In a year when the electronic manufacturing and distribution industries continue to be decimated in the traditional strong markets of North America and Western Europe, one region has been booming – the East, and in particular, China. This begs the question, where does this put our small market in South Africa, and how will we be affected by the global trends?
Whilst we await the official import statistics, it seems that our local market has grown, certainly in rand terms, in the last year. Contrast this with 40 to 50% reductions (over two years) seen in the United States and Europe! It is worth examining the reasons for their decline to see what can be done to protect our local industry.
In Europe and the US, the second half of the 1990s saw the trend towards out-sourcing and therefore the massive growth in contract equipment manufacturing (CEM). As the CEMs strove to reduce their costs, they looked towards the East where they acquired or built new facilities.
Although the impact was felt as manufacturing moved offshore, this was a natural evolution as companies sought competitive advantage. However, this focus was almost exclusively cost-based. Companies must seek world class costs, however, they also need to be mindful of their value proposition and balance price against flexibility, service levels, transport times and costs, quality, security of intellectual property and security of supply during product allocation times.
There are many products that are not well suited to 'distance manufacturing'. These include those with lower volumes and higher variations, where the end customer needs great flexibility in pulling demand with a day's notice. Practical things such as the weight of the product is a problem as the cost of air freight is high, and tying up a product on a boat for six weeks can be extremely negative to an overall business model.
Expect to see further migration of the 'appropriate type' of very high volume manufacturing offshore. However, most products are not suitable for 'distance manufacture' and the holy grail of lowest cost is not as simple as the lowest cost of labour in the world.
All is not doom and gloom elsewhere, however, as book/bill ratios - the best barometer of changes in demand - have turned positive in North America and recently in Europe. Sales in terms of units sold (as opposed to in dollars or rands) have increased dramatically as average selling prices (ASPs) have tumbled.
So the future of our domestic industry is still positive in my opinion, especially when one considers that our end products have the potential to be highly competitive in global markets. A survey Arrow recently conducted on the ASP of components in the various regions shows North America to be highest, Europe second and Asia-Pacific lowest (by far). In South Africa, prices follow those in the Far East closely, in spite of the relatively small size of the market. This is possibly one reason for the relative strength of the industry when compared to the rest of the world, and another good reason to be in this business in South Africa (as well as our weather of course!)
In conclusion, the need for everyone involved in our industry to focus on new and innovative products must be reinforced. Manufacturers, distributors, component suppliers and indeed, the government, have a vested interest in innovating both hardware and software for the future success of South African electronics in the local and global market.
For more information contact Tony Boardman, Arrow Altech Distribution, 011 923 9600, tboardman@arrow.altech.co.za
| Tel: | +27 11 923 9600 |
| Email: | info@arrow.altech.co.za |
| www: | www.altronarrow.com |
| Articles: | More information and articles about Altron Arrow |
© Technews Publishing (Pty) Ltd | All Rights Reserved
printer friendly version