been a positive turnaround up capacity released by the ongoing similar dynamic pattern. The RF in European sales, which increased by decline in the PC and laptop markets. front-end module business is now 16%. We have a number of European We have maintained and built on our well established in this segment, and customers with a strong position in position in the industry’s top 2 leading the early adopters of our technology network infrastructure and base­smartphone brands, and whilst we now have a very strong position in stations, and the large-scale roll-out were affected by some recent softness the smartphone platform. This is of 4G/LTE infrastructure across the from the market leaders, we have generating a lot of interest from other world has boosted our business. We been penetrating further into the players, including new accounts which have also seen a steady increase in newer Chinese platforms. Our radio we are sampling with prototypes that automotive sales following our push frequency RF front-end modules, will ramp in the coming year. The into custom automotive. This business which were initially launched into recent settlement with Amkor clears will take time to grow, but it is typically the United States of America (“USA”) the way for new USA customers who very stable, and products have an segment, have also made successful might have been deterred in the past 8-10 year life cycle, forming a reliable inroads into the Asia market this year. from dealing with the Group. foundation for the business in future years.
OPERATION REVIEW
Carsem (M) Sdn Bhd (“Carsem (M)”) comprises the two Ipoh plants (namely S-site and M-site), which are now concentrated on Added-value MLP and High Density Leaded products respectively. The Testing business is the third pillar of our high-margin portfolio and together, these three portfolios now comprise 85% of sales. Each plant has a differentiated growth strategy, with S-site heavily directed to the smartphone and consumer world, and M-site serving the automotive industry. Large-scale consolidation is now complete, and the plants have implemented a programme of efficiency and utilisation improvement through automation (known as i-manufacturing) which has resulted in steady margin improvement throughout the year. Despite an important shift in the business to multi-die and copper wire, we have been able to redeploy assets to minimise new capital expenditure, although M-site in particular is approaching full capacity with its current equipment set and by year-end, we were starting to invest further. In Carsem (M), we now have two well-tuned, cost-effective and stable plants, both well able to respond to future growth opportunities.
Carsem Semiconductor (Suzhou) Co., Ltd (“Carsem Suzhou”) did not grow as expected this year, despite making solid progress in new products. The weakness in demand from our top customer was not a surprise given their exposure to the PC/laptop market. Less expected was the simultaneous fall in demand from a second key customer, who lost smartphone market share to their competitors causing a weak 3rd quarter for Carsem Suzhou. The gap was closed by year­end, with products like multi-die, copper clip, and ultrathin MLP, and the phase 1 factory is currently fully utilised again, now with a wider spread of customers. With the phase 2 expansion, we are introducing a new range of products, high pin count LGAs and FBGAs, opening up a new growth market for the company and providing further diversification. We anticipate substantial growth in Carsem Suzhou in the coming year.
Dynacraft Industries Sdn Bhd (“Dynacraft”) went through an important year of transition following a review of strategic options, and the decision to exit the unprofitable stamped leadframe business with the loss of 560 jobs. Following the announcement of closure and the last-time-buy notice, many customers placed substantial orders for stock as expected, and the plant ran at full capacity until these orders were fulfilled. Profit from this last-time­buy programme more than offset the total cost of closure, so there was a net positive impact on the company’s overall performance. On an ongoing steady-state basis, Dynacraft revenue will reduce by around 30%, but the remaining advanced etched leadframe business is profitable, and we are continuing to invest in this growth business.
RESEARCH AND DEVELOPMENT
The Carsem Technology Centre (“CTC”) continues to focus on breakthrough new products in targeted strategic high growth segments supporting the IOT (Internet of Things) and automotive sensors. The IOT drive includes wearables, handheld, smartphones and wireless internet routers. The potential of wireless addressable devices is accelerating exponentially with new applications in security/safety, wellness, medical, lifestyle, sports/fitness and personal communications. Forecasts estimate the number of such devices could ramp from 2 billion today to 25 billion within 2 years.
In line with this strategic thrust, we are continuing to expand on the generation of X3 ultrathin MLP packages that are 3 times thinner than a standard MLP. After promoting the advantage over wafer level chip scale packages (WLCSP) for the last 2 years, this is now being recognised by customers, particularly regarding robustness, development time, and the ability to use precious circuit board space more effectively. We already have several segment-leading customers in full production in both Suzhou and Ipoh. This range is continuing to expand into ever larger and more complex ultrathin devices, including now a range of high density, fine line routing capability of substrate and implementing it into MLP lead-frame (Molded Interconnect System or MIS) that enables fan-in/fan-out capability. This greatly increases design flexibility and enables more complexity in a smaller footprint.
With these developments, the CTC is building an important international reputation. This year again, we presented several papers at international conferences. 5 further patents were granted, and a further 5 applications are pending.
OUTLOOk
The general economic outlook for the semiconductor industry seems to be improving, with most forecasters predicting moderate and steady growth this year. The Group is very well-positioned to benefit from this growth with industry-leading product and service offerings in mobile interconnectivity and automotive markets. This market position is underpinned by a strong balance sheet, an internationally respected Research and Development team, and a sound portfolio of plants, each one of which is successfully configured for cost-effective and profitable growth. We therefore expect the performance of the Group to continue to improve in the FY ending 30 June 2015.
PETER NIgEL YATES
Group Managing Director

 

 

 

2013 Annual Report

On behalf of the Board of Directors, I am pleased to present the Annual Report and Financial Statements of the Group and of the Company for the financial year ended 30 June 2013 (“FY 2013”).
BUSINESS ENVIRONMENT
The semiconductor industry continued to experience a challenging environment with very modest growth due to slow reform in the US economy, continuing weakness in the Eurozone and a slowdown in the China market. Despite the overall modest growth in the industry, the Group achieved a better result through the planned shift to higher margin products, lower cost base manufacturing techniques and lower material costs arising from declining commodity prices.
FINANCIAL REVIEW
Revenue for FY 2013 was RM1,226.3 million, 3% higher than the previous financial year ended 30 June 2012 (“FY 2012”). The FY 2013 went through an uneven path but ended the financial year with a very strong growth in the final quarter. The Group reported a profit attributable to owners of RM10.9 million despite a modest revenue growth, registering a massive favourable swing of RM30.7 million against a loss attributable to owners of RM19.8 million in FY 2012. Healthy cash flow generated from the operations enabled the Group to invest RM97 million into new plant and equipment for future growth, reduce debts by RM21 million and declare a dividend payout to the shareholders of the Company of RM17 million.
SIGNIFICANT DEVELOPMENT
Amkor Technology, Inc. (“Amkor”) filed a complaint with the International Trade Commission (“ITC”) on 17 November 2003 alleging Carsem (M) Sdn Bhd, Carsem Semiconductor Sdn Bhd (now known as Recams Sdn Bhd) and Carsem Inc. (collectively “Carsem Group”) of infringing three of Amkor’s US Patents. Amkor also filed a civil lawsuit at the District Court on even date alleging Carsem Group of infringement of the same three patents which are the subject of the ITC Investigation.
After several years of investigations, the ITC had, on 20 July 2010, issued the final determination and found that the claims of Amkor’s patents are invalid and not
infringed and that Carsem Group had not violated the Tariff Act by importing the Micro Leadframe Package (MLP) products which Amkor had accused of infringement (“ITC’s Decision”). Amkor appealed against ITC’s Decision to the Court of Appeals of the Federal Circuit (“CAFC”).
The parties have requested the District Judge continue to stay all proceedings in the District Court case pending the final outcome of the ITC proceedings. The District Court continued the Stay Order. On 22 August 2012, the CAFC reversed the ITC’s determination on prior invention and remanded the case to the ITC for further proceedings consistent with the decision. Carsem Group has on 5 October 2012 filed a petition for rehearing at the CAFC. The CAFC has denied Carsem Group’s petition for re­hearing of the appeal. The case has been remanded to the ITC for further proceedings consistent with the CAFC’s decision.
Carsem Group filed a request with the US Patent and Trademark Office (“PTO”) for re-examination of Amkor’s ‘277 patent on 15 September 2012. On 10 January 2013, the PTO issued an Office Action rejecting all 25 claims of the patent on multiple grounds. By the 15 August 2013, both Amkor and Carsem Group had filed their responses which are currently under consideration by the PTO.
On 5 February 2013, the parties filed their response submissions concerning the remand proceedings with the ITC. Further briefings were filed by both parties on 16 July 2013. ITC has not set a date for its review of the briefing and has not identified the further proceedings it intends to undertake thereafter.
FUTURE AND PROSPECTS
Going forward, the industry is not expected to see strong growth in the near future and the business environment will remain challenging due to slow recovery in the global economies. Therefore, the management will continue to focus on new packages development, strategic business portfolio re-alignment and cost saving projects to maintain the Group’s positive results.
DIVIDEND
The Company declared and paid a first and second interim dividend of 5.4 sen per share less tax and 5.0 sen per share tax exempt respectively during FY 2013. The Board does not recommend any final dividend for the FY 2013.
APPRECIATION
On behalf of the Board, I would like to express my sincere
appreciation to each and every member of the Group for their contribution, commitments and dedication to the Group.
Our appreciation also goes to our valued customers, business associates, vendors, financiers, shareholders and the Government for their continuous support and
confidence in the Group.
DATUK KWEK LENG SAN
Chairman
INDUSTRY REVIEW
The financial year ended 30 June 2013 (“FY 2013”) was a financial year of performance turnaround for Malaysian Pacific Industries Berhad (“MPI”). Revenues increased modestly by 3%, the Group returned to profitability, and profit attributable to equity holders increased to RM10.9 million. With general semiconductor industry demand increasing by only 0.6%, this improvement in performance was being driven by targeting higher margin product sectors, coupled with a strong drive on productivity and asset utilisation.
OPERATING SEGMENT REVIEW
Asia sales remained steady and now represents 47% of the Group revenues. We have continued actively to target the growing smartphone and tablet market. Over one third of our output is shipping into these two key applications. We have a well-established position in the top 2 industry-leading brands, and more recently have also started shipping into the rapidly growing China smartphone market. The Group now has a very strong presence in the accelerometer and advanced display driver businesses. This growth has been sufficient to offset both a small decline in leadframe sales in the region as well as the continuing weakness in the personal computer and consumer business. United States of America (“USA”) sales grew markedly by 20%, representing 29% of the Group revenues. We now have a leading position in radio
frequency (“RF”) front-end modules, with important design wins with several key industry players. Once again, it is the presence of these modules in smartphones and tablets that is driving demand. However, we do expect this to accelerate as RF-
enabled devices are increasingly adopted into the home in the form of routers, smart TVs and other devices connected via the internet. European sales declined further by 7% and now represents 24% of the Group revenues. The macro­economic picture in the Eurozone remained fragile with industrial sales declining the most. Despite this, there were some signs of improvement in the final quarter of FY 2013 that may signal a long-overdue recovery is imminent. Automotive sales remained flat. However, we have been working closely with key players and have secured design wins in new custom automotive products which will bring additional volume in the coming financial year ending 30 June 2014 (“FY 2014”) and beyond.
OPERATION REVIEW
Carsem Semiconductor (Suzhou) Co., Ltd (“Carsem Suzhou”) had another record year, with combined shipments to all segments rising by 21% as compared with the previous financial year ended 30 June 2012. Production has now commenced in the second phase building, which has the space to allow capacity ultimately to be increased by a factor of four to 20 million units/day. Equipment utilisation is high, and this is therefore a very cost-effective plant, concentrating on high added-value turnkey Micro Leadframe Package (“MLP”). We have been successful in balancing the customer portfolio by targeting accounts outside Greater China, which now comprise 61% of the portfolio as compared with 48% one year ago. With a strong portfolio of advanced technology, a balanced customer portfolio and room to expand quickly, Carsem Suzhou is extremely well-positioned for future growth. Carsem (M) Sdn Bhd (“Carsem (M)”) has completed a year of consolidation, exiting a number of legacy lines to concentrate resources onto its targeted high-margin portfolio of leaded high density, MLP and turnkey test business. Together, these three segments comprised 76% of revenue by year end. Indeed, test revenues now comprise 14% of total Carsem (M) revenues, a substantial shift from earlier years. We have furthermore consolidated our customer portfolio, from over 100 two years ago to around 60 today. 90% of our business now comes from the top 20 customers. We believe this represents an optimum – few enough to ensure top customers receive the attention this service industry requires, without Carsem (M) becoming over-dependent on any one specific customer. These consolidation actions taken together with the productivity programme and the drive to maximise utilisation will further enhance profitability of Carsem (M) in the coming year.
Dynacraft Industries Sdn Bhd has had a challenging year, with strong competitive pressures squeezing both volumes and margins. Stamped leadframe sales in particular
continue to decline. Nevertheless, the operating loss reduced as commodity prices weakened during FY 2013 and productivity improvements and reductions in overhead cost and administrative expenses provided further savings.
The team continues to focus on driving yield performance of the etching lines. Given the decline in traditional stamped leadframe sales, the directors have decided to
take a one-time goodwill write-off of RM12.4 million.
RESEARCH AND DEVELOPMENT
The Carsem Technology Centre has developed a new range of breakthrough products in the form of ultra-thin packages (less than 0.35 mm) targeted at next generation
mobile devices. This is a development of the so-called “X3” technology from applications in single-die transient voltage suppressors to full multi-die RF capable products using specialised and patented bonding techniques. These devices offer significant advantages over competitive wafer level chip scale packages in terms of speed, cost and reliability. Carsem’s technology reputation has been further enhanced by having 10 technical papers accepted for the Semicon Shanghai Symposium, and by being invited to host the industry’s prestigious bi-annual IEEE (Institute of Electrical and Electronics Engineers) conference, with 100 papers presented by over 400 international participants. As our industry reputation for leading-edge solutions is building, so are the sales from these new technologies. The last 3 years of technology releases already account for 15% of Carsem sales.
OUTLOOK
The general economic outlook for the semiconductor industry remains modest, with most forecasters not anticipating significant pick-up until 2014. Nevertheless, the Group is well-positioned to benefit from any resumption in growth, with a strong position in today’s leading growth markets, under-pinned with a growing presence in the more stable automotive markets, and supported by well-tuned factories. We are therefore looking to grow faster than the industry-average, and expect the performance of the Group to improve further in the FY 2014.
PETER NIGEL YATES
Group Managing Director

