Cottage industry and the education revolution
08 December 2010
Author : Tim Fryer
Graham Naisbitt has a passion for Britain and its electronics industry. He recently shared some of these thoughts with Tim Fryer.
Tim Fryer: How do you see the current UK electronics industry fitting into the global electronics industry?
Graham Naisbitt: With the consignment of volume production to the lower cost countries - obviously the old Eastern Bloc countries and most notably China - we have become much more reliant on research and development. Of course an awful lot of what we are doing is in aerospace and high reliability electronics and there is a resistance, utterly justifiable in my opinion, for businesses to offload that offshore - I think that would be dangerous as the world is a far more unstable place than ever before. Furthermore, over the recent years, since the environmental issues have become so much more profound, there has been a change in administration and also our economic circumstances. I think there has to be a greater move to a return of manufacturing to a home base. You can't have a population of an estimated 60 million sitting around doing nothing!
TF: I guess you're not referring just to the UK, but any mature industrialised society?
GN: Unquestionably it applies anywhere in the West but most predominantly I am referring to the UK. When you take into account the environmental issues and huge transportation costs involved in shipping goods from China - containerships by far provide the biggest source of pollution to the environment - why not localise your manufacturing and go back to the ‘cottage style’?
TF: The people of this country may want it to happen, but we live in a capitalist society. Whoever makes the product cheapest will end up making the product.
GN: Given that we are going to see ever increasing cost of fuel and energy, it is going to become much more cost-effective to localise fabrication and assembly. The cost of oil is never going to come down, particularly in Europe, and on top of that we have the near strangulation effect that China has on rare earth materials. So we face real challenges in the future, and I think the cost of labour is going to become less and less a significant factor, which would make assembly more practicable, on a localised basis.
The UK has a debt of £4.8 trillion. Add to that the debt of the rest of Western Europe and the United States, and it almost becomes nonsensical. Unquestionably, the governments have to make some radical and fundamental changes. Fundamental in a way that they use people, radical in the way in which they tax and the economy is driven. Here I wish to refer to Peter Victor, an Economist at the University of Toronto who argues most convincingly: "Our global economy must operate within planetary limits to promote stability, resilience and wellbeing, not rising GDP. At grass-roots level, many people are already directing their energies towards enhanced wellbeing, in part by turning local producers for their food, clothing and other needs."
Money needs to be put into research. However you look at it, this country still has a vast amount to offer. If you don't believe me, then consider this. In April 2010 I was asked to address a trade delegation. I was informed that the Chinese government recognized that they have a very poor reputation for quality and reliability. They therefore funded a trade delegation to go and find how they could address those two fundamental issues. Where did they go? The UK - that speaks volumes. How ironic, therefore, that the Chinese government recognizes that the UK still has a vast amount to offer. But our own government didn’t, although hopefully that will now change!
TF: So if much of the manufacturing is gone, and we are helping the Chinese to become better designers, and the design will follow the manufacturing inevitably anyway, what will be left?
GN: Well you could argue that you could look at the UK and say all we are going to do is end up being an agricultural hinterland. The Chinese are far more savvy than that, because they recognize that they, with a wealth that they are enjoying right now, are benefiting from supplying goods to the west. It is simply not in their interests to see us become an economic disaster. We are, in my opinion, experiencing the first stages of transition to "Planet Earth" - One government, one administration, one language, instead of fragmented communities. We have a population of around 60 million people, who still want to earn money and still want to live, because we are a culture of greed and avarice, and that's unlikely to change. I am certain that we have not lost our almost innate inventive ability.
TF: Are we using this inventiveness just to find ways of satisfying our greed and avarice? Is a still more money in finance or law? Why should people use these mental skills, to go into engineering? There is no glamour and not much money?
GN: Perfectly true. Let us only consider therefore, only a philosophical point of view. What proportion of the world's population are the motivators? Traditionally, the view is that 5% of the population are that way inclined. So in the UK, out of a population of around 60 million that is around three million leaders. Now look at the population of China and the population of India, the numbers speak for themselves. These countries, and the whole southeast Asia region, are making huge strides in scientific developments. And yet the UK and London, still manages to hold its own.
