Heroes of Traditional Industries: Insights from Boon Choon Lim on how manufacturing companies in APAC region can embrace technology and innovation to stay competitive.

Hi Boon Choon, glad to have you here today!

Tell me more about yourself and how did you get to work with manufacturing companies?

Boon Choon: My journey began over two decades ago, working for companies that support manufacturers in the process industries—managing refineries, petrochemical plants, and more. About 12 years ago, I began discussions with Hexagon, who were which was seeking someone to scale their metrology business throughout the Asia-Pacific and Japan region excluding China.

 Hexagon wanted to hire someone with Asia Pacific experience working with international companies to enhance their metrology business, and I lucky to be chosen. That marked the beginning of my journey with Hexagon. As time passed, they began acquiring companies that excelled in design, engineering, production software, and quality management.

Today, I’m responsible for overseeing the ASEAN region, Australia and New Zealand, and Korea—my current portfolio.

So, how is Hexagon helping manufacturing companies?

Boon Choon: Hexagon's technology is no stranger to most industries. We know that every global manufacturing company looks for innovative ways to improve their productivity, cut costs and improve quality. As per our market share analysis conducted in 2021, our technology touches 95% of all cars manufactured, 90% of aircrafts and 75% of smartphones every year. It sprawls ever wider into various industries, like electronics, automotive, EVs, Aerospace and defence, oil & gas, shipbuilding, constructions etc. 

Take MSC Software, for instance, a business we acquired. It has a fascinating history. Back in the 1960s, NASA approached two MIT professors and requested that they design a software simulation to rigorously test the structural strength of rockets before launching them into space. As you can imagine, it's way too pricey to rely purely on trial and error in that game. The proofing phase needs a ton of careful simulations to ensure everything is just right before the rockets are launched into orbit. The professors in question, Dr. Richard MacNeal and Dr. Robert Schwendler, went on to establish a company aptly named MSC, from MacNeal-Schwendler Corporation, and that's MSC Software for you!

We contribute to our customers' journey from the design and engineering stages right to the production side. Our portfolio also includes various top-of-the-game software when it comes to production software licenses. 

Metrology is yet another domain where we excel. We support our customers in verifying that their products conform to design specifications. Essentially, our technology ensures that companies consistently hit their targets with precision.

What do you think are the challenges that manufacturing companies face when undergoing a digital transformation process?

Boon Choon: Many companies talk about Industry 4.0 and digitization, but frequently they offer complex, expensive solutions that fail to address customers' actual needs. This creates apprehension among customers about starting their digitalization journey. As a result, they hesitate to invest, not knowing if these solutions will truly deliver value.

To overcome this, there’s a need for clear change management—knowing what to do and how to do it. The real challenge is understanding what steps to take and how to manage the process. 

Our approach is to avoid overwhelming customers with large-scale projects. Instead, we encourage them to start small by addressing immediate operational challenges. By implementing small solutions with measurable impacts, they can build momentum over time.

We emphasize that they don’t need to worry about the entire transformation upfront. A long-term vision is essential, but it’s more effective to focus on short-term wins with quick ROI. As they see those gains, they’ll naturally want to continue expanding. This is how we approach transformation.

In your opinion what's the best way for these companies to start this journey?

Boon Choon: Each company is unique, having its own set of challenges to address. So, the best way to commence this journey varies, but at its core, it's about identifying and tackling specific challenges.

For instance, one company might be grappling with a high scrap rate. They'll need to scrutinize their manufacturing processes to pinpoint exactly where the issues lie. Another organization might aim to accelerate new product introductions—if they can cut the time it takes to ramp up production by half, it could save them heaps of money.

Then, you might have a company that's thriving, but short on trained engineers. Here, the question is, how can technology enable less experienced engineers to perform efficiently and accurately?

You'll also find many companies in Asia that are primarily manufacturing hubs. Their main concern is cutting costs. For them, improvement might involve streamlining processes to produce faster and better, reducing scrap, and ensuring their manufacturing adheres strictly to customer specifications.