 

 

 

2012 Annual Report

Chairman’s Statement
On behalf of the Board of Directors, I am pleased to present the Annual Report and Financial Statements of the Group and of the Company for the financial year ended 30 June 2012 (“FY 2012”).
BusiNess eNViroNMeNt
The industry continued to experience a difficult and challenging enviroment in our FY 2012. The uncertainty of the US economy and the on-going EURO crises did not help the situation. The slower Chinese economy had also contributed to our
disappointing performance. The volatility of commodity prices and the strength of Ringgit exerted pressure on our margins. Efforts to restructure our cost base through productivity improvement and increase our sales mix to the newer and higher margin packages had helped to mitigate the impact on our results.
fiNANciAL reVieW
Revenue for FY 2012 was RM1,192 million, a reduction of 16% over the previous financial year. During the year, we experienced negative revenue growth until our fourth quarter of FY 2012 when we had a 16% growth. This was encouraging because this growth was contributed by new accounts and the newer packages the Company had been working on over the last few quarters. The overall decline in revenue for the FY 2012 had resulted in a loss attributable to owners of the Company at RM20 million against a profit of RM59 million recorded for the financial year ended 30 June 2011.
However, the Company continued to generate a healthy cash flow. This cash flow enabled the Group to invest RM203 million into new plant and equipment for future growth, reduce debts by RM11 million and a dividend payout of RM20 million for FY 2012.
sigNificANt DeVeLoPMeNt
Amkor Technology, Inc. (“Amkor”) filed a complaint with the International Trade Commission (“ITC”) on 17 November 2003 alleging Carsem (M) Sdn Bhd, Carsem Semiconductor Sdn Bhd (now known as Recams Sdn Bhd) and Carsem Inc. (collectively “Carsem Group”) of infringing three of Amkor’s US Patents. Amkor also filed a civil lawsuit at the District Court on even date alleging Carsem Group of infringing the same three patents which are the subject of the ITC Investigation.
After several years of investigations, the ITC has, on 20 July 2010, issued the final determination and found that the claims of Amkor’s patents are invalid and not infringed and that Carsem Group has not violated the Tariff Act by importing the Micro Leadframe Package (MLP) Products which Amkor has accused of infringement (“ITC’s Decision”).
Amkor appealed against ITC’s Decision to the Court of Appeals of the Federal Circuit.
On 22 August 2012, the Court of Appeals reversed the ITC’s determination on prior invention and remanded the case to the ITC for further proceedings consistent with the decision. Carsem Group is preparing to file a petition for re-hearing.

 

future AND ProsPects
Going forward, although the business environment is not expected to improve substantially, I believe the management
effort in the development of new packages, strategic business portfolio re-alignment and cost saving projects will contribute positively to our results.
DiViDeND
The Company had declared and paid a first and second interim dividend totalling 10 sen per share tax exempt during the financial year under review. The Board does not recommend any final dividend for the FY 2012.
APPreciAtioN
On behalf of the Board, I would like to express my sincere appreciation to each and every member of the Group for their
contributions, commitments and dedications to the Group.
Our appreciation also goes to our valued customers, business associates, vendors, financiers, shareholders and the Government for their continuous support and confidence in the Group.
DAtuK KWeK LeNg sAN
Chairman

 

Group Managing Director’s Review
The financial year ended 30 June 2012 (“FY 2012”) was a disappointing year for Malaysian Pacific Industries Berhad (“MPI”) with revenue falling by 16%, resulting in a loss attributable to equity holders of RM19.8 million. This revenue fall was set against the backdrop of widespread falling demand across the semiconductor industry, with the second and third quarters of FY 2012 proving particularly challenging. However, the year ended more strongly, with MPI’s revenue in the final quarter being boosted by shipments into smartphone and tablet PC applications.
oPerAtiNg segMeNt reVieW
Although sales to each of the major geographic segments have all fallen during the year, there were significant regional variations.
Asia sales now represent 48% of the Group’s revenue. Active and successful targeting of smartphone and tablet applications throughout the year have been able to partially offset the widespread decline in the PC and consumer
business. Successful products now include advanced display drivers, accelerometers, ambient light sensors and proximity sensors – demand remains robust in these areas. Volume shipments of Carsem (M) Sdn Bhd (“Carsem (M)”) and Carsem Semiconductor (Suzhou) Co., Ltd (“Carsem Suzhou”) (Carsem (M) and Carsem Suzhou are collectively referred to as “Carsem”)’s ultra-thin 0.3mm package known as X3 continue to rise. Leadframe sales to Asia continue to underpin the business of Dynacraft Industries Sdn Bhd (“Dynacraft”).
US sales declined the least and this year represent 25% of the Group’s revenue. The conversion of leaded products to high-density leadframes has been completed. Carsem’s leading edge performance in high-accuracy, multi-die products, complemented by radio frequency (“RF”) test capability has enabled new design wins in the multiple-band radio devices incorporated into today’s smart phones, which business continues to grow substantially.
European sales suffered the most substantial decline, falling by 27% from the financial year ended 30 June 2011 levels.
In 2012, European sales represent 26% of the Group’s sales. Demand has been low across all customers, but particularly across consumer and PC applications, with automotive proving rather more resilient. We have maintained market share within this segment’s customer base, but we do not expect revenue to rise until the macro-economic picture in the Eurozone improves.
oPerAtioN reVieW
The building expansion of Carsem Suzhou is now complete, such that capacity can now be increased by a factor of 4 to 20 million units/day. Qualification of the new clean room was completed in the fourth quarter of FY 2012 (“Q4 FY 2012”) and following another record sales quarter for Carsem Suzhou in Q4 FY 2012, production will now start up in
this new module. Throughout the year, volume has been shifting from gold to copper wire, with volumes using copper now exceeding 40%. The international sales teams have been working to balance the customer profile by specifically
targeting customers outside Asia. These accounts now comprise 51% of Carsem Suzhou’s sales as compared with 36%
one year ago.
Carsem (M) has made a successful transition to its targeted high margin portfolio of high density, Micro Leadframe Package (“MLP”) and turnkey test business. By the end of FY 2012, over 70% of the revenue came from these three segments. Coupled with the impact of cost-down and productivity programmes, Carsem (M) is now operating at
competitive margins. The success of added-value MLP business such as multi-die, MEMS and RF has been such that these lines have been capacity-limited, and we have continued to add capacity in these areas throughout the year.
Dynacraft has had a challenging year, with high commodity prices and strong competitive pressures combining with
lower demand to squeeze both volumes and margins. The operation continues to drive down costs by improving product
yields, and margins also improve as the proportion of etched leadframe rises. European sales were particularly weak, but new accounts in Asia are being successfully targeted to backfill the capacity. Looking forward, the company now has an injection moulding process, opening up new applications for cavity packages in LED and MEMS products.
reseArcH AND DeVeLoPMeNt
Carsem Technology Centre has been at the heart of this year’s progress in penetrating new markets in smartphones and tablets. This capability has been noted by key customers as giving Carsem a clear competitive advantage, providing solutions and resulting in shorter time to market. New developments in copper clip technology, multi-die, MEMS and LED have accelerated. The team has focused on building the company’s intellectual property and patent portfolio, including 15 new patents in China.
outLooK
Although the immediate general economic outlook for the semiconductor industry is unclear, the Group is well-positioned
to benefit from any resumption in growth. The Group has a strong and increasing position in key growth markets; low cost technologies such as copper wire and high-density leadframes are already in place; and we are ready to bring on-stream additional capacity in China in the coming months. I therefore expect the performance of the Group to be satisfactory in the financial year ending 30 June 2013.
Peter NigeL YAtes
Group Managing Director

 

 