Britain always has been one of the great trading nations; the City of London by itself would still count in GDP terms, 14th on the list of trading nations! But not all of the three million leaders can work in the city of London, and what do the other 57 million do? Without some sense of purpose, we will have a complete societal breakdown that simply must not, and cannot, be allowed to happen.
TF: Do you think holding on to the R&D community is what is critical to this country?
GN: Unquestionably, but I do see the opportunity of returning to a cottage type industry, where assemblage of electronic and electrical equipment could more easily and economically be dealt with for the domestic market place. Yes I know you would have to be moving components around, but far cheaper to do that than shipping everything else.
TF: Do you think we need to be looking at the manufacturing model in this country then? Perhaps more focus on developing the EMS companies so that they can provide the low-cost manufacturing alternative to going offshore, rather than encouraging the OEM model?
GN: I have friends who run CEM’s in this country, very successfully, and I doubt their operations are any more costly than they would be in China because the proportion of labour involved isn't that great. The materials and equipment costs the same.
TF: So why don't we do more high volume manufacturing in this country?
GN: That is exactly how I feel about it. I think there is an opportunity for that to happen.
TF: So what needs to be done then? Does it need to be in apprentice schemes, or government initiatives to attract the expertise back into the electronics industry?
GN: Yes to both! It is ironic that the present government are counting (hoping and praying) on manufacturing to pull us out of this economic mess.
TF: Is hoping and praying enough?
GN: Well they certainly need to put some fuel in. And there is an effort being made to do that. Will it be too little too late? I certainly hope not. When you see the preponderance of educational television, better access to information, and subjects being taught in alternative ways - whether it is chemical engineering, electronic engineering, nuclear engineering, bioscience, any sort of engineering or science, it has got to be the way forward.
TF: But what is going to make young people want to look at these sorts of careers?
GN: Over the past 20 years what I have seen is an increasing number of talented individuals migrating into any areas of activity where money is more easily obtained, but I think those days maybe behind us and those sorts of opportunities are going to be leaner. I really do believe that we will see a greater degree of rewards for students of engineering and science than has been the case over the previous 20 years. They will command a premium.
TF: Could we still be in a downward spiral? People don't see the jobs in the future so do not want to study engineering at university. We therefore don't have the expertise coming through from the next generation. What we need is to generate an upward spiral, where a new generation of creative young minds is driving industry forward?
GN: At school, subjects that pupils are most interested in are those that are taught best and this I think is the fundamental problem. There is sadly in this country over the last 30 or 40 years a real problem with the quality of the education system - there are far too many bad teachers and not enough good ones. So for education, we need to focus on establishing good teaching methods. Our state system has operated to the lowest common denominator and the country has, consequently, suffered. If we have got the right quality of education in place then we will see the migration of students into subjects that are really interesting - as long as they are made to be interesting - and they can’t be more interesting than trying to understand how these other electronic gizmos actually operate and are designed and made!
TF: So apart from education, what does our government do now to stimulate the electronics industry in the UK?
GN: This government must become less bureaucratic, de-centralise responsibility and remove targets that have effectively crippled us into a system that systemically denies responsibility. We need more or apprenticeships, people need to understand how to do things using their hands. There is nothing wrong with getting down and dirty.
If I could leave it this way, I would say that the British electronics industry, like many others, has got a bright future if we can encourage more people to be involved with it and look constantly at having new designs and new concepts constantly emanating from educational establishments. And we provide more resource to carry that work forward.
TF: And do you think that we are ready to build up manufacturing as well as design capabilities?
GN: I think we are. There are an awful lot of companies who are doing just that. There are contract electronic manufacturers doing a huge amount of work from aerospace and defence groups, who used to run their own production facility, and now their work is being done on a dedicated line at a CEM. These CEMs are growing nicely and they have some really good skill sets. I don't believe that the cost of the staff is a barrier to that being expanded because salary costs in China are rising. Inflation is taking hold there, it could do nothing else. The era of products getting cheaper and cheaper every time are gone.
Graham Naisbitt is Managing Director of Gen3 Systems. He also sits on several IPC committees, is a member of the UK Industrial Advisory Group and is Vice-Chairman of the SMART Group. However, the opinions expressed above are his own and not necessarily representative of any of these organisations.
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