KUALA LUMPUR: Dagang NeXchange Bhd (DNeX) may need another RM600 million to RM700 million in additional capital to expand and enhance its subsidiary SilTerra Malaysia Sdn Bhd's (SilTerra) production capacity and capability for the next two to three years.
DNeX group managing director Tan Sri Syed Zainal Abidin Syed Mohamed Tahir said the additional capital would be required without needing to build a brand new factory to increase the capacity based on the existing facility.
"Based on the current capacity, we have the ability to produce 8.5 million mask layers a year. We can go up to the maximum level of 12 million mask layers annually.
The group recently approved about RM645 million worth of investment to increase SilTerra's annual production capacity by 20 per cent from the current 8.3 million to 10 million mask layers per year, which will be ready for production by early 2023.
"To go to maximum capacity, we may need another RM600 million to RM700 million to spend to increase the capacity and make some other improvements," Syed Zainal told the New Straits Times and Berita Harian in an interview last week.
"Subsequently, we probably need to have another expansion to reach about 12 million capacity per year. However, decision has yet to be made – we have to look at how the demand will grow for the next one to two years."
He said SilTerra's focus was to optimise its plant utilisation rate and execute debottlenecking while processing improvements exercise.
"These have resulted in improved productivity, efficiency and quality levels. We have signed long-term agreement (LTA) supply agreements with a few companies. We hope to garner 80 per cent of our capacity into LTA as it guarantees us to get continuous volume amid the market uncertainty.
"We also developed a long-term technology roadmap for us to identify initiatives to focus on in the core technology platform, as well as in new emerging technologies to start planning forward."
Syed Zainal said DNex could also set up a RM30 million to RM50 million innovation fund to develop the local electrical and electronics (E&E) ecosystem.
"We will help companies with lack of expertise and funding. We can invest in small companies (less capital) to help them growing their businesses, leveraging on our network and partners in creating a champion via a venture-capital. We want to focus on the E&E and semiconductor sector and drive the innovation fund.
"We have spoken to the government about our plans as we need to drive this together with our partner – CGP Fund," he added.
Syed Zainal said the on-going global chips supply crunch was likely to persist in the foreseeable future and the company expected the demand curve to remain strong until 2024.
He said the company was positive on SilTerra's growth prospect, driven by its capacity expansion plans, on-going cost and production efficiency initiatives and implementation of the technology roadmap.
"The roadmap includes horizontal expansion into new emerging technologies such as microelectromechanical systems (MEMS) and Silicon Photonics which have much higher average selling prices. We are working with global customers and partners to develop and qualify new emerging technologies. The technologies will be a significant contributor to SilTerra's long-term growth," he added.
Meanwhile, Syed Zainal said DNeX's oil and gas (O&G) upstream company, Ping Petroleum Ltd, would likely require at least between RM300 and RM400 million in capital expenditure (capex) to develop its newly-acquired Avalon oil field in the United Kingdom.
"Overall, the company is evaluating the best way to optimise our cash that we have and capital that we are going to invest, to get the best return in all the sectors that we are. It is a sizeable capex and the company has strong cash position. We have spoken to both local and internal banks to possibly seeking for funding, rather than issuing any new share capital," he said.
Syed Zainal said the Avalon asset – which was yet to be developed with expected production between 5,000 and 6,000 barrels per day - was bigger than Anasuria.
Production output from the Avalon oilfield is expected to come on stream by 2024.
Syed Zainal said the group would focus on LTAs to ensure recurring business namely in technology segment, while maintaining efficiency and productivity especially in technology and energy segments.
On the information and technology segment, the group said it would continue assisting customers in their digitalisation journey.