2011 Annual Report

CHALLENGING BUSINESS ENVIRONMENT
The global economy experienced modest growth last year after the strong
rebound from the economic crisis of 2009. Key concerns on the debt crisis
in the EURO region and the record United States (“US”) trade deficit led
to global economic uncertainties. The natural disaster caused by the
Japanese earthquake hurt the supply chains of the global manufacturing
industry, further dampening the already shaken global economy.
However, strong growth in China and the emerging markets cushioned
the negative impact in the developed countries. Malaysia, as one of
the emerging countries, managed a gross domestic product growth of
5%. Weaker US economic data and the effect from Quantitative Easings
caused the US Dollar (“USD”) to weaken against most currencies including
the Ringgit Malaysia (“RM”). In addition, the weak USD further provoked
speculation on commodities. The stronger local currency and escalating
commodity prices adversely impacted the performance of the Group’s
revenue and profitability during the financial year under review.
FINANCIAL REVIEW
During the financial year ended 30 June 2011 (“FY 2011”), the Group’s
revenue grew in line with that of the global semiconductor industry. Strong
demand in tablet computing and smart phone devices at the end markets
sustained the growth of the industry.
I am pleased to report a revenue of RM1,415 million for the FY 2011, a
growth of 2% (12% in USD terms) over the previous financial year ended
30 June 2010 (“FY 2010”). Profit attributable to owners of the Company
was lower at RM59 million against RM105 million in FY 2010. Consequently,
earnings per share were lower at 30 sen against 54 sen recorded for FY
2010. The weaker performance was mainly due to the strengthening of
the RM against the USD coupled with rising commodity prices during the
financial year under review.
Strong cash flows generated from the Group’s operations have enabled
the Group to invest RM241 million in new plant and equipment, reduce
debt by RM24 million and pay a dividend of RM40 million in the financial
year.
SIGNIFICANT DEVELOPMENT
Amkor Technology, Inc. (“Amkor”) filed a complaint with the International
Trade Commission (“ITC”) on 17 November 2003 alleging Carsem (M)
Sdn Bhd, Carsem Semiconductor Sdn Bhd (now known as Recams Sdn
Bhd) and Carsem Inc. (collectively “Carsem Group”) of infringing three
of Amkor’s US Patents. Amkor also filed a civil lawsuit at the District Court
on even date alleging Carsem Group of infringement of the same three
patents which are the subject of the ITC Investigation.
After several years of investigations, the ITC has, on 20 July 2010, issued
the final determination and found that the claims of Amkor’s patents are
invalid and not infringed and that Carsem Group has not violated the
Tariff Act by importing the Micro Leadframe Package (MLP) Products
which Amkor has accused of infringement (“ITC’s Decision”).
Amkor appealed against ITC’s Decision to the Court of Appeal of
the Federal Circuit. The Court directed Amkor to file its Opening
Appeal Brief on or before 3 January 2011 and Carsem Group
to file its Intervenor Brief (reply) within 40 days from the date of
receipt of Amkor’s Opening Appeal Brief.
As at 23 May 2011, Carsem Group, ITC and Amkor have filed
their Appeal Briefs. As required by the US Federal Circuit Rules of
Court, the parties have also filed a Joint Settlement Conference
Report with the Court on 31 May 2011 confirming that the parties
have conducted settlement discussion in connection with this
case as late as September 2010 but that no settlement has been
reached.
The parties is now awaiting a communication from the Court to
set a date for hearing oral arguments.
FUTURE AND PROSPECTS
Going forward, the continuing global economic recovery is
expected to be choppy given slow growth in the US coupled with
continuing debt deleveraging and the yet unresolved debt crisis
in the EURO region. With growth restrained, the management
will focus on technology advancement and cost saving projects
to keep the Group’s competitive edge in the semiconductor
industry.
Barring any unforeseen circumstances, the Board expects the Group to perform satisfactorily in the new financial year ending 30
June 2012.
DIVIDEND
The Company has declared and paid a first and second interim tax exempt dividends totalling 20 sen per share during the
financial year under review. The Board does not recommend any final dividend for the FY 2011.
APPRECIATION
On behalf of the Board, I would like to express my sincere appreciation to each and every employee of the Group for their
contributions, commitments and dedication to the Group.
Our appreciation also goes to our valued customers, business associates, vendors, financiers, shareholders and the Government
for their continuous support and confidence in the Group.
KWEK LENG SAN
Chairman
Chairman’s Statement
(cont’d)
Annual Report 2011 11
Group Managing Director’s Review
The financial year ended 30 June
2011 has been a year of modest
growth for the semiconductor
industry, with the Semiconductor
Industry Association reporting
growth in US Dollar (“USD”)
terms of 10.6%.
Against this backdrop, Malaysian Pacific Industries Berhad has grown
revenue by 12% in USD terms. However there has been a substantial
strengthening of the Ringgit Malaysia (“RM”) during the year, which
has meant revenue growth in RM terms, was limited to 2%. This currency
movement, combined with substantial commodity price increases have
also had a substantial effect on profitability, driving down profit attributable
to MPI equity holders to RM59 million.
Revenues were adversely affected in the second half of the year by the
economic consequences of the Japanese earthquake tragedy. Although
there was no immediate direct impact on the supply of key raw materials,
the wider effect was a reduction in demand which has persisted beyond
the end of the financial year.
Operating Segment Review
Asia sales again represent 47% of the Group’s revenues, a proportion
unchanged from last year. This has been supported by growth of 14% in
Carsem Semiconductor (Suzhou) Co., Ltd. (“Carsem Suzhou”) operation,
where we have continued to invest in expanding capacity for production
of Micro Leadframe Packages (“MLP”). The growth occurred during the
first half of the year, with the second half proving relatively soft. Carsem’s
new, extremely thin version of the MLP package, at 0.3mm thick, known
as “X3” is now well established in the transient voltage suppression market,
and we have shipped significant volumes. For the first time, one of our
Asian customers has moved into Carsem’s top 5 customer list. Leadframe
sales to Asia continue to dominate the business of Dynacraft Industries Sdn
Bhd (“Dynacraft”).
European sales declined slightly during the year and now represent 30%
of the Group’s revenues. Sales to European automotive customers remain
strong with good prospects for further growth. We have continued our
investment in new cost-effective ATE (automatic test equipment) systems,
building our test development capability in parallel and making inroads
into new areas such as RF testing. MLP capacity has been increased to
match, allowing us to take a higher proportion of combined assembly/
test (turnkey) business, thereby adding value and reducing cycle time to
customers.
US sales increased from 22% to 23% of the Group’s revenues. There has
been a major migration during the year to high-density leadframe, which
improves both productivity and capacity. Although some customers
have been slower to qualify the new leadframe than anticipated, over
70% of the identified production volumes have been converted, and the
remainder will convert during the financial year ending 30 June 2012 (“FY
2012”). The new cavity package concept has also been introduced into
the US market, gaining a very important designed-in win for tyre pressure
sensors, which will grow substantially in coming years.
12 Malaysian Pacific Industries Berhad (4817-U)
Operation Review
Carsem Suzhou continued to grow, with USD revenues increasing by 14% year-on-year. The adoption of copper wire is rapidly
gaining momentum, and combined with the adoption of the new high-density leadframe design, have resulted in lower costs and
enhanced sales. With the plant rapidly approaching full capacity, we have broken ground on a substantial building expansion,
which will increase capacity by a factor of four to 20 million units/day. Construction is due to be completed in December 2011,
with the volume ramp-up planned to commence in January 2012. The plant has received several customer awards again this
year, underlining its success in attracting US and European customers to balance the regional dependency.
Carsem (M) Sdn Bhd (“Carsem (M)”) has been substantially affected by the weakening USD which averaged RM3.08 as compared
with RM3.37 in the previous year. Competitive pressures have prevented any price increases to offset the erosion. Margins have
therefore been squeezed, and even though USD revenues were higher by 10%, profit in RM terms was lower than the previous
year. Nevertheless, the revision of the product portfolio and the operational cost reduction drive have resulted in lower underlying
unit costs during the year. This programme has now been followed with a focus on streamlining processes and reducing inventory
and work-in-progress to reduce manufacturing cycle time by a factor of two for key high volume lines.
Dynacraft has experienced a particularly challenging year. Rising metal prices, particularly of copper and silver, combined with
the unfavorable foreign exchange environment, have substantially eroded profits, despite 14% higher sales in USD terms. During
the year, capital investment has resulted in a 20% increase in etched leadframe capacity (for MLP applications), from which
benefits will start to flow through in FY 2012. Dynacraft is exploring partnership options in China to maximise the value of its expertise
in etched leadframe for which demand is forecast to rise substantially over the next 5 years.
Research and Development
The Carsem Technology Centre (“CTC”) has been recognised by the industry with the award of Best Paper in the IEMT Conference
in 2010 for the new 0.3mm thick X3 package. This has been followed up with the development of a dual-die version, enabling bidirectional
transient voltage suppression, once again opening up a new market area. Production will commence in Suzhou in the
coming year. There have also been significant developments in the field of cavity packages, where CTC’s proven competence
in developing novel materials and package architectures has borne fruit. During the year, Carsem (M) filed 5 patents which
were approved. Dynacraft has also been developing an injection molding process to open up new applications such as cavity
packages for MEMS and LED applications.
Outlok
Although the immediate general economic outlook for the semiconductor industry is unclear, the Group is well-positioned to
benefit from any resumption in growth. New technologies such as copper wire and high-density leadframe are already in place,
and additional capacity can come on-stream in China in the second half of the year. We expect the performance of the Group
to be satisfactory in the FY 2012.
PETER NIGEL YATES
Group Managing Director
Group Managing Director’s Review
(cont’d)
Annual Report 2011 13

 

2010 Annual Report

CHAIRMAN’S STATEMENT
On behalf of the Board of Directors,I am pleased to present the Annual Report and Financial Statements of the Group and of the Company for the financial year ended 30 June 2010.
CHALLENGING BUSINESS ENVIRONMENT
The global economy has been steadily recovering from the financial crisis in response to the various stimulus packages and the easing of monetary policy implemented by governments around the world. Stronger growth in China and the emerging economies further boosted the recovery. The Malaysian recovery, evidenced by gross domestic product growth of 10% in the first half of 2010 against the significant contraction of 2009, has caused the Malaysian Ringgit to strengthen against the US Dollar. This currency strengthening coupled with higher commodity prices have an impact on the revenue and profitability performance of the Group during the financial year under review.
FINANCIAL REVIEW
During the financial year ended 30 June 2010 (“FY 2010”), the Group’s results improved gradually from quarter to quarter in line with the recovery of the global semiconductor industry. The key drivers of this growth have been strong customer demand in the end markets, particularly the computing and communication sectors, coupled with inventory restocking after heavy depletion during the financial downturn.
I am pleased to report a revenue of RM1,386 million for FY 2010, a 20% increase over the previous financial year ended 30 June 2009 (“FY 2009”). Profit attributable to equity holders of the parent was at RM105 million, against a loss of RM40 million in FY 2009. Earnings per share were 54 sen, compared with a loss per share of 20 sen recorded for FY 2009.
Strong cash flow generated from the Group’s operations enabled the Group to invest RM190 million into new plant and equipment, implement debt reduction of RM44 million and pay a dividend of RM50 million for the financial year under review.
CHAIRMAN’S STATEMENT
(cont’d)
SIGNIFICANT DEVELOPMENT
We are pleased to report the finding of “No Violation” in the Final Determination of the United States’ International Trade Commission (“ITC”) issued on 20 July 2010, in respect of the complaint filed in 2003 by Amkor Technology, Inc (“Amkor”) against Carsem (M) Sdn Bhd, Carsem Semiconductor Sdn Bhd (now known as Recams Sdn Bhd) and Carsem Inc. (collectively “Carsem Group”).
Amkor has filed a complaint with the ITC on 17 November 2003 alleging Carsem Group of infringing three of Amkor’s United States Patents. Amkor also filed a civil lawsuit at the District Court on even date alleging Carsem Group of infringement of the same three patents which were the subject of the ITC Investigation. This civil lawsuit was stayed by the District Court pending the outcome of the ITC Investigation.
Following lengthy legal proceedings over several years, on 20 July 2010, the ITC terminated the investigation and issued the Final Determination finding that the claims of Amkor’s patents are invalid and/or not infringed and that Carsem Group has not violated section 337 of the Tariff Act by importing the Micro Leadframe Package (MLP) Products.
OUTLOOK AND PROSPECTS
The recent mixed economic data released by the developed nations has caused some uncertainties in the growth direction of the global economy. Thus, the management will remain focused on operational efficiency and effective cost management to maintain the Group’s competitive edge in the semiconductor industry.
Barring any unforeseen circumstances, the Board expects an improved satisfactory performance from the Group in the new financial year ending 30 June 2011.
DIVIDEND
The Company declared and paid a first and second interim dividend totalling 25 sen per share tax exempt during the financial year under review. The Board does not recommend a final dividend for the FY 2010.
APPRECIATION
On behalf of the Board, I would like to express my sincere appreciation to each and every employee of the Group for their contribution, commitment and dedication to the Group.
Our appreciation also goes to our valued customers, business associates, vendors, financiers, shareholders and the Government for their continuous support and confidence in the Group.
KWEK LENG SAN
Chairman
GROUP MANAGING DIRECTOR’S REVIEW
The financial year ended 30 June 2010 has been a year of recovery for the semiconductor industry. Following the dramatic downturn in early 2009, and despite the widely-voicedfear of a prolonged downturn or a double dip, the industry has recovered quite rapidly.Correspondingly, the Group revenue has increased steadily throughout the year, an overall increase of 20% as compared with the previous financial year ended 30 June 2009.
This steady increase in revenue has driven a substantial shift in profitability, and coupled with the benefits of the cost saving and productivity programmes implemented in response to the 2009 industry downturn, the Group generated a profit attributable to equity holders of RM105 million.
OPERATING SEGMENTS REVIEW
Sales to each of the major geographic segments have all risen substantially during the financial year ended 30 June 2010.
Asia sales grew the most dramatically and now represent 47% of the Group’s revenue. This has been supported by growth in the Carsem Semiconductor (Suzhou) Co., Ltd’s (“Carsem Suzhou”) operation, where we have invested in expanding capacity for production of Micro Leadframe Packages (“MLP”). Carsem Suzhou has also successfully introduced a new, extremely thin version of the MLP package, 0.3mm thick, known as “X3”. Aimed at the transient voltage suppression market, we are already shipping significant volumes. Carsem Suzhou is the first contract assembly house to offer this package in production. Leadframe shipments also form a key component of Asia sales which are expected to grow further, particularly in Taiwan and China.
Europe sales also increased, but at a slower rate. Europe now represents 31% of the Group’s revenue. Largely served by Carsem (M) Sdn Bhd (“Carsem (M)”), we have concentrated on building this business by investing in both Automatic Test Equipment (“ATE”) and MLP capacity. ATE testers are currently improving in flexibility and reducing in cost, allowing us to serve multiple customers and products from a common equipment base. Matching ATE and MLP capacity allows us to take a higher proportion of combined assembly/test (turnkey) business, thereby adding value and reducing cycle time to customers.
The United States (“USA”) sales increased in line with the overall portfolio and remained at 21% of the Group revenue. A major driver for this market (though not exclusively for the USA) is the high density programme, whereby products are migrating to a larger leadframe, improving both capacity and productivity. Currently, 40% of the identified production volumes have been converted, and we expect to complete this programme during the financial year ending 30 June 2011 (“FY 2011”). We are also targeting new cavity package products into the USA market.
GROUP MANAGING DIRECTOR’S REVIEW
(cont’d)
OPERATION REVIEW
Carsem Suzhou resumed its expansion with annual output growing vigorously by over 35%, supported by additional capital expenditure on equipment. The existing production floor space is projected to be at full capacity by the end of FY 2011, so building expansion plans are now in progress. The plant continues to receive accolades from customers, and we are actively promoting the site to our customers in the USA and Europe to balance the regional dependency.
Carsem (M) has faced the double challenge of ramping production whilst simultaneously reducing costs, in response to falling margins due to the weakening US Dollar. Direct labour has also been a constraint as a result of the Malaysian Government policy limiting the recruitment of foreign workers, although this was resolved by the financial year-end. In response to the cost challenge, we have instituted a comprehensive portfolio review, investing actively in high productivity hardware for growing product lines, and discontinuing certain low volume lines. In parallel, the team has implemented a series of process changes to improve robustness, consistency and efficiency, boosting profitability accordingly.
Dynacraft Industries Sdn Bhd (“Dynacraft”) also recorded stronger revenue and profits despite the unfavourable foreign exchange environment and rising metal prices. During the year, capital investment has resulted in a 20% increase in etched leadframe capacity (for MLP applications), from which benefits will start to flow through in FY 2011. Dynacraft is now exploring expansion options in China to support the predicted boom in demand for etched leadframe over the next 5 years and beyond.
RESEARCH AND DEVELOPMENT
Carsem Technology Centre has built extensive competence in developing novel materials and package architectures. In conjunction with our material suppliers, we are now able to model and characterise materials exclusive to Carsem, which offer a clear performance advantage over standard commercial offerings, simultaneously accelerating their adoption into production. Examples include a new electrically conductive die attach adhesive applied to the back of the wafer which permits thinner die and package size reduction. These developments facilitate new breakthrough architectures such as X3, and are also being applied to existing products to enhance performance and reduce cost. Other technologies include use of copper clip technology which can improve performance in key applications by a factor of ten, new cavity packages for MEMS (sensor) applications, and module applications.
OUTLOOK
The Group is well-positioned to benefit from the continued strengthening which is currently forecast for the world semiconductor market, and we expect to see further growth in sales and profits in the FY 2011.
PETER NIGEL YATES
Group Managing Director

