Q5 interview - Andrew Cox, TT electronics

Andrew Cox, managing director of the manufacturing services division of TT electronics, talks to Electronics Weekly about China, Vietnam and government support for UK electronics manufacturing firms.

Challenges facing UK-based manufacturers?

UK manufacturers need to constantly keep their business models under review to ensure that they stay competitive. Providing that they do this successfully, there is the opportunity to create a value added service that addresses customers complete supply chain needs using a local global model. Indeed, early life design / cost engineering support, project management and end of life servicing and recycling might remain better dealt local to the OEMs, especially in the small-medium volume high mix environment where my company operates.

In addition, growing regulations governing electronic waste also drive indirectly an increased interest in servicing and repair - operations that are again best handled locally. Where it is more cost-effective to offshore, the UK EMS needs to offer its customers that solution, or risk losing that business to a competitor that does.
 
How can Europe compete with China and SE Asia for manufacturing services?

Asia can normally beat Europe on unit cost, but other factors like the point of use have a huge influence on the total manufactured cost of a product. So long as Europe remains a major end market for electronics there will always be manufacturing here. There are always niche markets that require UK manufacturing - key ones at the moment are applications that are safety critical, where security of data is an issue, and where exceptional complexity entails particularly close liaison between customer and EMS. These are characteristics of the defence, medical and aerospace markets in particular.

The ideal is to offer customers the best of both worlds - UK manufacturing where it is required and offshore where it is more cost effective.

Most important issue to consider when moving production to China?

Whilst it is easy to calculate the saving in unit cost, there are many less visible costs that can swallow up this saving for many projects. We offer manufacturing in the UK, China, the USA and Malaysia, and when we evaluate internally where a product should be made, we start with looking at the obvious issues of production volume and product complexity.

If the transfer still looks attractive, issues to consider include how stable is the design, and how good is the customer at forecasting their production schedule. Changes to both are much harder to manage over 5000 miles than 500. Finally, we look at the logistics. Where the end-customer is European, it may well make sense to bring final assembly/ configuration and logistics back to the UK, as well as repair.

Could government do more to support UK's dwindling manufacturing base?

Vast sums are offered in grants and tax breaks to encourage overseas companies to come here - which are unavailable to companies already here who want to expand. UK government agencies seem more interested in inward investment than in the health of their local business base. We've often seen the resulting plants close soon after the grants expire - either to move to the next highest bidder or because the business model was flawed. The money would be better spent encouraging businesses that have demonstrated a commitment to the region to expand - I think that would be a good place to start.

Is the industry already looking beyond China to Vietnam?

The global outsourcing market remains dynamic, and there is growing competition between the Asian countries for outsourcing business. Countries in this region are certainly becoming more attractive thanks to improving infrastructure and trade incentives; despite its economical and political problems China still remains a major destination, accounting for approximately 60% of the EMS revenue for the region in 2007. However, Vietnam could well be the next in line, with India and Malaysia also strong contenders.

See also: Q5 - Interviews with electronics industry leaders
Read all the Electronics Weekly Q5 interviews. From ARM's chairman, Sir Robin Saxby, to touchscreen technology firm Zytronic's MD, Mark Cambridge, the business leaders share their particular insights on the UK electronics industry.