Boom, doom and gloom, or something completely different?

25 November 2019 News Editor's Choice

As the end of 2019 looms, it’s time to look ahead to what next year might have in store, and reflect on the year gone by. And what a year it’s been. We’ve seen load shedding on a massive scale, outbreaks of xenophobic violence, Johannesburg City Power held to ransom by hackers, and now tornadoes – in South Africa!

The silver (or rather, gold) lining was undoubtedly the Springboks winning the Rugby World Cup – despite the fact that we had to witness images of Faf de Klerk in a speedo, and even worse, the inevitable copycats that followed. There are other reasons for optimism, such as government finally getting tough on perks for its officials, by capping what they’re allowed to spend on vehicles and using economy class for domestic flights.

Presumably that means they will start getting tough on folks like KwaZulu-Natal’s education MEC, who spent half a million Rand on hired cars and chauffeurs in six months because his Mercedes-Benz GLE 350’s “intake capacitor” was lethally defective (go to*nov19-intakecap to be redirected to MyBroadband’s article if you feel like a laugh).

And that’s not even to mention what’s going on outside our borders – things are relatively stable here compared to much of the rest of the world. This all makes it next to impossible to predict even a couple of months into the future, never mind a whole year. Some are optimistic (see Actum Group’s forecast below) and nobody can know for sure, but here are three trends that have been particularly noteworthy, or that I foresee for the electronics industry in 2020.

Shifting distribution landscape

All the broad-line electronic component distributors have virtual storefronts nowadays, but it’s the online-only specialists – most notably Mouser and Digi-Key – that have really grown hand over fist in recent years, to the detriment of the old-school establishment. Two recent announcements have the potential to shake things up yet further.

In probably the biggest shock, Texas Instruments announced that it is terminating three of its major distribution agreements – with Avnet, World Peace Group (WPG) and Asia-Pacific distributor WT Micro – effective 31 December 2020. That followed just weeks after Avnet announced a deal with Chinese e-commerce giant Alibaba to open a superstore on Alibaba’s website.

I doubt whether this trend will migrate to our shores anytime soon (if ever) because in our local industry FAEs (field application engineers) play a vital role in product development rather than simply peddling components. What’s more, Alibaba hardly registers on South African radar, or most other places in the Western world, but if Avnet starts selling through Alibaba, who’s to say they (or another distributor) won’t start selling through Amazon, or Takealot?

The Icarus delusion

Yekani Manufacturing took a big gamble last year when it invested R1 billion in a new mega-factory in East London. It seemed like a longshot at the time but there was generally hope that the company could reach the critical mass necessary to sustain such an ambitious venture.

Now, just 16 months after promising it would employ more than 1000 people, the company is instead retrenching more than 200 workers, according to an article from the Daily Dispatch. The article quotes Yekani group CEO Dr Siphiwe Cele taking an apparent swipe at the government by saying countless investment conferences would not solve the country’s unemployment – but supporting local businesses would.

These comments come as President Cyril Ramaphosa addressed an investment summit in Johannesburg, and amid speculation that the Eastern Cape education department had bought tablet devices for R900 million from a company that imported them from China, rather than from Yekani which also manufactures similar devices. Members of state and provincial government hit back at Cele, instead blaming the company’s failings on poor management.

I guess the moral of the story is that in the current climate, it’s wiser for electronics manufacturers to ‘stay in their lane’ and focus on niche markets and smaller opportunities, rather than flying too close to the sun.

The Fourth Industrial Revolution, IoT, and AI

Because, of course. No matter where in the world you are, there’s no getting away from these themes, and they invariably go hand in hand. There is indeed enormous potential in using these modern concepts to create innovative solutions for African challenges. Not all South Africans are convinced, however.

A recent survey by Kagiso Trust on how aware, prepared and enabled South Africa is for the impact of the Fourth Industrial Revolution (4IR) found that:

Almost half (49,1%) of the respondents believed that there will be a societal impact from 4IR.

Two in five of the respondents believe that there will be no job creation with the advent of 4IR.

Just over half of the respondents were of the view that 4IR will result in large-scale job losses, with two in five believing it will lead to social unrest.

Only a quarter of the respondents believe that the 4IR will improve societal equality.

A third of the respondents believe that during the 4IR there will be an improvement to service delivery.

More than half of the respondents believe that there will be an improvement in re-industrialisation from the 4IR. Government and private sector respondents were optimistic about 4IR.

I find it unsurprising that so many people are unconvinced about 4IR having a positive societal impact. Perhaps that perception will gradually change, but one thing for certain, going by the number of conferences and private and public sector initiatives centred on 4IR, is everybody’s going to be talking about it, a lot.


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