 

 

 

 

2009 Annual Report

Chairman’s Statement
On behalf of the Board of Directors, I am pleased to
present the Annual Report and Financial Statements
of the Group and of the Company for the financial year
ended 30 June 2009.
CHALLENGING BUSINESS ENVIRONMENT
The credit crunch in the financial market that started in 2008 had led the world economy into a severe recession. Higher unemployment rates, record low level of consumer confidence and tightening in credit financing in the United States and Europe had severely dampened consumer demand. Malaysia, a country heavily dependent on exports, experienced a reversal in gross domestic product growth rate from 6.7% in the second quarter of 2008 to a contraction of 3.9% in the second quarter of 2009. With the implementation of economic stimulus packages by various economic groups and several countries, the rate of contraction in the world economy has shown signs of abatement but the visibility and pace of recovery remain unclear.
Weak consumer demand, excess industry capacity and inventory correction had adversely impacted the Group’s revenue and profitability during the financial year under review.
FINANCIAL REVIEW
The financial year ended 30 June 2009 (“FY 2009”) had started with a strong performance in the first quarter. However, the subsequent two quarters experienced a sharp reduction in revenue, but this was followed by a gradual recovery in the last quarter. The volatile performance reflected continued uncertainties in the global economic conditions.
Revenue for FY 2009 was RM1,151 million, representing a 25% decline from the previous financial year ended 30 June 2008 (“FY 2008”). Loss attributable to equity holders of the parent was at RM40 million, compared with a profit of RM112 million recorded in FY 2008.
Reflecting the unfavourable business environment, capital expenditure was significantly reduced to RM129 million from RM267 million. However, the Group continued to pay out a total dividend of RM40 million in spite of the adverse business conditions for the financial year under review.
Annual Report 2009
SIGNIFICANT DEVELOPMENT
Amkor Technology, Inc (“Amkor”) has filed a complaint with the International Trade Commission (“ITC”) on 17 November 2003 alleging Carsem (M) Sdn Bhd, Carsem Semiconductor Sdn Bhd and Carsem Inc (collectively “Carsem Group”) of infringing three of Amkor’s United States Patents. Amkor has also filed a civil lawsuit at the District Court on even date alleging Carsem Group of infringement of the same three patents which are the subject of the ITC Investigation.
Following a hearing in July and August 2004, an Administrative Law Judge (“ALJ”) issued an Initial Determination finding all of the asserted claims of Amkor’s patents invalid, not infringed, or both, and no violation by Carsem Group. Subsequently, the ITC reviewed the Initial Determination and remanded to the ALJ for further findings on several issues.
Carsem Group has been advised by its lawyers that the ALJ has found that some but not all of Carsem Group’s devices infringed on Amkor’s patents. Carsem Group has filed a petition for review by the ITC and the motion to extend the target date (“Target Date”) for completion of this investigation by three months pending ASAT, Inc.’s subpoena enforcement proceeding.
On 1 July 2009, the ITC issued a Remand Order remanding the investigation to the ALJ and setting a new Target Date of 1 September 2009 to complete the investigation, but instructed the ALJ to set a schedule for the remand proceedings, and to issue an Initial Determination extending the Target Date accordingly. Subsequently, the ALJ issued an Order extending the Target Date to 2 February 2010.
On 10 and 11 September 2009, the ALJ held a hearing at the ITC in order to receive the additional evidence ordered by the ITC. Parties are presently in the process of filing post-hearing pleadings. The deadline for the ALJ to issue his Initial Determination addressing the newly received evidence is 2 November 2009.
PROSPECTS
In view of the challenging business operating environment, the management is focusing on qualification of cost efficient products and operational productivity to maintain the Group’s competitive edge in the semiconductor industry.
Barring any unforeseen circumstances, the Board expects the Group’s performance to be satisfactory in the financial year ending 30 June 2010.
DIVIDEND
The Company had declared and paid a first and second interim dividend totalling 20 sen per share tax exempt during the financial year under review. The Board does not recommend a final dividend for FY 2009.
APPRECIATION
On behalf of the Board, I would like to express my sincere appreciation to each and every employee of the Group for their contribution, commitments and dedication to the Group.
Our appreciation also goes to our valued customers, business associates, vendors, financiers, shareholders and the Government for their continuous support and confidence in the Group.
KWEK LENG SAN
Chairman
MALAYSIAN PACIFIC INDUSTRIES BERHAD (4817-U)
9
Group Managing Director’s Review
INDUSTRY REVIEW
The financial year ended 30 June 2009 (“FY 2009”) was a disappointing year for Malaysian Pacific Industries Berhad (“MPI”) with revenue falling by 25% from the previous financial year ended 30 June 2008 (“FY 2008”) resulting in a loss after tax of RM66 million.
The year started well with a robust first quarter but with the world financial sector in disarray and its economy in free fall, it was only a matter of time before its impact was felt in the semiconductor industry. The fall in revenue in MPI’s three subsidiaries was sudden and dramatic but different in timing.
OPERATION REVIEW
Carsem Semiconductor (Suzhou) Co., Ltd. (“Carsem Suzhou”)’s revenue remained strong for the second quarter, fell dramatically in the third quarter only to recover midway through the fourth quarter. This almost certainly reflects China’s strong and resilient economy and its ability to pick up quicker than the economies in the ‘West’. Carsem Suzhou’s revenue grew year-on-year by 13% but with reduced profitability.
Carsem (M) Sdn Bhd (“Carsem (M)”) felt the full impact of the downturn in the world economy with a dramatic reduction in revenue in the second quarter and a further and equally dramatic reduction in the third quarter. The fourth quarter saw a significant recovery from the previous quarter. However, this was not sufficient to offset the fall in revenue in the second and third quarters and revenue for the year was 31% down from FY 2008.
Dynacraft Industries Sdn Bhd (“Dynacraft”)’s revenue remained strong in the second quarter, fell dramatically in the third quarter and recovered well in the fourth quarter. Revenue fell 27% year-on-year but profit increased as Dynacraft overcame its problems described in last year’s report.
The Group’s loss for FY 2009 was the result of the significant drop in revenue at Carsem (M). Our revenue was fully exposed to the weakness in the economies of the United States and Europe and exacerbated by the inventory correction in the semiconductor industry.
Annual Report 2009
OPERATION REVIEW cont’d
Unfortunately, both Carsem (M) and Dynacraft had to implement a voluntary separation scheme although we chose not to do so in Carsem Suzhou as we felt that China would be quick to recover. The manufacturing restructuring programme reported last year at Carsem (M) has progressed such that all packages are now internally qualified and most have either completed or are under qualification at Carsem (M)’s customers. It is anticipated that this programme would be substantially completed by the end of the new financial year.
The sudden and dramatic fall in revenue had caused the Group to focus on managing its cash. Capital investments were postponed with the Group spending RM129 million, the lowest for many years and compared with RM267 million for FY 2008. The Group’s debt fell by RM48 million from FY 2008 and a dividend of 20 sen per share was declared for FY 2009.
RESEARCH AND DEVELOPMENT
The technology centre at Carsem (M) has made excellent progress over the past twelve months introducing many new technologies and products that have started to generate substantial revenue, the most notable being copper wire-bond technology, Micro Leadframe Packages (“MLP”) clear package for optical sensors, flip-chip MLP with exposed die back for power control, MLP with thicknesses of 0.5 mm and 0.4 mm for consumer applications with space constraints and innovative movement and pressure sensors.
A similar albeit smaller development capability now exists in Carsem Suzhou, ensuring that the China market is served with state-of-the-art assembly technology.
Dynacraft continues to focus on etching and plating technologies needed to support the growing and demanding MLP range of products. Micro thin nickel/palladium plating with roughening to ensure good adhesion to mould compounds, selective plating for high plating tolerances and a roughening process for silver plated leadframes are the main programmes.
OUTLOOK
In FY 2008, the main challenge for the Group was one of cost reduction and improved competitiveness. The downturn in the world economy has emphasised even more strongly the importance of this programme.
Carsem Suzhou has established an excellent reputation for high quality, cost effective MLP assembly and test and I expect them to show good growth this year as they build on this reputation. Dynacraft’s problems of a year ago are behind them and their profits should improve. Carsem (M) will benefit from the recovery of the world economy and as the cost reductions come into play, will also improve its profitability.
DAVID EDWARD COMLEY
Group Managing Director
MALAYSIAN PACIFIC INDUSTRIES BERHAD (4817-U)
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2008 Annual Report

The global economy has been affected by the subprime issue in the United States (“US”) which had resulted in credit crunch in the world financial market, and the strong surge in oil price has driven up inflation. While the global economy is surrounded by uncertainties, Malaysia is still forecasting a gross domestic product growth rate of about 5% in 2008, mainly driven by the oil and gas industries and the plantation sector. However, the electronic and electrical sector, one of the major exports of the country, has continued to deteriorate over the last 2 years in Ringgit Malaysia (“Ringgit”) terms due to the strong appreciation of the Ringgit against the US Dollars. The strong Ringgit, coupled with higher commodity price and cost-push inflation due to higher oil prices, have affected the Group’s profitability for the financial year.
During the financial year ended 30 June 2008, the Group’s revenue has reached another peak, driven by strong demands from consumer electronics and digital devices.
I am pleased to report a revenue of RM1,539 million for the financial year ended 30 June 2008, a 4% increase over the financial year ended 30 June 2007 (“FY 2007”). However, profit attributable to equity holders of the Company was at RM112 million, 15% lower than the previous financial year mainly due to the effect from the appreciation of the Ringgit against the US Dollars. Earnings per share was 58 sen as compared with 68 sen for FY 2007.
Strong cash flow generated from the Group’s operations has enabled the Group to maintain a healthy gearing after investing RM264 million into new plant and equipment and a dividend payout of RM72 million.
Amkor Technology, Inc. (“Amkor”) has filed a complaint with the International Trade Commission (“ITC”) on 17 November 2003 alleging Carsem (M) Sdn Bhd, Carsem Semiconductor Sdn Bhd and Carsem Inc. (collectively “Carsem Group”) of infringing three of Amkor’s US Patents.
Amkor has also filed a civil lawsuit at the District Court on even date alleging Carsem Group of infringement of the same three patents which are the subject of the ITC investigation.
Following a hearing in July and August 2004, an Administrative Law Judge (“ALJ”) issued an Initial Determination finding all of the asserted claims of Amkor’s patents invalid, not infringed, or both, and no violation by Carsem Group. Subsequently, the ITC reviewed the Initial Determination and remanded to the ALJ for further findings on several issues.
8
Malaysian Pacific Industries Berhad (4817-U)
Chairman’s Statement (cont’d)
(cont’d)
Carsem Group has now been advised by its lawyers that the ALJ has found that some but not all of Carsem Group’s devices infringed on Amkor’s patents. Carsem Group has filed a petition for review by the ITC and the motion to extend the target date for completion of this investigation by three months pending ASAT, Inc. subpoena enforcement proceeding (“ASAT Proceeding”).
Carsem Group’s motion is granted to the extent that the target date for completion of the investigation is extended to a date that is three months after completion of the pending ASAT Proceeding.
As at the date of this report, the ASAT Proceeding is still pending.
In view of the volatility and challenging business operating environment ahead, the management is focusing on cost restructuring, implementation of lean management concept to enhance operational efficiency and cost management effectiveness to maintain the Group’s competitive edge in the semiconductor industry.
Barring any unforeseen circumstances, the Board expects the Group to perform better in the new financial year ending 30 June 2009.
The Company had declared and paid a first and second interim dividend of 13 sen per share tax exempt and 24 sen per share tax exempt respectively during the financial year under review. The Board does not recommend any final dividend for the financial year ended 30 June 2008.
On behalf of the Board, I would like to express my sincere appreciation to each and every member of the Group for their contribution, commitments and dedication to the Group.
Our appreciation also goes to our valued customers, business associates, vendors, financiers, shareholders and the Government for their continuous support and confidence in the Group.
Chairman
9
Malaysian Pacific Industries Berhad (4817-U)
Annual Report 2008
Group Managing Director’s Review
Malaysian Pacific Industries Berhad (4817-U)
Annual Report 2008
Group Managing Director’s Review (cont’d)
OPERATION REVIEW (cont’d)
I wrote in last year’s report about the price reviews for low margin products, the discontinuation of certain low volume products and the conversion to more productive equipment. This first phase of Carsem’s cost restructuring has been completed and the second phase in which all leaded plastic products are to be manufactured using a leadframe design and equipment that are the same irrespective of the product’s body size and leadcount, is now entering its qualification stage. These products will also be consolidated at Carsem M’s airport site, leaving the larger Jelapang site to focus on MLP, modules and test.
Dynacraft’s high speed etching lines installed during this past year are now full and plans are in place to add more capacity. The conversion to Nickel Palladium Gold leadframes has stalled as the high price of gold has caused assembly companies to evaluate copper as an alternative to gold. However, bonding copper to Nickel Palladium Gold is not easy and still under development.
RESEARCH AND DEVELOPMENT
This past year saw the opening of Carsem’s assembly and test technology centres. The assembly technology centre has been resourced with equipment to the value of USD7 million and over 100 technologists developing Carsem’s new products and processes and evaluating new materials. An investment of USD3 million has been made in equipment for the test development centre to support the development engineers in writing test programmes for the many hundreds of products tested by Carsem.
Carsem’s copper bonding process is now in production, thanks to the support from our customer, Integrated Device Technology, and finally receiving attention from other customers.
Research and development efforts are almost entirely focused on the MLP family, modules and test.
OUTLOOK
The challenge for the Group is one of cost and one that can only be addressed by a major business restructure. In the next few years, the Company is expected to achieve significant cost reduction to maintain its competitiveness. My optimism for the future remains firm.
11