But it doesn’t stop there. Add COVID to the mix, and companies are now also having to address supply chain challenges. They need quality management solutions and a sturdy, efficient supply chain to weather such disruptions.

The reality we're facing is that manufacturing is gradually moving out of China, opening opportunities for countless other countries. However, to capitalize on these, companies must have an effective supply chain in place and strictly maintain quality. If they can't manage this, they stand to lose out on potential business.

In essence, being able to manufacture goods isn't just about cost anymore. It's equally crucial to have a well-integrated supply chain and the capacity to produce quality goods consistently. Achieving this balance is critical for success in today's evolving landscape.

You actually shared a great point here regarding manufacturing companies moving out of China. Then if you're saying that there are opportunities for many countries now, but the problem is supply chain, how should they approach supply chain? How should they build it and integrate it with their manufacturing operations?

Boon Choon: Large firms, which we aptly label as 'queen bees,' often pull supply chains with them when they migrate. We're seeing this with Korean and Chinese companies that are venturing into Southeast Asia and India. 

When these corporations consider setting up a factory, the thought process goes beyond the factory itself. They also have to consider their supply chain. Can they convince a part of their existing supply chain to establish operations in the new location too? Are there local players capable of producing parts at the required quality and speed, while maintaining utmost flexibility? These are significant challenges to address.

Take Apple as an example—it was reported that when the US Government urged them to shift operations to the US, they argued that their Chinese suppliers could turn around a design within a weekend—at such speed and efficiency that is hard to replicate elsewhere.

The real struggle for manufacturers looking to move out of China is finding a similarly efficient and trusted supply chain that can deliver both quality and speed, while providing the required flexibility. This challenge is proving to be a substantial hurdle for many players in the manufacturing arena.

But how did they achieve that level of integration between manufacturing and supply chain? As you said in the example, on Friday somebody went to the design and on Monday they had the product on the table in the office.

Boon Choon: Achieving this impressive level of integration between manufacturing and the supply chain is a compounded result of partnering with capable entities and benefiting from targeted government policies. 

Consider how some governments establish industrial parks pre-filled with companies that form parts of the supply chain ecosystem. This strategic planning ensures that instead of having to cover considerable distances, or even cross national borders to reach supply chain partners, companies find them all within the same industrial park.

Government policies can play a significant part here. For instance, in Singapore, Jurong Island stands out as a hub for the process industry. There, many related enterprises are all congregated within a small geographic area, forming an efficient supply chain.

Having such closely situated partners eliminates the need to ship equipment over long distances—whether by flight or boat—which can take months and lead to inefficiencies. Instead, proximity within the same industrial park enables speedy, efficient operations—an essential aspect of a well-integrated supply chain.

Do you think that manufacturing companies in Asia keep up with the technological progress or do you think they are still behind? How does manufacturing industry in Asia and Pacific compare to, let's say, the western part of the world or other parts of the world?

Boon Choon: I would say that it's a combination, there are some things in which Asian companies are doing very well and they are very fast. For example, China has come a long way, many people think that China is third world, but I think, in terms of manufacturing they are definitely first world, they are very, very fast. They can design, they have their own technologies, they don't necessarily have to steal Western technologies. they have their own capabilities in AI and many other technologies.  

As far as Southeast Asia, Japan and Korea, Southeast Asia is more of a manufacturing hub less of the original OEMs.  These are more in Japan and Korea, but SE Asian countries have come a long way, Some countries they are a bit slow to catch up in terms of adopting new technology because they are so proud of the ways that they are doing things. Like it's well known that Japanese are experts in using spreadsheets, but today spreadsheets are not enough and they need good software to manage their processes.

The manufacturing sector here is very much alive and people work hard over here. Not saying that other people don't work hard, but over here, you know, like my example about Apple saying that they develop something over the weekend, they rush it out for you I think that that is a good thing in Asia. You can find companies that are really hungry for the business.

What do you think are the current challenges that manufacturing companies face in Asia, Pacific?

