Within today's pessimistic economic climate, how is the electronics industry holding up?

If you follow the latest figures from industry bodies, such as Afdec or DMASS, you might think that the UK electronics industry is dead in the water or at least struggling to stay afloat.

There is no doubt that the huge exodus of electronic manufacturing over the last few years has hit the DTAM (distributor total available market) figure.

In other words, the amount of money spent on electronic, electro-mechanical and PCB components has reduced significantly. This is having a knock on effect on manufacturers and local distributors.

Many people make a fundamental assumption error when looking at this decline in DTAM. They mistakenly equate the amount of money spent in the UK on electronic components as being equal to the potential to make revenue.

DTAM is actually irrelevant when you look at the overall potential to create demand by working with customers and their design engineers in the UK. The fact that much of the manufacturing and component purchasing is overseas, just means that you have to adapt to 'go follow the dollar/pound/euro'.

From a design perspective the UK is healthy. We have a highly fragmented customer base, with many hundreds of SMEs (small and medium enterprises); and this in itself poses a challenge from a service point of view from distribution.

The UK has the third highest level of venture capital funding in the world, after US and Israel, and its entrepreneurial spirit is visible in the huge number of new business starting up. We embrace and develop many new areas of technology, which could have global influence, i.e. fuel cell technology, could be one such area.

We also have the second largest defence spending in the world, and this means that many companies and locations involved in this sector, will generally keep this type of manufacturing in the UK.

So how can companies succeed in the UK? It is my belief that companies need to recognise two fundamental issues to ensure success in the UK.

Firstly, adapt to the UK environment. Recognise that our customer base is highly fragmented and that to get your arms around it, you have to support many more customers than you possibly would in France or Germany.

Our customers might be smaller in terms of number of design engineers, but there are many of them. Adapt your supply chain and service proposition to low volume/high mix type of requirements.

Secondly, it is all about 'attitude'. Develop a 'can do, will do' attitude. People do business with people. If you think you are not going to succeed, well, guess what? Your chances of failure just increased.

There are many tier two contract manufacturer's in the UK who are expecting double digit growth in the UK in 2008. Their car parks are full and their order books are healthy.

True, they are not making mobile phones or set top boxes, but they are adding value with complex, hard to do, low volume, high mix type printed circuit board assemblies for industrial, aero-mil, broadcast, medical and defence customers.

Many of them have links into low cost regions such as Eastern Europe and Asia, but that's 'adaptation' for you.

In short, the challenge facing our industry is to support the 50% of UK's design engineers, whose employers no longer manufacture in the UK.

Alastair Boyd is with Linear Technology