 

 

 

 

2007 Annual Report

Chairman’s Statement
On behalf of the Board of Directors, I am pleased to present the Annual Report and Financial Statements of the Group and of the Company for the financial year ended 30 June 2007 (“FY 06/07 ”).”
CHALLENGING BUSINESS ENVIRONMENT
The Malaysian economy is expected to record a Gross Domestic Product growth rate of 5.5% to 6% in 2007, mainly driven by the services and plantation sectors. However, the continued appreciation of the Malaysian Ringgit against the US Dollars has impacted many exporters, particularly in the manufacturing sector including the domestic semiconductor industry. Increasing competition from China and the Malaysian Ringgit’s appreciation have posed many challenges as well as opportunities for the Group.
FINANCIAL REVIEW
The semiconductor market went through an inventory correction towards the end of 2006. However, the industry is projected to grow between 3% and 7% in 2007, mainly driven by demands from consumer electronics and digital devices.
I am pleased to report an aggregate revenue of RM,485 million for the FY 06/07, a 9% increase over the previous financial year. Operating profit and profit attributable to shareholders were at RM208 million and RM32 million, 6% and 23% higher than the previous financial year respectively. Earnings per share was 68 sen as compared with 54 sen for financial year ended 30 June 2006.
Strong cash flow generated from the Group’s operations has enabled the Group to maintain a healthy gearing after investing RM24 million into new plant and equipment and a dividend payout of RM78 million.
SIGNIFICANT DEVELOPMENT
Amkor Technology, Inc. (“Amkor”) has filed a complaint with the International Trade Commission (“ITC”) on 7 November 2003 alleging Carsem (M) Sdn Bhd, Carsem Semiconductor Sdn Bhd and Carsem Inc. (collectively “Carsem Group”) of infringing three of Amkor’s United States Patents. Amkor has also filed a civil lawsuit at the District Court on even date alleging Carsem Group of infringement of the same three patents which are subject of the ITC investigation.
Following a hearing in July and August 2004, an Administrative Law Judge (“ALJ”) issued an Initial Determination finding all of the asserted claims of Amkor’s patents invalid, not infringed, or both, and no violation by Carsem Group. Subsequently, the ITC reviewed the Initial Determination and remanded to the ALJ for further findings on several issues.
Carsem Group has now been advised by its lawyers that the ALJ has found that some but not all of the Carsem Group’s devices infringed on Amkor’s patents. Carsem Group has filed a petition for review by the ITC and the motion to extend the target date for completion of this investigation by three months pending ASAT, Inc.’s subpoena enforcement proceeding (“ASAT Proceeding”).
8
Annual Report 2007
Malaysian Pacific Industries Berhad (487- U)
Chairman’s Statement (cont’d)
Carsem Group’s motion is granted to the extent that the target date for completion of the investigation is extended to a date that is three months after completion of the ASAT Proceeding.
As at the date of this report, the ASAT Proceeding is still pending.
PROSPECTS
In view of the business volatility and challenging operating environment ahead, the management is focusing on product development, margin improvement, operational efficiency enhancement and effective cost management to maintain our competitive edge and continue our leadership in packaging and leadframe technologies.
Barring any unforeseen circumstances, the Board expects the Group to perform better in the next financial year ending 30 June 2008.
DIVIDEND
The Company had declared and paid a first and second interim dividend of 7 sen per share tax exempt and 23 sen per share tax exempt respectively during the financial year under review. The Board does not recommend any final dividend for the FY 06/07.
APPRECIATION
On behalf of the Board, I would like to express my sincere appreciation to each and every member of the Group for their contribution, commitment and dedication to the Group.
Our appreciation also goes to our valued customers, business associates, vendors, financiers, shareholders and the Government for their continuous support and confidence in the Group.
KWEK LENG SAN
Chairman
9
Annual Report 2007
Malaysian Pacific Industries Berhad (487-U)
Group Managing Director’s Review
“ I am pleased to report that the Group’s revenue grew by 9% from the previous financial year. Carsem (M) Sdn Bhd’s revenue grew by 6%, Carsem Semiconductor (Suzhou) Co., Ltd by 82%, giving a combined 9% growth and Dynacraft Industries Sdn Bhd by 9%. This growth rate would have been six percentage points higher if not for the appreciation of the Malaysian Ringgit and the Chinese Renminbi. ”
INDUSTRY REVIEW
The financial year started with strong sales. However, a weaker than expected Christmas resulted in business starting to slow down in December 2006 and remaining down until the end of March 2007. The industry’s excess inventory data at the end of the December 2006 quarter showed a USD4 billion excess against a monthly revenue of USD22 billion. It is interesting to compare these numbers with those in 200, just prior to the industry’s worst ever downturn, when the excess inventory was at USD20 billion against a monthly revenue of USD2 billion.
The December 2006 quarter was a very different scenario as it was resolved by the industry in a period of four months. I believe that this type of correction will become the norm as the industry better manages inventory, resulting in shorter cycles and less pronounced peaks and troughs.
The fourth quarter ended June 2007 saw strong growth and, together with a strong first quarter ended September 2006, saw the Group’s sales grew by 9% and its profit by % compared with the previous year.
OPERATIONAL DEVELOPMENT
The Micro Leadframe Package (“MLP”), despite the inventory correction, grew in unit terms by 25% over the previous year whereas the other plastic leaded packages remained flat. Module sales were disappointing, due mainly to the slow consumer spending over last Christmas. However, as its technology and benefits are slowly but surely accepted by the semiconductor industry, I believe that it will become a major contributor to the Group’s revenue and profit in the years to come.
Costs remain a challenge with commodity prices still at all time high. Carsem has completed the review of its product lines and has initiated a product rationalisation programme whereby those products with low margins have been either discontinued or had their selling prices raised. The majority of the remainder are being converted to using higher density matrix leadframes with the associated much improved productivity. Carsem introduced multi-site testing for both MLP and non MLP packages. The successful introduction of multi-site testing of sawn MLP will be a major contributor to this important product’s future productivity.
Dynacraft’s strategy is also aligned to the growth of the MLP package, and a new high speed etching line was installed during the year.
Leadframes pre-plated with Nickel Palladium Gold continued to grow as this technology gained increasing acceptance, and Dynacraft’s addition of higher accuracy spot plating equipment
Annual Report 2007
Group Managing Director’s Review (cont’d)
was again well aligned to the needs of the MLP.
The addition towards the end of the year of a plating line using photoresist technology has been well accepted by customers, and we expect more purchases this coming year.
Carsem Semiconductor (Suzhou) Co., Ltd remains as an assembler and tester of MLP but with testing growing at a faster rate as it catches up with assembly volumes.
RESEARCH AND DEVELOPMENT
The Group’s research and development will focus on the MLP and module package families, particularly the next generation, together with multi-site testing. Costs of the more established plastic packages will be reduced by the introduction of copper wire bonding and high density leadframes. This new year will see the opening of Carsem’s two technology development centres, one for assembly and the second for test. Each will be resourced with dedicated technologists and equipment that will enable the company to quickly bring its new developments to market. Carsem’s research and development capability is being strengthened by the appointment of Mr LW Yong to the position of Chief Technology Officer. He brings many years of experience in technology and management to the Carsem senior team.
Dynacraft’s new technology will be closely aligned to that of the MLP products with the introduction of selectively plated nickel palladium gold frames and increased etching and plating capacities.
OUTLOOK
I am pleased to say that my statement in last year’s report remains valid in that the semiconductor industry appears to be managing inventory more prudently. The actions taken and programmes introduced over the past years by the Group will enable it to meet or even exceed the demands of the industry. I view the next five years with great optimism.
DAVID EDWARD COMLEY
Group Managing Director
Annual Report 2007 

 

 

 

2006 Annual Report

Chairman’s Statement
On behalf of the Board of Directors, I am pleased to present the Annual Report
and Financial Statements of the Group and of the Company for the financial
year ended 30 June 2006.
BUSINESS ENVIRONMENT
The Malaysian economy is expected to record a GDP growth rate of above 5% in 2006, due to strong export performance especially in the semiconductor industry since the second half of 2005. The global market environment continues to experience rising interest rates particularly in the United States as a result of tighter monetary policy to curb inflation. In addition, surging commodities prices, in particular, oil, gold and copper and the volatility in foreign exchange markets due to de-pegging of the Chinese Yuan and Malaysian Ringgit have posed many challenges and opportunities to the Group.
FINANCIAL REVIEW
The semiconductor market for 2006 is projected to grow between 7% and 10% over 2005, bringing the Group’s revenue back to its peak since the last downturn in the financial year ended 30 June 2000.
I am pleased to report a revenue of RM1,359 million for the financial year ended 30 June 2006, a 22% increase over the previous financial year. Operating profit and profit attributable to shareholders were at RM179 million and RM107 million, 179% and 126% higher than the previous financial year respectively. Earnings per share was 54 sen as compared with 24 sen for financial year ended 30 June 2005.
Strong cash flow generated from the Group’s operations has enabled the Group to maintain a healthy gearing after investing RM365 million into new plant and equipment and a dividend payout of RM76 million.
SIGNIFICANT DEVELOPMENT
Amkor Technology, Inc. (“Amkor”) has filed a complaint with the International Trade Commission (“ITC”) on 17 November 2003 alleging Carsem (M) Sdn Bhd, Carsem Semiconductor Sdn Bhd and Carsem Inc. (collectively “Carsem Group”) of infringing three of Amkor’s United States Patents. Amkor has also filed a civil lawsuit at the District Court on even date alleging Carsem Group of infringement of the same three patents which are the subject of the ITC investigation.
Following a hearing in July and August 2004, an Administrative Law Judge (“ALJ”) issued an Initial Determination finding all of the asserted claims of Amkor’s patents invalid, not infringed, or both, and no violation by Carsem Group. Subsequently, the ITC reviewed the Initial Determination and remanded to the ALJ for further findings on several issues.
8
MALAYSIAN PACIFIC INDUSTRIES BERHAD (4817-U)
Chairman’s Statement (Cont’d)
Carsem Group has now been advised by its lawyers that the ALJ has found that some but not all of Carsem Group’s devices infringed on Amkor’s patents. Carsem Group has filed a petition for review by the ITC and the motion to extend the target date for completion of this investigation by three months pending ASAT, Inc.’s subpoena enforcement proceeding (“ASAT Proceeding”).
Carsem Group’s motion is granted to the extent that the target date for completion of the investigation is extended to a date that is three months after completion of the ASAT Proceeding.
As at the date of this report, the ASAT Proceeding is still pending.
FUTURE AND PROSPECTS
In view of the business volatility and challenging operating environment ahead, the management is focusing on product development, margin improvement, operational efficiency enhancement and effective cost management to maintain our competitive edge and continue our leadership in packaging and leadframe technologies.
Barring any unforeseen circumstances, the Board expects the Group to perform better in the new financial year ending 30 June 2007.
DIVIDEND
The Company has declared and paid a first and second interim dividend of 15.0 sen per share tax exempt and
22.5 sen per share tax exempt respectively during the financial year under review. The Board does not recommend any final dividend for the financial year ended 30 June 2006.
APPRECIATION
On behalf of the Board, I would like to express my sincere appreciation to each and every member of the Group for their contribution, commitments and dedication to the Group.
Our appreciation also goes to our valued customers, business associates, vendors, financiers, shareholders and the Government for their continuous support and confidence in the Group.
KWEK LENG SAN Chairman
ANNUAL REPORT 2006
9
Group Managing Director’s Review
I
am pleased to report that the Group’s revenue grew a commendable 22% from its previous year as compared with the semiconductor industry which grew by 7% in 2005 and is expected to grow at between 7% and 10% in 2006. Carsem (M) Sdn Bhd (“Carsem(M)”) and Dynacraft Industries Sdn Bhd (“Dynacraft”) achieved a year-on-year growth of 20% and 25% respectively. Our start-up in Suzhou, Carsem Semiconductor (Suzhou) Co., Ltd (“Carsem Suzhou”), completed its second year of operation with sales significantly up from that of its first year and was profitable for the last two quarters of the financial year.
INDUSTRY REVIEW OPERATIONAL DEVELOPMENT
The markets of the United States of America and China The Micro Leadframe Package (“MLP”) has contributed
were particularly strong and a fast growing consumer to Carsem (M) and Carsem Suzhou (“Carsem”)’s growth
electronics market now joins that of the computer and by over 50% from the previous financial year. The financial
cellphone sectors as drivers of the semiconductor industry. year ended 30 June 2006 also saw a significant growth in
Assembly and test capacity has remained at high levels the assembly and test of modules. The MLP and module
of utilisation as the industry takes a conservative approach business will continue to contribute positively to Carsem’s
to expanding capacity resulting in firmer selling prices. growth going forward. Dynacraft supplies the majority of
leadframes for MLP assemblies.
10
MALAYSIAN PACIFIC INDUSTRIES BERHAD (4817-U)
Group Managing Director’s Review (Cont’d)
Costs remain a challenge particularly with commodity prices at an all-time high. Silver, palladium, and particularly, copper are major costs for Dynacraft although the company has been able to pass the copper price increase onto customers. Silver, copper and gold are some of the commodities used by Carsem with the gold price increase also passed onto customers, whilst the others have been absorbed. Rising interest rates, an uncertain USD/RM exchange rate and the prices of commodities will continue to be offset by improvements in product cost. The emphasis from Dynacraft is on high density etched leadframes, faster and more accurate spot plating machines, the replacement of spot silver plating with nickel/ palladium full plated leadframes and higher yields. Carsem’s major focus is on the development of copper as a replacement for gold and the increasing use of high-density, pre-plated leadframes.
RESEARCH AND DEVELOPMENT
Technology remains the high priority of our Group. High precision etching allowing higher density frames and a thinner layer of palladium for a more cost effective pre-plated leadframes have been joined by plating using photo­resist technology as Dynacraft’s most important development programmes. Carsem’s development is dominated by the many different versions of MLP that are either thinner, smaller, uses clear plastic, assembled with a cavity or multi-rowed. Other important developments are copper bonding, strip test, module assembly using substrates and leadframes, stacked die and wafer scale packaging.
Carsem and Dynacraft have made significant investments in ensuring that all of their products have a “green” option and each of the Group’s factories has received official accreditation for conformity.
ANNUAL REPORT 2006
11
Group Managing Director’s Review
OUTLOOK
The semiconductor industry has entered an exciting era as new and innovative applications come to market and although the industry will remain cyclical, the lessons learnt from the 2001 downturn suggest that inventory is being monitored and managed more carefully and that future cycles will be shorter and less severe.
I am glad that the Group is well positioned with strong technology and a sound balance sheet to make the most of the many opportunities that have and will continue to come the way of the Group.
DAVID EDWARD COMLEY
Group Managing Director
12
MALAYSIAN PACIFIC INDUSTRIES BERHAD (4817-U)