Boon Choon: One major challenge for manufacturing companies operating in the Asia Pacific region, particularly in rapidly growing economies like Vietnam, is the shortage of experienced workers. With a surge in foreign direct investments over the last decade resulting in new factories being constructed, the demand for experienced manpower has skyrocketed. Often, newer factories hire from established factories, causing a talent migration.

So, it's a hotbed for experienced workers' demand. This shortage has pushed companies in these countries to be more receptive to automation and technology, which proves to be a useful aid since training experienced workers from scratch is truly a daunting task.

If you juxtapose this with countries like Japan or Korea, you typically find workers with decades of experience, knowing their tasks like the back of their hands. However, such seasoned workers are a rarity in a developing country like Vietnam.

On the rare occasion that you do find one, they don't come cheap—and there's usually a line of companies vying to hire them. So the challenge of sourcing experienced expertise in the workforce is arguably the foremost hurdle for manufacturing companies in this region.

Okay, you shared and explained the challenges regarding human force and how hard it is to hire, but what, for example, challenges the manufacturing companies in Asia and Pacific face from a technology and innovation standpoint?

Boon Choon: From a technology and innovation perspective, the primary challenge is the generally slow adoption of new technology. This could be due to lack of vision from the management or understanding of the technology itself.

Governments in many countries are making strides to address this by establishing institutions that lead the way in technology, assisting local small and medium-sized enterprises to implement these new technologies.

However, there's a specific attitude, particularly noticeable in places like Singapore where you find small companies that will only launch a project if there is a government subsidy; without it, they won't proceed. What this leads to is a competition based on having the cheapest solution, not the most innovative one.

I commend countries like Germany where, despite high costs, they create products that command high prices yet are still sought after. Why? Because they're backed by incredibly smart engineers, they're offering products that are differentiated, innovative, and of such quality that consumers are willing to pay a premium.

In contrast, many Asian companies aren't quite there yet. They excel at producing already invented products cheaper. But that's a part of the growing process—it takes time for nations and their industries to evolve beyond this point.

Take Japan as an example. In the aftermath of World War II, their products weren't highly valued. However, by the 1980s, the Japanese economy was so robust, with a book even proclaiming Japan as number one. This surge was thanks to their relentless focus on quality and capability, propelling their products to a top-tier status.

Now, we see countries like Korea reached a point where their products are favored over those from Japan. China is on an upwards trajectory, with India following suit. Southeast Asia will also need to step up its game.

Reaching such standards would involve focusing on creativity, providing the best products, and maintaining top quality.

But do you think that these companies where you said that there is no such a big will even from the management to change, do you think they will keep up with the competition and continue to exist? Or do you think that at some point, if they don't change, they'll go out of business?

Boon Choon: Absolutely. Businesses that have been operating for the past few decades, particularly small and medium-sized enterprises, often encounter scenarios where their founding members are retiring. If these companies fail to adapt their business models to accommodate more innovation and higher-value production, they run a high risk of being phased out. 

There's always someone who can offer a cheaper solution. Take Vietnam's steady growth over the last decade - they can certainly deliver cheaper solutions than Singapore or Malaysia, and yet, even Vietnam is now increasingly becoming more expensive. Then you have emerging players such as Laos and a few others who offer even cheaper alternatives. 

With countries like India also becoming pricier, the inevitable solution is focusing on innovation and quality. We must reach a point where consumers choose a product for its quality, not because it is the cheapest option. It's a shift that makes absolute sense and seems inevitable in the long run.

Yeah, it makes sense. Also what trends do you see in Asia and Pacific in terms of innovation and technology implementation in manufacturing companies?

Boon Choon: Let's take trends from the electronics industry as an example. Years ago, brands like Toshiba and Sony were among my top choices for televisions. Today, I find myself gravitating towards brands like LG for their TVs and other appliances, and I opt for devices like Samsung tablets.

What this highlights is the impressive rate at which Korean manufacturers have caught up with Japanese manufacturers. The pricing of their products is on par with the Japanese offerings. However, I choose Korean products because, in my experience—for instance, when comparing different TVs—I found that brands like LG offered superior image quality and features. 

