SME's aerospace venture takes off

DIVERSIFYING into an entirely new business area is no easy task for small and medium-sized enterprises (SMEs), but it can sometimes pay off handsomely.

Home-grown Proway Engineering Plastic started out producing plastics for the consumer electronics sector.

Now, it gets a growing share of its revenue from the aerospace industry, which it ventured into two years ago.

It could have been a very risky endeavour, said Mr Vincent Chew, project manager at Proway, which also manufactures medical device components.

"We didn't have the knowledge and training, we didn't understand the (aerospace) industry," he said.

Building up capabilities and assembling a team of engineers would have been costly, especially if the venture had failed, he added.

The company got its big break through the Agency for Science, Technology and Research (A*Star), set up to foster scientific research and talent.

The agency's Precision Engineering Centre of Innovation (PE COI) - which works with firms in the industry to develop new products and boost their technological capabilities - assembled a consortium of four SMEs for an aerospace project.

Proway was brought in to make containers to protect some parts in aircraft cockpits.

Requirements for aerospace parts are more stringent and demanding than for consumer electronics, and meeting those requirements involves a higher level of technological capability, said Mr Chew.

The centre's director, Dr John Yong, said local companies have to produce more technology-intensive products to "command higher margins necessary to pay for the high overheads they face here".

However, SMEs often lack the resources to develop their own technological know-how, which is where A*Star comes in.

The agency works with companies to develop new products, as well as build up their capabilities for future projects.

PE COI has worked with 550 SMEs since it was set up in 2008.

Its collaboration with Proway has boosted the firm's margins and revenue.

"When we go into aerospace, it's big (sales) figures and high margins," said Mr Chew.

"Electronics can have high (sales) figures, but the margins are quite limited."

Proway gained about US$200,000 (S$270,000) in sales from aerospace last year.

It plans to grow this amount in the coming years by taking on more projects.

The company has 200 employees, with 90 per cent of them based in its factory in Malaysia.

Its Singapore head office, which employs about 20 staff, manufactures medical devices and precision parts under controlled environments.

Besides aerospace, A*Star is looking to help SMEs move into high-growth industries such as medical technology, oil and gas, and manufacturing complex machinery, said Dr Yong.

"For companies to really capture high value, they need to upgrade themselves or enhance their capabilities."

A version of this article appeared in the print edition of The Straits Times on June 29, 2015, with the headline 'SME's aerospace venture takes off'. Print Edition | Subscribe