 

 

2005 Annual Report

CHAIRMAN’S STATEMENT
On behalf of the Board of Directors, I am pleased to present the Annual Report and Financial
‘Statements of the Group and of the Company for the financial year ended 30 June 2005.‘
FINANCIAL REVIEW
The financial year ended 30 June 2005 saw the semiconductor industry undergo another round of inventory adjustment, although this time, the downturn was nowhere near as drastic as the one that took place in 2001.
Against a backdrop of a weak market environment, the Group is pleased to report a turnover of RM1.114 billion for the financial year ended 30 June 2005, a 5.8% decline from the previous year.
Operating profit was RM64.1 million, 63% down from last year’s RM173.3 million.
Even though profit attributable to shareholders declined 64% to RM47.5 million from last year’s RM131.2 million, the Group was actually able to stay profitable throughout this difficult year.
The Group’s operations continued to generate healthy cash flows during the financial year, thus, enabling the Group to pay dividends of RM108 million.
BUSINESS REVIEW
After a strong financial year 2003/2004 when sales grew 34%, the first quarter of the financial year ended 30 June 2005 started out with some concerns, leading to a sharp 18% dip in sales in the second quarter before a moderate recovery took place in the second half of the financial year. While orders are usually slow in the summer months, the rate at which bookings decelerated caught many in the industry by surprise. Excess inventory was the main cause of this slow-down in the technology sector. During the financial year 2003/2004, the semiconductor industry had ramped-up in anticipation of strong year-end seasonal demand. However, the stock build-up was far in excess of actual
Malaysian Pacific Industries Berhad (4817-U) | Annual Report 2005 15
CHAIRMAN’S STATEMENT (cont’d)
demand and once again new orders that were expected were held back as companies worked to prevent excess stock from building up. With the exception of the automotive market where demand had remained steady throughout the slowdown, the Group felt the impact from all market sectors as customers cut back their orders. The wireless sector was most badly affected due to over anticipation of mobile phone demand, especially in the China market. While electronics companies, especially in consumer products like mobile phones, game sets, flat-panel TVs and personal computers enjoyed robust sales during the festive season, much of those sales depleted stocks built earlier. We believe that as the semiconductor industry matures, the cycles will become shorter, ensuring that the dramatic downturn of 2001 will not be repeated.
Our factories had been ramping-up since the last financial year, adding people, floor-space and equipment in anticipation of growth. The sudden and swift softening of business resulted in gross factory capacity under-utilisation and under-recovery of overheads, which in turn adversely affected profits. The Group reacted quickly by implementing numerous strategic initiatives to improve operational performance and on-time delivery, to reduce costs and to shorten cycle-time. These initiatives helped to meet customers’ increasingly demanding needs.
On the brighter side, most product lines saw improvement in orders during the last quarter, while test business continues to be in demand as more customers are requesting for turnkey services. The Group’s MLP shipments hit a record 233 million units during the quarter and remain the strongest growth package. The Group has also come to an agreement with Intersil, to set up a captive wafer probe and test centre in Carsem.
The Group’s venture into China, Carsem Semiconductor (Suzhou) Co., Ltd., became fully operational during the third quarter. Over the year, revenue increased strongly and the operation is expected to break-even during the new financial year and become profitable thereafter.
FUTURE DEVELOPMENTS
The Group has invested RM229 million over the past twelve months. A substantial portion of these investments went into enhancing new product capabilities, test, people skills, computer systems and research and development.
The Group’s MLP product line continues to see the highest growth, having shipped 40% more units than in financial year 2003/2004. MLP shipments are expected to further increase in future quarters as more new customers come on board.
Already an industry leader in MLP technologies, Carsem is well poised to improve on this position by working on new technologies such as Clear, Power, Ultra-Thin and Mini MLPs. With the proliferation of our high-density low-cost MLP programmes and going by the high number of qualification runs that Carsem continues to receive, it is apparent that our MLPs are the preferred package and are being designed into many new applications.
16 Malaysian Pacific Industries Berhad (4817-U) | Annual Report 2005
CHAIRMAN’S STATEMENT (cont’d)
Another area of high growth is in test services. Many of our customers have either already stopped or downsized their in-house test operations and now rely heavily on independent test houses. Also the emergence of many fabless companies is further raising the demand for test services. It is clear that in order to attract customers today, one has to provide a complete assembly and test turnkey solution. With its continuous focus and investments into test, the Group is well positioned for this business.
Dynacraft, too, has grown to support an extensive range of new MLP products and this growth is expected to continue in the following year. It has also made major investments in acquiring the latest industry technology to support the growing demand for nickel palladium gold lead-free plating, as the industry drives for environmentally friendly plating solutions. Dynacraft will treble its current installed capacity and will position itself to be the most competitive and technologically advanced nickel palladium gold plating supplier. The current financial year has seen its nickel palladium business grow significantly and this is expected to double in the following period. This is further complemented by the successful development and implementation of the MEP (Mould Enhancement Process), which improves the moisture sensitivity of its customers’ packages, which is a key product requirement. This process can be applied to both silver plated products and lead-free nickel palladium gold products. By equipping itself with these technologies and capabilities and increasing its capacity, Dynacraft is positioning itself well to increase market share in a number of key accounts and new customers.
This past year also saw the emergence of competitors from China. The majority of these companies compete on very low prices and have little to offer in terms of quality systems or technology. They focus on the mature packages but in time, one can expect them to expand their product offerings as they acquire more technology. Pricing pressures will continue to pose a challenge and the Group is positioning itself to meet these challenges.
OTHER DEVELOPMENTS
Amkor Technology, Inc (“Amkor”) filed a complaint with the United States International Trade Commission (“ITC”) on 17 November 2003 alleging Carsem (M) Sdn Bhd, Carsem Semiconductor Sdn Bhd and Carsem Inc. (collectively “Carsem Group”) of infringing claims in three of Amkor’s United States patents. Following a hearing in July and August 2004, an Administrative Law Judge (“ALJ”) issued an Initial Determination finding all of the asserted claims of Amkor’s patents invalid, not infringed, or both, and no violation by Carsem Group. Subsequently, the ITC reviewed the Initial Determination and remanded to the ALJ for further findings on several issues.
The ITC recently issued a notice in Carsem Group’s patent infringement litigation with Amkor (ITC Investigation no. 337-TA-501) that they will re-open the record to make further findings and has notified the parties that it will further extend the target
Malaysian Pacific Industries Berhad (4817-U) | Annual Report 2005 17
CHAIRMAN’S STATEMENT (cont’d)
date for completion of the investigation from 21 November 2005 to 9 February 2006.
As the ALJ has already issued the Initial Determination in favour of Carsem Group, the Board is of the view that further findings should also be in Carsem Group’s favour.
PROSPECTS
As we exit the financial year, it would appear that the excess inventory that caused the pull back of the industry has sorted itself out and hereafter, orders should start matching actual market demand.
The Board believes that demands for the Group’s products will very much depend on new applications, affordability and the global economic conditions. While the semiconductor industry is expected to make a stable recovery, the growth for next year is forecasted to be moderate. As such, in order for the Group to grow at a faster rate, it will have to focus on high growth areas like MLP & test services, as well as increase its market share.
Solid business fundamentals, an experienced management team, a strong balance sheet, healthy cash flows and being a leader in new packaging and leadframe technologies will ensure that the prospects of the Group remain sound.
Barring any unforeseen circumstances, the Board expects the Group to perform satisfactorily in the next financial year.
DIVIDEND
A second interim was paid during June 2005 in lieu of a final dividend. As such, the Board will not be recommending a final dividend. For the financial year, a total gross dividend of 37.5 sen per share tax exempt has been declared (Period ended 30 June 2004: 35 sen per share tax exempt, 5 sen per share less tax and special 20 sen per share tax exempt).
APPRECIATION
On behalf of the Board, I would like to express my sincere appreciation to each and every member of the Group for their contributions, commitments and dedications to the Group.
Our appreciation also goes to our valued customers, business associates, vendors, financiers, shareholders and the Government for their continuous support and confidence in the Group.
KWEK LENG SAN Chairman
Kuala Lumpur
18 Malaysian Pacific Industries Berhad (4817-U) | Annual Report 2005

 

 