We've seen this transformation trajectory before. Initially, Japanese products struggled for acceptance and then, by the 1980s, became widely regarded. Korea has followed a similar path. Initially, Korean products were enticing because of their lower prices, but today, Korean products lead with their quality and innovation. 

China is treading a similar path. Yes, there are many cheap Chinese products, but they're steadily becoming better. Some Chinese products now stand toe-to-toe with the best in the business. Even amidst varying opinions about Chinese products from Western companies, some of their products are truly impressive.

India is another country on this journey. Currently, India's still got some distance to cover, as its products aren't at that superior quality level yet. Our customers in India recognize this—they know that to make an impact on the global stage, a keen focus on quality is non-negotiable. Without it, they risk being seen as producers of second-tier products that must be cheaper to be considered. We're seeing a growing effort from Indian manufacturers to emphasize quality.

That's where we come in—with Hexagon, our core operation focuses on assisting customers in bringing up their productivity and quality. Helping our customers excel in these areas is our bread and butter. That's our primary focus and where we bring considerable value to the table.

Can you share an example or use case that you and together with your team at Hexagon did for a manufacturing company? And the results that you managed to achieve for them, maybe 30% increase in productivity, or 20% increased revenues, or maybe 20% less time on manual tasks. Like what was the problem, how did you find the solution to that problem, and what was the results after the implementation?

Where do you see, uh, the manufacturing, the industry in Asian Pacific in like 10 or 15 years?

Boon Choon: Within the 10 to 15 years, Asia Pacific region will remain the most vibrant region for manufacturing and increasingly our own local companies OEMs will become more and more mature.

Take for example Hyundai, now is a world player. In the past it was a small company and then we have we have also newly formed automotive companies like Vinfast.

Just today I saw a picture from a friend. He's in Canada and he was surprised to see Vinfast being sold in Canada. So this is Vietnam's first and only automotive OEM and they are our customers as well.

In the past, yes, there are a lot of Western companies that are very famous and they are still doing well but we are expecting to see more and more Asian companies come on board and become world beaters.

We see Chinese companies also becoming more and more significant in the market share. Of course, there's all these geopolitical issues right now, but if you minus out the geopolitical issues, they will be really, really quite powerful with their capabilities.

But how much do you think actually this geopolitical situation can influence the development of manufacturing industry in general in the world, like on both sides, Asia, Europe, USA, South America, the whole world? Do you think it can accelerate or de-accelerate, decelerate the development?

Boon Choon: At the moment, we do see that there's a significant impact. On the one hand, because of the geopolitical issues, some of the technologies are being invested in the US, for example, chip making, AI chips and all those things. On the other hand, because of the geopolitical issues, somebody says, I don't want to sell you my advanced chips, somebody says, I don't want to sell you my steel and all this so that will slow down the world economy.

I think it's not a good thing for the global economy, but at the moment it is what it is so we have to just adjust to it.

What do you think would be a solution for this?

Boon Choon: Going into politics is a bit difficult.

No, but I mean a solution not from a geopolitical standpoint, even with the geopolitical thing going on, what would be a solution for manufacturing companies to continue to cooperate between each other? Because that's very important.

Boon Choon: Of course, people are looking at different suppliers and so on, but it's not easy. For example, you know, when we talk about EV cars, to make the batteries, you have rare materials like lithium and all those kind things and some countries that own much of the supply chain can control things.

So, of course people are looking for other sources and so on, but it's not something that can happen overnight, there will be much challenges in the supply chain as well.

One last advice that you would give to manufacturing companies on how to embrace technology innovation?

Boon Choon: Start small, scale fast. As I mentioned earlier in today's interview, don't be afraid to take on this digitization and innovation, don't be afraid because if you don't do it, you'll run out of business.

Because you will not be able to compete with those who are doctors.

But you don't need to worry about, you know, going big time spending millions of dollars on it.

Just start small, gain some experience, get your return on investment, go to the next stage and scale fast.

Boon Choon, thanks a lot it was a very interesting discussion and readers for sure will find your insights about Asia Pacific manufacturing very informative.

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