Grabbing the opportunity
06 May 2009
The exodus of big, global, tier 1 electronics manufacturers from UK shores is the ideal opportunity for smaller, tier 2 players to capitalise, argues Dave Taylor.
The Sales and Marketing Director of ACW Technology states that tier 1 manufacturers have now largely abandoned the UK’s shores in favour of lower cost economies such as Asia and Eastern Europe. Many experts believe that this trend will spell the end of the UK’s contract electronics manufacturing sector; the remaining tier 2 and tier 3 manufacturers will crumble under the intense strain of cheaper overseas competition.
However, my view is rather different. The reality is that tier 1 manufacturers leaving the UK are creating many opportunities for the smaller, savvy CEMs to pick up business from local companies who do not and may not want to offshore. These conditions will help UK-based manufacturing companies with the means and mindset to invest in new services and processes to put themselves in a strong position to grow and prosper.
There will always be a solid base of UK-based companies who want a local supplier that can fulfil their manufacturing requirements to a high standard. Someone that they can visit regularly without having to fly half way around the world for a one hour meeting to check the progress of their latest PCB. They don’t want the stress of dealing with foreign cultures and the prospect of potentially putting their IP at risk.
For example, ACW have a 400-strong team of highly skilled employees, matched by three world-class manufacturing facilities. We’re running ten production lines, producing 752 product variants and last year dispatched nearly 500,000 products for our customers. Over the last five years alone, we’ve increased turnover by 80% and pre-tax profit by 82%. This is hardly what you would call struggling.
I believe that even in the face of cheaper overseas competition, the UK can still compete on overall cost if companies make the right products here. The growth in the UK’s electronics manufacturing sector will come from low volume, high value designs. Products that typically require high levels of complex engineering input and ‘hand holding’, products that are liable to change, products that can’t cope with six weeks at sea and products that require confidentiality or IP protection. Offshore manufacturing, unless managed locally, does not offer this service. It only makes sense when dealing with stable, higher volume products that require little effort in terms of engineering dialogue and customer’s engineering involvement.
However, the choice between lower cost (in China) or higher quality and convenience (in the UK), doesn’t have to be mutually exclusive. Often there are only specific elements within a product that would benefit from the intricacies of being manufactured in Britain.
At ACW, we saw value in setting-up our own wholly owned factory in China. Rather than running in competition with our two British facilities, it complements them by enabling us to offer customers a lower cost option for the established, higher volume and lower complexity parts of our customers’ manufacturing requirements. The highly skilled, new product introduction phase will always be carried out in the UK and only moved over to the China facility for manufacturing when they are stable and running in volume.
In this way, customers can have the best of both worlds: the cost savings associated with offshore manufacture but without the risks. They benefit from dealing with only one supplier, face-to-face, in the same language, and with the guaranteed deadlines and reduced lead times that result from ACW being the owners, rather than just the partners, of the Chinese plant.
For the right low volume, high value products, the UK’s manufacturing competence blended with UK design expertise will achieve the best results. It is this that will be the lifeblood of the sector going into the next decade. The fact that the tier 1 manufacturers aren’t here to compete adds to the potential opportunities for everyone else. At ACW we’re doing everything we can to make sure we’re well placed to capitalise.
Dave Taylor is Sales and Marketing Director, ACW Technology
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