2004 Annual Report

CHAIRMAN’S STATEMENT
On behalf of the Board of Directors, I am pleased to present the Annual Report and Financial Statements of the Group and of the Company for the financial year ended 30 June 2004.
FINANCIAL REVIEW
The Group is pleased to report a turnover of RM1.18 billion for the financial year ended 30 June 2004, an increase of 34% over the previous year’s turnover of RM882.5 million.
Operating profit was RM173.2 million compared with RM57.8 million a year ago. The profit attributable to shareholders was RM131.2 million, an almost threefold increase over the previous year’s RM46.7 million. The Group had enjoyed nine consecutive quarters of profitability, marking a sustained return to profitability after the severe semiconductor industry downturn that started in 2001.
Earnings per share was 65.95 sen compared with
23.46 sen in financial year 2002/2003.
Strong cash flow enabled the Group to invest RM277 million in new plant and equipment, pay a dividend of RM117 million and hold gearing at a healthy 30%.
BUSINESS REVIEW
The past year had seen strong consumer spending in America, China, Japan and to a lesser extent Europe, resulting in a year of exceptional growth for the electronics industry. The computer industry benefited as improved profitability gave companies the confidence to replace and upgrade hardware. The inventory of cellphones, one of the major causes of the last downturn, had been reduced and the introduction of new models with new features resulted in substantial growth for this sector.
An important outcome from the last downturn was the reduction of costs throughout the supply chain leading to significant reductions in the selling prices of consumer
CHAIRMAN’S STATEMENT
CHAIRMAN’S
statement (cont’d)
electronic goods. The past year had seen the consumer electronics market become as significant as the computer and cellphone markets. The automotive industry continues to grow albeit at a more modest rate.
Carsem (M) Sdn Bhd (“Carsem”) achieved a year-on­year revenue growth of 40%. The quantities of the traditional, leaded packages had recovered to levels higher than before the downturn and the market acceptance and growth of the company’s new product, Micro Leadframe Package (“MLP”), had been encouraging. Carsem’s electrical Test business continued to grow at a greater pace than its other products as more of Carsem’s customers outsource this operation. Carsem completed the construction of a four-storey factory, which was started in year 2000 and put on hold during the downturn. Two floors had been facilitised and became operational in May 2004.
Dynacraft Industries Sdn Bhd (“Dynacraft”), the Group’s leadframe design and manufacturing arm, achieved an annual growth of 19% and continued with major transformations in all aspects of its business, repositioning the company towards outperforming the leadframe industry. These efforts include sustained operational improvements achieved through key programmes such as total productive maintenance, team-building and driving towards lean manufacturing concepts, executed by a young but experienced management team, resulting in improved balance sheet and healthy cashflow indices.
The strategic challenges to the business, such as cycle-time and inventory reduction were being addressed through a supply chain management approach. In addition, customer needs, competitiveness, reduced manufacturing cost, new technologies, equipment and improved products continued to be further enhanced and intensified.
FUTURE
The Group had invested RM274 million into property, plant and equipment over the past twelve months with the majority being spent on assembly, Test and further research into the MLP range of products. The Group’s MLP product line continued to see the highest growth, shipping 620 million units this year, compared with 148 million in the financial year ended 30 Jun 2003, making Carsem one of the largest producers of MLPs in the world.
CHAIRMAN’S STATEMENT
CHAIRMAN’S
statement (cont’d)
Carsem continues to lead the industry in MLP technologies and while most of the current products are for the cell-phone and disc-drive markets, Carsem is working on a variety of MLP applications for opto, power and multi-chip integration applications. The launching of the high-density, low-cost MLP programme ensures that Carsem is well placed to gain market share going forward.
Another area of high growth is in Test services. Many of Carsem’s customers had either exited or downsized their in­house Test operations and are now relying heavily on independent Test houses. Also the emergence of many fabless companies is pushing the demand for Test services even higher. It is clear that in order to win business today, one has to provide a complete assembly and Test turnkey solution. With its continuous focus and investments into Test, the Group is well positioned for this business.
Dynacraft is now supporting a wide range of leadframes for MLP packages and had successfully developed the M.E.P., “Mould Enhancement Process”, to improve its customers’ package “moisture sensitivity levels”. This will be complemented by further improvements on their “Lead-free, Pre-plated” leadframe technology, which is anticipated to be an industry standard in the next few years. Its success in developing and promoting this technology had paved the way for it to increase its market share with a number of key customers.
Moving forward, Dynacraft will increase its installed capacity and capability for each products to meet market demands and open up its product portfolio to provide a “one stop shop” concept to its expanding customer base.
OTHER DEVELOPMENTS
The Group’s expansion into The People’s Republic of China is progressing well. The factory building was completed in February 2004 and the delivery, installation and qualification of equipment for the first phase of production had been completed. Carsem Semiconductor (Suzhou) Co., Ltd (“Carsem Suzhou”) has 200 employees, most of whom had completed their training in Carsem’s factories in Malaysia. There had been a growing number of customer visits to the Carsem Suzhou’s factory and to date, three customer qualifications had been successfully completed. Production is expected to start in September 2004 and the official opening ceremony is scheduled for 23 September 2004.
CHAIRMAN’S STATEMENT
CHAIRMAN’S
statement (cont’d)
In November 2003, a complaint was filed by Amkor Technology, Inc., against Carsem with the U.S.A. International Trade Commission (“ITC”), alleging infringement of three of its Micro Lead Frame patents. Carsem will vigorously defend its right to use the technology it has developed. The ITC trial was completed in August and is awaiting judgment due in November 2004.
PROSPECTS
The Board expects the Group to further benefit from the continuing trend of outsourcing activities as customers move to downsize their internal assembly and Test capacities in efforts to reduce cost and cycle time.
Solid business fundamentals, an experienced management team, a strong balance sheet, healthy cash flows and being a leader in new packaging and leadframe technologies will ensure that the prospects of the Group remain sound.
Barring any unforeseen circumstances, the Board expects the Group to perform better in the next financial year.
DIVIDENDS
The Board is not recommending a final dividend. For the financial year ended 30 June 2004, a total gross dividend of 35 sen per share tax exempt, 5 sen per share less tax and a special interim dividend of 20 sen per share tax exempt had been declared (Period ended 30 June 2003:
21.5 sen tax exempt, 18.5 sen per share less tax).
APPRECIATION
On behalf of the Board, I would like to express my sincere appreciation to each and every staff of the Group for their contributions, commitments and dedication to the Group.
Our appreciation also goes to our valued customers, business associates, vendors, financiers, shareholders and the Government for their continuous support and confidence in the Group.
KWEK LENG SAN Chairman
Kuala Lumpur

 

 

2003 Annual Report

CHAIRMAN’S STATEMENT
On behalf of the Board of Directors, I am pleased to present the Annual Report and Financial Statements of the Group and of the Company for the financial year ended 30 June 2003.
Financial Review
The financial year ended 30 June 2003 was fraught with economic and geopolitical uncertainties, which brought consumer confidence to decade low levels, before staging some recovery in the fourth quarter. Against the back drop of a struggling global economy, the Group is pleased to report a turnover of RM882.5 million, a 15% improvement over the previous year.
Profit attributable to shareholders was RM46.7 million compared to a loss of RM47.3 million last year. The Group has now enjoyed five consecutive quarters of profitability, marking a sustained return to profitability after the severe semiconductor industry downturn that commenced in 2001.
The Group’s operations continued to generate healthy cash flow during the financial year, thus enabling the Group to pay dividends of RM69 million and reduce debt by RM94 million. The gearing of the Group remains low at 10%.
MALAYSIAN PACIFIC INDUSTRIES BERHAD (4817-U) ¦ 2003 ANNUAL REPORT
CHAIRMAN’S STATEMENT
(cont’d)
Business Review
Although the industry experienced some moderate growth during the financial year, the result was nevertheless rather disappointing. The second quarter seasonal surge did not materialise and neither did the traditional fourth quarter financial year-end surge. Sluggish spending in the corporate and consumer sectors kept sales low resulting in under-utilisation of equipment.
Demand for conventional IC products was exceptionally weak, especially for cellphone and PC related products, due to the impact of SARS. However, this softness was more than compensated by strong MLP and Test sales. The Group attributes its success in the MLP business to its wide range of MLP products introduced, competitive prices, the high quality and yields achieved and the successful promotion campaign. Carsem is now recognised as one of the top MLP suppliers in the world.
Another very positive development is the closure of a major deal with Analog Devices Inc., which will culminate in the transfer of its entire assembly volume from the Philippines to Carsem. This transfer should be completed during the first quarter of the new financial year and is expected to deliver significant upside to the Group’s results.
The Future
The Group has invested RM115 million into buildings, plant and equipment over the past twelve months. A substantial portion of these investments went into enhancing new product capabilities, Test equipment, computer systems and research and development.
The Group’s new technologies continue to see encouraging growth, translating into higher demands and a larger customer base. The commencement of volume production for Multi-Chip and Bluetooth modules has allowed Carsem to demonstrate to the industry its ability to manufacture very sophisticated and high-end products.
Presently, Carsem is working on yet another new range of MLP products, such as the High-Density MLP as a cost-effective solution, Copper-clip technology for power applications and Clear MLP for opto and sensor applications. With these technologies, Carsem’s competitive edge on MLP will be further enhanced.
Demand for Test services is strong as more customers choose to outsource more operations to reduce cost and delivery time. Most customers today demand full turnkey assembly and Test solutions, especially for the newer products. With its focus and investments into Test over the last few years, Carsem is well positioned for this business.
MALAYSIAN PACIFIC INDUSTRIES BERHAD (4817-U) ¦ 2003 ANNUAL REPORT
CHAIRMAN’S STATEMENT
(cont’d)
Dynacraft Industries, the Group’s leadframe design and manufacturing arm, continues to provide the latest product innovations to meet customers’ and industry’s demands. Utilising advanced materials, designs and manufacturing technologies, Dynacraft ensures the highest quality stamped and etched leadframes. Dynacraft is an industry leader in preplated lead frame (PPF) technology and is in the process of perfecting a lead-free PPF solution to meet future industry environmental standards and requirements. Its success in developing and promoting this technology has paved the way for it to increase its market share with a number of key customers. In addition, Dynacraft has developed Advanced MLP leadframe solutions to support leading edge IC package technology.
to promote its business under one trade name and become more business friendly, whilst promoting greater efficiencies in various areas such as operations, costs and tax. These benefits are expected to enhance the future profitability of the Group.
In line with the Group’s emphasis of employee development, Video Specs training and Video Te s t certification via multimedia kiosk on the production floor, was introduced in Carsem. This innovation is the result of a three and a half years effort to revolutionise the direct labour on-the-job training initiative. Via the use of multi­sensory dimensions – video, animation, audio and text, consistent delivery and quality of training is guaranteed resulting in effective training and a shorter learning curve. The system also enables superiors to access the training records, plan cross-training activities and track certification compliance to quality systems.
Prospects
The darkest period of the semiconductor sector appears to be over and the industry is looking forward to brighter days ahead. Inventories have generally reached levels whereby new orders have to be placed to meet demand. With the uncertainties of the Iraq War and SARS removed, the Board believes that the industry is gearing up for an optimistic year-end festive season.
Other Developments
The Group’s venture to expand its Semiconductor Assembly and Test business into The People’s Republic of China (PRC) is progressing smoothly. A ground-breaking ceremony was conducted on April 1st, which was officiated by Prof. Wang Min, Standing Committee Member of CPC Jiangsu Committee, Party Secretary of CPC Suzhou Committee. Construction of the 160,000 sq. ft. factory is now underway and expected to be completed by end of calendar year 2003.
During the year, two of the Group’s subsidiaries, Carsem (M) Sdn. Bhd. and Carsem Semiconductor Sdn. Bhd., both of which were engaged in the same business, were merged into one. This was done to enable Carsem
MALAYSIAN PACIFIC INDUSTRIES BERHAD (4817-U) ¦
2003 ANNUAL REPORT
CHAIRMAN’S STATEMENT
(cont’d)
The Board also expects the Group to further benefit from the continuing trend of outsourcing activities as customers move to downsize their internal assembly and Test capacities in efforts to reduce cost and cycle time. Solid business fundamentals, an experienced management team, a strong balance sheet, healthy cash flow and being a leader in new packaging and leadframe technologies would ensure that the prospects of the Group remain sound. The Group is well positioned with its new offerings, which continue to gain acceptance in the electronics industry as more applications are discovered in different markets, thus fueling further optimism.
Barring any unforeseen circumstances, the Board expects the Group to perform better in the financial year ending 30 June 2004.
Dividends
A second interim was paid during June 2003 in lieu of a final dividend. As such, the Board will not be recommending a final dividend. Total gross dividends paid for the financial year was 80%, or RM79.6 million.
Appreciation
On behalf of the Board, I would like to express my sincere appreciation to all our staff for their contributions, commitments and dedications to the Group.
Our appreciation also goes to our valued customers, business associates, vendors, financiers, shareholders and the Government for their continuous support and confidence in the Group.
KWEK LENG SAN Chairman
Kuala Lumpur 27 August 2003

 

