The tide is turning

The tide is turningIt has not been a good year for the electronics manufacturing industry. Richard Wilson reports
Electronic manufacturers are suffering from the effects of recession. But perhaps not as severely as some other sectors.
More manufacturing plants have closed or have been reduced in size during that last 12 months compared with 1997. However, while making gloomy reading, a recent survey of the UK’s electronics manufacturing sector carried out for contract manufacturer Remploy Manufacturing Services indicates that the situation has not reached the levels of industrial contraction experienced in the recession of the early 1990s. The light at the end of the tunnel may be getting a little nearer.
Undeniably the sector has contracted. The results show that 11 per cent of 7,613 manufacturing sites surveyed closed during the last 12 months. While a further 12 per cent were reduced in size.
Twelve months ago a similar survey indicated that 6 per cent of site closures and 2 per cent of site shrinkage’s reported during 1997.
The sites were spread across the UK and a range of market sectors, but with more than half the sites surveyed representing the consumer electronics, telecommunications, computer and industrial electronics industries.
According to the survey results this represents a loss of 46,887 jobs at sites that closed or shrank during 1998. But new manufacturing jobs have been created as well.
The job losses have been countered by the business growth reported by 14 per cent of the electronics manufacturing sites surveyed, bucking the trend to create 43,849 jobs during 1998. The resulting net change is an overall loss of 3,038 jobs in the electronics sector during 1998.
By comparison, in 1997 only 3 per cent of sites reported growth in 1997.
Using site closures as a benchmark for the state of the economy,the survey shows that despite initial concerns, the current economic difficulties are not as deep as those of the last recession at its peak, when site closures reached 13 per cent across all UK manufacturing sites surveyed in 1992.
Sasha Bowman, Remploy’s group marketing manager believes that the contract manufacturing sector in particular learnt from the painful experiences of the early 1990s and is in a better position to deal with the current situation. “The contract manufacturing industry has matured significantly since the last recession,” says Bowman. “Many CEMs lost business in the early 1990s because they provided only a basic overflow production resource with no added value. We learnt from that industry-wide experience, and have broadened our services.”
According to Bowman, the experience of global economic uncertainty during 1998 means the results for the electronics manufacturing industry parallel the overall trend within the whole UK manufacturing survey base. This reveals an increase in site closures from 5 per cent in 1997 to 10 per cent in 1998.
However, Anthony Parish director general of the Federation of Electronics Industry (FEI) is by his own admission “quite bullish” about the industry’s prospects. “That’s not to say that profits will be huge but we are better prepared than some industries, ” says Parish.
The industry is still pinning its hopes on more optimistic forecasts which anticipate that a more positive picture will emerge towards the end of the year and into 2000, as the current decline in orders is expected to ease.
The Printed Circuit Interconnect Federation (PCIF) executive director Brian Haken is also upbeat about the industry’s prospects. He points to the PCIF book-to-bill which last November finally exceeded one and it is expected to do the same in December. “This is a clear indicator of where the market is going,” says Haken. “By the fourth quarter of this year we will be well on the road to recovery.” Results of Remploy Manufacturing Services’
‘Annual Survey of UK Manufacturing Sites’ YEAR
1998
1997
1996
1995
1994
1993
1992
1991 CLOSED
10%
5%
6%
4%
4%
8%
13%
6% SHRANK
12%
2%
23&
24%
24%
n.a
n.a
n.a UNCHANGED
64%
90%
43%
40%
53%
n.a
n.a
n.a GREW
14%
3%
28%
32%
19%
n.a
n.a
n.a TOTAL
100%
100%
100%
100%
100%
n.a
n.a
n.a Table 1: Percentage of 7,613 manufacturing sites surveyed (across all manufacturing disciplines) that closed / shrank / remained unchanged / grew, comparing results for surveys from 1991 through to 1998. YEAR
1998
1997
CLOSED
11%
6%
SHRANK
12%
2%
UNCHANGED
63%
89%
GREW
14%
3%
TOTAL
100%
100%
Table 2: Percentage of 4,279 electronics manufacturing sites surveyed that closed / shrank / remained unchanged / grew, comparing the results of the surveys for 1997 and 1998.


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