Is there room in the electronics industry for another mega regional player like China, South Korea and the United States? Government officials and leading high-tech industry executives in the United Kingdom believe so and are actively pushing a plan they believe will dramatically jack up the sector’s contribution to the country’s GDP to more than 7 percent of from 5.4 percent today.
This dream of a resurgent British high-tech market may seem far-fetched to rival regions and countries in the electronics industry, considering the economic and fiscal malaise gripping the European continent and amidst the specter of stubbornly high youth unemployment and the inability of the political leadership to effectively tackle several of the key problems plaguing key members of the EU.
The goals may be difficult to achieve but the U.K. undoubtedly wants and believes it should get a bigger piece of the electronics system and components market. In a report published June 27, the U.K. government and a consortium of players drawn from some of the country’s biggest high-tech companies advocated strongly for investments and plans that would by 2020 transform the local electronics market into a £120 billion ($180 billion) industry from approximately £80 billion today, a 50 percent jump. They acknowledge, though, that obstacles lie ahead.
“There are significant threats from other regions that appear to be ahead of the UK in their realization that Electronic Systems really will deliver the future, and are already taking investment decisions with this in mind,” the report said. “To safeguard its future and enable the industry to achieve its full potential, we must tackle the challenges and seize the opportunities outlined in this report together.”
The authors of the Electronics Systems Challenges & Opportunities (ESCO) have some audacious goals. They want the electronics sector to add 150,000 highly-skilled jobs in the U.K. also within the next seven years, raising the total number of people working in the industry locally to one million from 850,000 today. They called for greater collaboration between government and industry players throughout all sectors of the economy in recognition of the fact electronics are being used to boost productivity and maximize efficiency across various enterprises.
“While electronic systems tend to be invisible to those outside of the industry, they are in fact pervasive and are an enabler in a host of other sectors – from education and healthcare to communications and entertainment,” said Michael Fallon, the U.K.’s minister of state for business and enterprise, in the report. “This is an accelerating trend and we will continue to see more and more products and services that rely on electronics.”
The report’s authors were even blunter on the pervasiveness of electronics in the global economy and warned that the U.K. could lose out to competing regions if it failed to increase investments in the sector. They observed that there are huge business opportunities in the ubiquitous nature of electronics and argued that “no single nation will have a global monopoly” on the market. While the U.K. can play a major role in electronics, they noted that its “position is under threat from other locations where the strategic partnership between industry, academia and government is stronger than it is in the UK.”
That’s an understatement. True, the U.K. has some major players today in the high-tech sector, including ARM Plc, a leading supplier of semiconductor IP to the communications equipment market, but it has so far failed to dominate any of the top market segments. The country lacks any brand names in consumer electronics, enterprise computing, software development or design engineering. In addition, it doesn’t have the same vibrant venture capital community that has made California’s Silicon Valley the predominant home for high-tech start-ups and the incubator capital of global electronics.
Furthermore, the U.K. lags far behind other major regional players, including Japan, South Korea and Taiwan. Due to its classification as a “high-cost” country, the U.K. is a nominal player in electronics manufacturing and this is unlikely to change anytime soon. What the country has going for it, though, is a strong financial base, one of the world’s top equity markets, a highly-educated and mobile workforce as well as an advanced and trusted legal system.
In recent years, the U.K. has leveraged some of these strengths to make significant inroads into the electronics and high-tech market and it is a preferred spot for many of the leading industry players seeking a landing pad for expansion into Europe. It is also home to some leading companies in intellectual property, software development and components distribution as the ESCO report noted.
“UK-based organizations, and UK units of international organizations, represent an internationally valued capability. Built on our strong heritage of innovative engineering, the UK has a large contingent of such organizations and attracts a significant share of global investment,” it said. “No fewer than 14 of the world’s top 20 semiconductor companies have established design and/or manufacturing operations in the UK and the community extends from creation of the base electronic materials right through to the development of the software and services that realize the capabilities of Electronic Systems.”
So, what does the ESCO report suggest the U.K. government and industry do to achieve the lofty goal of growing more than 50 percent in just seven years? The report says the government of the U.K. and the local industry need to collaborate as follows:
- Ensure recognition for the role of the UK’s key enabling technologies (KETs), as happens elsewhere in Europe
- Provide a basis for more investment in research, development and innovation.
- Develop our innovation climate supporting the Prime Minister’s stated ambition of “The UK being the best country in Europe to start, finance and grow a company.”
- Support the development of new supply chains for the industries of tomorrow.
- Deliver the improvements in capability and availability of engineering skills we need.