2002 Annual Report

FINANCIAL REVIEW
The financial year ended 30 June 2002 has been a most challenging one for MPI, with the business environment being tenuous for most of the year. The Group, however, managed to return to profitability in the last quarter of this financial year. This late turnaround, though, was not enough to prevent the Group from reporting
an overall loss of RM33.3 million for the year.
For the year, turnover amounted to RM768.8 million, a decrease of over 42% from last year. Profit attributable to shareholders fell RM234.3 million into a loss of RM33.3 million, representing a loss per share of RM0.167, compared with earnings per share of RM1.006 for the previous year. Included in the loss were some one-off restructuring charges amounting to RM8.4 million.
In spite of the adverse business conditions, the Group’s operations still generated healthy cash flows during the financial year, thus, enabling the Group to pay dividends of RM81.2 million.
On behalf of the Board of
Directors, I am pleased to
present the Annual Report and Financial Statements of
the Group and of the
Company for the financial
year ended 30 June 2002.
DIVIDEND
A second interim was paid during June 2002 in lieu of a final dividend. As such, the Board will not be recommending a final dividend. Total dividends paid for the financial year was 90%, comprising 60% tax exempt and 30% less tax.
BUSINESS REVIEW
The exceptionally high inventory levels throughout the electronics sector that had caused revenues to drop so significantly from the beginning of calendar year 2001, continued to be a problem throughout the Group’s financial year.
Revenues for the first three quarters were essentially flat with considerable variation and fluctuation in the different sectors. For example, the second quarter showed strong growth of components for cellphones but this was offset by declines in other sectors.
There were indications of an industry pick-up in March and this continued into the fourth quarter with revenue growth of 25% over the third quarter, thus returning the Group to profitability.
14 MALAYSIAN PACIFIC INDUSTRIES BERHAD 2002 ANNUAL REPORT
This year has been one of many challenges, with semiconductor companies making the most of excess capacities in the market to reduce selling prices and accelerate their demands for additional services. The Group responded by offering competitive selling prices and focused on cost reduction programmes to ensure that profitability is restored.
Emphasis on the development of new products, processes and technologies and aggressively promoting them in the USA and Europe, have continued to generate strong interest from customers, old and new. It was most heartening for the Group to witness significant increases in demand over the year for these new products and technologies.
OTHER DEVELOPMENTS
In an effort to expand its semiconductor assembly and test business into the People’s Republic of China (PRC), the Group has, during the year, incorporated a wholly-owned subsidiary in the PRC, known as “Carsem Semiconductor (Suzhou) Co. Ltd.”. The right to use a 60,000 square meter plot of land located in the Suzhou Industrial Park, about one and a half-hours drive west of Shanghai, was acquired. The plant is expected to be operational by the end of 2003.
The Group underwent a restructuring which resulted in the closure of Dynacraft’s USA operations and relocating the Cerdip manufacturing to Penang. This, coupled with a combination of higher capacity utilisation, yield and cost improvements, have returned Dynacraft Industries Sdn Bhd to profitability in the fourth quarter.
THE FUTURE
these new products showed encouraging improvement during the last few months of the financial year, thus setting a good base for further growth next year.
The business model is changing in that, an increasing number of customers today demand full turnkey assembly and test solutions, such that without test capability, subcontractors would not get to assemble the products. The demand for test is also rising as more
MALAYSIAN PACIFIC INDUSTRIES BERHAD 2002 ANNUAL REPORT 15
customers chose to outsource more operations to reduce cost and delivery time. With its investments into test over the last few years, Carsem (M) Sdn Bhd and Carsem Semiconductor Sdn Bhd are well positioned for this change.
The highly advanced computerised integrated manufacturing and planning
Dynacraft ensures the highest quality stamped and etched leadframes. Dynacraft is an industry leader in preplated leadframe (PPF) technology and is in the process of perfecting a lead-free PPF solution to meet future industry environmental standards and requirements. Its success in developing and promoting this technology has paved the way for it to increase its market share with a number of key customers.
PROSPECTS
Notwithstanding poor visibility, the new financial year is expected to start slowly before building momentum from September in preparation for the year-end festive season. Beyond that, the Board believes that the industry is still in recovery mode and much would depend on an overall sustained global recovery.
16 MALAYSIAN PACIFIC INDUSTRIES BERHAD 2002 ANNUAL REPORT
Solid business fundamentals, an experienced management team, a strong balance sheet, healthy cash flow and being a leader in new packaging technologies would ensure that the prospects of the Group remain sound. The Group is well positioned with its new offerings, which continue to gain acceptance in the electronics industry as more applications are discovered in different markets, thus providing a certain degree of optimism.
Barring any unforeseen circumstances, the Board expects the Group to perform satisfactorily in the next financial year.
APPRECIATION
On behalf of the Board, I would like to express my sincere appreciation to all employees of the Group for their contribution, commitment and dedication.
Our appreciation also goes to our valued customers, business associates, vendors, financiers, shareholders and the Government for their continuous support and confidence in the Group.
KWEK LENG SAN Chairman
Kuala Lumpur 15 August 2002

 

2001 Annual Report

MALAYSIAN PACIFIC INDUSTRIES BERHAD
Chairman’s Statement
On behalf of the Board of Directors, I am pleased to present the Annual Report and Financial Statements of the Group and of the Company for the financial year ended
previous year.
In spite of the adverse business conditions during the second half of the financial year, the Group achieved an annual return on shareholders’ funds of 24%. The Group has declared net dividends of RM130.9 million, an increase of 16% over last year and utilised RM80 million on share buy back. Cash flow of the Group continues to be healthy.
MALAYSIAN PACIFIC INDUSTRIES BERHAD
Business Review
Business for the first two quarters of the financial year was slightly down from the peak seen in the final quarter of the preceding financial year. The traditional surge in the second quarter’s revenue, fueled by
Christmas and New Year consumer spending, did not materialise this year. Concerns of a slow­down in the US economy, high oil prices, coupled with lower than expected sales of personal computers and cell-phones, resulted in many companies having over-produced or over­stocked.
The beginning of 2001 saw the start of the biggest decline in the history of the semiconductor industry. The speed and severity of this decline caught the whole industry by surprise. Even as we ended the financial year, there were still no clear signs of the industry having reached the bottom as companies worldwide continue to report falling demands and excess capacities. This is compounded by fears of a US-led global economic slow-down. The deceleration in business affected all market sectors, with the telecommunications sector being the worst affected.
The Group reacted swiftly to the business downturn by implementing numerous major austerity
initiatives to counter its impact. These include a hiring freeze, zero overtime, repatriation of foreign workers, natural attrition, reduction in factory overheads and requiring all employees to take mandatory annual or unpaid leave. In addition, curtailment of discretionary expenses will continue to be strictly enforced, to ensure that the Group sustains through this industry downturn. Prudent management of capital expenditure and continued investments in next-generation technology will ensure that Group’s future is not jeopardised.
The Future
The Group has invested RM338 million into buildings, plant and equipment over the past twelve months. A substantial portion of these investments was to further expand Carsem’s test capabilities as more customers are seeing assembly and test as one business.
MALAYSIAN PACIFIC INDUSTRIES BERHAD
Chairman’s Statement
(cont’d)
The Group continued to invest in research and development, covering new products, processes and computer systems. The computerised integrated manufacturing and planning system, which was over two years in the making, has finally gone live at Carsem Semiconductor and is in the process of being replicated into Carsem (M). This real-time system, one of the most advanced of its kind, is expected to bring quantum leap improvements to productivity, cycle-time and production data visibility.
Carsem’s new advanced packages and process technologies continue to gain favour with many existing and new customers, especially the MLP (Micro Leadframe Package) range. So far, engineering or qualification works have been completed for over fifty companies and more than half of them are in the process of starting commercial production. Production has also commenced on its other new packages such as the Array Packaging,
Spak, system-in-package (SiP) and flip-chip on leadframe (FCOL). All these new packaging technologies continue to attract much interest. Carsem has already developed assembly and test capabilities to service the Bluetooth market. This technology is expected to enjoy a very bright future and grow at a phenomenal pace as its wireless communications applications can extend far beyond that of mobile phone functions. We expect all these packages to spearhead the Group’s growth in the future.
Dynacraft Industries, the Group’s leadframe design and manufacturing arm, continues to provide the latest product innovations to meet customers’ and industry’s demands. Utilising advanced materials, designs and manufacturing technologies, Dynacraft ensures the
highest quality stamped and etched leadframes. Dynacraft is an industry leader in preplated lead frame (PPF) technology and is in the process of perfecting a lead-free PPF solution to meet future industry
environmental standards and requirements.
Other Developments
The Group persisted to invest extensively in employees development, recognising this as a critical success factor. Carsem (M) is the first local company in Malaysia to embark on
a multimedia training project and its success led to it winning the “National Human Resources Development Award 2000”.
The Group continued to receive numerous awards during the year from its key customers in recognition of its excellent services to them.
Under the Group’s Executive Share Option Scheme, a further 315,000 options were issued during the year.
MALAYSIAN PACIFIC INDUSTRIES BERHAD
Prospects
Notwithstanding overall poor market visibility, we expect a moderate growth in the second quarter in response to the Christmas and New Year festive seasons. The performance of the Group is dependent on the global trend of the semiconductor industry and at this stage, it is difficult for the Board to make a prediction as to whether this growth is sustainable.
Solid business fundamentals, an experienced management team, a healthy balance sheet, strong cash flows and being a leader in new packaging technologies will ensure that the prospects of the Group remain sound.
Dividend
A second interim dividend was paid during June 2001 in lieu of a final dividend. As such, the Board will not be recommending a final dividend for the financial year ended 30 June 2001. Total gross dividend declared for the financial year was 140%, an increase of almost 17% over last year’s 120%.
Appreciation
customers, business associates, vendors, financiers, shareholders and the Government for their unwavering and continuous support and confidence in the Group.
KWEK LENG SAN Chairman
Kuala Lumpur, 27 August 2001

 

 

 

2000 Annual Report

CHAIRMAN’S STATEMENT
On behalf of the Board of Directors, I am pleased to present the Annual Report and Financial Statements of the Group and the Company for the financial year ended 30 June 2000.
Financial Review
The year ended 30 June, 2000 was an excellent year for Malaysian Pacific Industries Berhad (“MPIB”). Revenue was in excess of RM1.5 billion, an increase of 57% over the previous year. Profit attributable to shareholders was RM326.7 million, an increase of 729% over last year. Earnings per share was RM1.61, an increase of 754% over the previous year. Particularly encouraging was the last quarter’s earnings per share of RM0.48, which was an increase of 25% over the previous quarter.
The return on shareholders funds was a commendable 48%.
The Group invested RM424 million in expanding its capacity, an increase of 127% over the previous year’s RM188 million. Dividends received by shareholders increased by 192% from RM38.6 million to RM112.9 million. Despite these significant increases in investments and dividends and a further RM68.6 million utilised on share buy-back, the Group’s net cash position improved from RM0.95 million to RM73.25 million.
Business Review
The semiconductor industry, which came out of its last downturn in February 1999, has now enjoyed five quarters of good growth. MPIB’s subsidiaries, Carsem and Dynacraft, have grown their revenues, in US dollars, by 41% and 20% respectively.
The demand came from all sectors, but mostly driven by personal computers (“PC”) and wireless communication manufacturers. The PC sector, currently the largest consumer of integrated circuits (“IC”), is seeing healthy growth. The demand is driven by increasing numbers of new Internet users, new PC replacements due to the Y2K upgrades and the overall recovery in Asia. Cheaper PCs have also opened new markets in China and India, thus stimulating wider global computer proliferation.
Demand for chips in wireless / cellular communications has grown astronomically in the last five years, as cellphones become more affordable and coverage areas are reaching out to even the most remote countries. With cellular subscribers expected to rise significantly over the next few years, phone sales will continue to be a major driver for IC demand for the next few years. This is compounded by the demand for higher bandwidth phones and the introduction of new technologies like WAP phones and Bluetooth applications. In addition to phones, wireless communications extend to pagers, the Internet and global positioning for vehicles.
Other key market sectors like automotive, consumer and industrial all remain strong and are likely to grow with stable economies in USA and Europe and improving economies in Asia.
Increasing numbers of semiconductor companies continue to favour outsourcing their assembly and test processes. Another key development is the growing number of Fabless companies, which mostly do not have inhouse assembly facilities and thus rely fully on independent assembly and test houses, like Carsem, to satisfy their needs.
As one of the leading semiconductor sub-assemblers and test houses in the world, all these developments augur well for the Group.
The Future
Carsem invested RM370 million in plant and equipment throughout the year and broke ground on two new factories amounting to additional floor space of 450,000 sq.ft. This should allow Carsem to more than double its revenue over the next two to three years.
Carsem invested RM40 million during the year on research and development, covering new products, processes and computer systems. The micro leaded package, MLP, was launched during 2000, and production capacities are being expanded. The MLP is smaller, has better thermal and electrical properties and is potentially cheaper than conventional leaded packages. We expect it to grow in popularity very quickly.
Carsem has also launched its flip-chip process this past year, both to substrates and leadframes. We are the first to have developed the flip-chip to leadframe technology and production has already started.
The multichip module line using SSBGA substrates is about to start making modules for Bluetooth applications. We believe that the MLP, flip-chip and SSBGA products will become an increasingly significant part of Carsem’s revenue growth. We also have patents pending on some of the technologies used in the MLP, flip-chip and SSBGA developments.
More customers are seeing assembly and test as one business, as such Carsem has decided to make a major investment in expanding its test capabilities.
Other Developments
The Group transited into the Year 2000 smoothly, without any interruptions to its operations and business processes.
Pursuant to the Group’s efforts to motivate, retain and recruit quality employees, an Executive Share Option Scheme was introduced. During the year, 4,823,500 options were issued under the scheme.
During the financial year, the Company bought back 5,338,000 of its own shares at an average price of RM12.74. The total number of shares bought back as at 30 June 2000 stood at 7,497,000.
Prospects
Numerous industry experts project healthy growth in worldwide semiconductor sales for years 2000 and 2001 at rates ranging from 20% – 30%. Manufacturers of cell phones and PCs are expected to be the main drivers. The prospects of the Group should remain sound based on increasing demand for its products and services. Given the strength of the Group’s balance sheet and business fundamentals, and barring any unforeseen circumstances, the Board expects the Group to perform satisfactorily in the coming financial year.
Dividend
The Board is pleased to recommend a final dividend of 80%, comprising 30% tax exempt, 30% less tax and a special dividend of 20% tax exempt. The total gross dividend for the financial year, including the interim dividend already paid, is 120% or RM121.3 million, an increase of 192% over the previous year’s RM41.6 million.
Appreciation
On behalf of the Board, I would like to express my sincere appreciation to each and every staff of the Group for their contributions, commitments and dedications, to the Group.
Our appreciation also goes to our valued customers, business associates, vendors, financiers and shareholders for their continuous support and confidence in the Group.
Acknowledgement
I wish to express, on behalf of the Board of Directors, my deep regret at the passing away of YBhg Dato’ Haji Mohd Shamsuddin bin Haji Mohd Yaacob on 20 May 2000. His presence and contribution to the Board will be sadly missed.
KWEK LENG SAN Chairman
21 August 2000

 

 

 

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