Henry Parker, programme manager, technology markets, Intellect

NE: What are the challenges facing UK electronics in 2009? HP: The terms ‘electronics’ and ‘trade association’ have a lot more in common than people think. It is famously difficult to define exactly what the UK Electronics Sector actually is, capture all the functions it performs and determine exactly who all the main actors within it are. Trade associations can be equally intangible. We all know the basics of what one is and what ‘it’ is supposed to do. At the same time, it is often difficult to comprehend the different facets such organisations have to their work or how all the individuals active in them fit together. Trade associations have no product lines, they don’t make any profit, but they all ask member companies to hand over relatively large amounts of cash on an annual basis. Sometimes, the benefit from engaging with us not is not being immediately clear. Companies often say ‘Yes, that’s all well and good, and I’ve heard a lot about Intellect, but what are you actually for?’. The normal answer is threefold and rather long. Suffice to say that, in the first instance, Intellect is here to provide a forum for what it calls ‘thought leadership’ for the electronics sector. In essence, it looks to develop –in partnership with the electronics sector itself – a vision of how it should be developing to meet future challenges and needs on the part of its major customers and society in general. Secondly, it aims to create a policy and regulatory environment that is conducive to the industry’s short and long term success. This can be through old fashioned ‘lobbying’ or through a more partnership based process of ‘mutual education’ with the ‘powers that be’, whether in Europe or the UK. Intellect’s final role, at least in this simplified analysis, lies in the emphasis it places on helping members to understand the market they are currently operating in, how that market will develop in the future and how collaborations with other key market players can help their development. NE: So, in context of that role, what is Intellect’s view of UK electronics today? And what challenges face it in 2009 and beyond? HP: As most will know, the first half of the decade saw a wave of closures and job losses as a large chunk of customers moved their manufacturing requirement offshore to the Far East and Eastern Europe. This trend has not, as some would have us believe, brought about the demise of UK electronics manufacturing. Those manufacturers who remain in the UK have adapted to new realities with a new business model. They now focus on low volume production of hi-tech products, principally for the defence, aerospace, security, medical and industrial markets. In design, the UK retains a highly innovative successful and globally respected capability. The UK is still home to 40% of Europe’s independent electronic design community by turnover, and number of design houses. While the total number of employed electronics design engineers in decreasing, there is significant anecdotal evidence to suggest that many multinational electronics OEMs have located design facilities to UK and retain them here, because of the highly skilled core workforce they can take advantage of. Government policies like the Research & Development Tax Credit, which Intellect had a leading role in reforming to suit the UK technology sector, have fostered an environment where it pays to be innovative. The appearance on the scene of Knowledge Transfer Networks, which have notably raised their profile recently, has done much to foster links between academia and the sector and promote the successful exploitation of innovation within the UK, rather than elsewhere. At the same time though, this is not a propaganda piece. There are a range of challenges that we must focus on and start to overcome in 2009 if the long term success and vitality of the sector is to be assured. One of the most important relates to the key ingredient of not just the electronics sector but any sector: the people we employ and the skills that they possess. NE: Does age come into it? HP: We urgently need to try and address the fact that the average age of those employed in the UK electronics sector is too high, with 38% of employees aged 35 to 44, and 37% aged 45 to 64. Meanwhile, the number of employees aged from 16 to 24 is half that of the economy as a whole. As the skilled workforce ages, it is not being replaced. The number of technical and engineering graduates coming out of UK universities has fallen by more than 20% since 1995. While the current situation does not look good, we do see a chink of light at the end of tunnel in 2009. SEMTA, the Sector Skills Council that covers electronics, has recently shown a new focus on our industry. The news that £65million will soon be made available to the sector to help ‘up-skill’ existing employees of all ages (in some cases to degree level) can only be welcomed. However, we still need to attract capable employees into the electronics sector in the first place, by engaging them at an early stage with the subject. It is telling that only 18% of UK schools teach electronics in some form at A-Level. Part of this problem stems from the fact that teachers and schools aren’t equipped to teach it. Laudable initiatives that focus on resolving this problem, such as the Government’s ‘Electronics in Schools’ programme, are significantly underfunded. Next year will see efforts resolve this. NE: What other key issues does Intellect see coming to the fore for 2009? HP: Other key issues include the ever increasing tide of regulation coming out of Brussels. Initiatives to reform both the RoHS and WEEE Directives are both well underway. While neither will be formally amended and updated until 2012, significant changes are already being proposed and draft regulations are likely to be published by the end of the year. Intellect will be helping the sector to ensure its current processes and products are compliant in the long term. Likewise, in terms of design, further specific implementing measures of the Energy Using Products Directive, which sets out eco design requirements such as energy consumption targets during a product’s working life, are likely to emerge in 2009. As the decade draws to a close, the globalised economy is throwing up a number of challenges. It seems the whole concept of outsourcing electronics manufacturing is evolving. No longer is moving production offshore an automatic choice. In many cases, the distance, language, cultural differences and supply chain management difficulties can offset the unit cost benefit. We are increasingly seeing high value, high reliability production returning to the UK. While it will never all come back, the evidence is beyond the anecdotal. If there is one message that characterises Intellect’s outlook for the future, it’s that there are real and systemic challenges to the future of electronics in the UK that must be addressed collectively by the sector itself. We’ve suffered from fragmented representation for too long. The need for an industry funded independent voice, and banner to rally behind has never been more acute. We would like to think we are that ‘voice’, and invite you to help us project it effectively.