Electronic equipment manufacturing

Industry definition

Electronic Equipment Manufacturing (the electronics industry) is defined as the manufacture of computers and business machines; telecommunications, broadcasting and transceiving equipment; miscellaneous electronics equipment (e.g. hearing aids, alarm systems, and printed circuit boards); professional and scientific equipment; and electrical equipment and appliances (e.g. household appliances, lights and signs).

Overview

The Queensland electronics industry has achieved strong growth in employment, turnover and exports in the last decade, with especially high demand for niche' products in telephony, photonics, power supplies and monitoring equipment. Growth has been from a low base but derives from inherent strengths in design and product development, forming a solid base for more extensive penetration into sectors such as aerospace (Defence, general and commercial) which is expanding strongly in Queensland and is a major customer of the electronics industry.

The small average size of Queensland firms fits them well for prototyping, product development and small-scale production, but leads to losses of bigger manufacturing runs to overseas operations with large-scale assembly lines and lower unit costs. Several Queensland companies are upgrading machinery to enhance manufacturing capability and reduce unit costs through automation.

There are also useful models of collaborative strategies being developed such as industry networks to capture economies of scale and synergies, and improve competitiveness and productivity. More activity on these lines is needed to position firms to meet demand for a higher volume in small-scale manufacturing and more diverse work.

Sustained investment in research and develoment (R&D) will be crucial to maintain and enhance the Queensland industry's edge' in product design and development and niche production. This could easily be lost to overseas competitors with more favourable R&D tax regimes, ready access to cheap components and lower wage costs. Reports from industry of emerging skills shortages and the effectiveness of current training and education regimes are being investigated to counter a recent reduction in the flow of ready-trained engineers and technicians from other sectors including the Australian Defence Force.

Electronics - Industry profile

Characteristics

• The industry is highly fragmented, largely made up of small firms and heavily concentrated in South-East Queensland: 81% of the State's 139 electronics manufacturing firms have fewer than 10 employees, with over 89% of the total located in the South-East.
• There has been rapid growth over the last decade based on the industry's strengths in the fields of design and product development and access to the expanding aerospace industry.
• The industry comprises a high percentage of niche products and suppliers, with a strong design and development base and rapid product turnover.

Employment

• There are sub-sectoral employment variations, with the highest proportion of industry employment being in the manufacture of miscellaneous electronic equipment such as hearing aids and alarm systems, an area which incorporates a high percentage of niche products and suppliers.

Trade

• The industry is highly reliant on imports due to the lack of component manufacturing in Australia and the availability of cheap supply from overseas.

Demand analysis

Aerospace

• The Aerospace industry is a potent driver in the growth of the electronics industry principally through the manufacture, maintenance and modification of avionic equipment for commercial, general, and defence aerospace sectors. The establishment of firms such as Boeing, QANTAS, Virgin, National Jet, Australian Airlines, Alliance, EADS, and Smiths in Queensland provides the electronics industry with opportunities in all aerospace sectors.

Defence

• Major Defence opportunities over the next decade will include the outsourcing of F-111 maintenance and modifications at RAAF Amberley; relocation of the Australian Defence Force (ADF) Helicopter School to Oakey; the planned relocation of the RAAF Air Lift Group fleet to Amberley around 2010; and modifications to RAAF Air Lift aircraft (C-130 Hercules) in progress at Amberley.
• The Lockheed Martin F35 Joint Strike Fighter (JSF) has been selected to replace the F-111 and F/A-18 fleets in 2014 under Defence project AIR 6000, providing potential opportunities for both electronics and aerospace companies capable of manufacturing equipment to stringent quality standards.
• Other Defence acquisition projects such as the construction by EADS of the new Tiger armed reconnaissance and civilian helicopters at Brisbane Airport and AIR 9000 (rationalisation of the ADF helicopter fleet).

Niche Products and other Target Sectors

• There is a growing demand for niche or boutique' product lines particularly in telephony, photonics, power supplies and monitoring systems. These product lines are usually innovative, have small production runs, or use proven equipment or expertise in an innovative way in kindred industry sectors.
• Component manufacture has strong growth potential particularly in the areas of electronics and precision engineering in support of equipment manufacturing.
• Other major users of electronic equipment to be targeted include the agriculture, mining, maritime, medical and transport sectors.

Issues and challenges

Fragmentation

• Consumers increasingly favour sophisticated, integrated solutions including through-life support of products, and suppliers with broad capability and capacity to absorb a wide range of risks. However, the Queensland industry is still fragmented with strong internal competition. There is therefore substantial scope for companies to explore collaborative strategies which would help them to develop the critical mass to handle major projects and benefit from economies of scale, to become globally competitive. Collaborative working arrangements such as networks, virtual factories' and clusters should be explored to help reduce destructive competition, build critical mass, expand manufacturing capability and share risk.
• Benchmarking based on exemplary competitors (national and international) should also be pursued as a means of improving industry standards and ambitions to achieve at the global level.

Skills availability

• Skills shortages have been identified in a variety of electronics fields including testing, systems analysis and component knowledge, with a higher level of shortages in regional Queensland. A continuation of the reduction in the flow of trained staff from external sources (notably Defence) without an increase in focused training threatens the future supply of skilled labour. Skills-related issues must be addressed and action taken if necessary to ensure that sufficient numbers of engineering staff are trained for employment in the fields of design, test and R&D.
• Issues and barriers (particularly in the regions) are likely to include:
  • difficulties in recruiting apprentices arising from demographic pressures, a lack of understanding of career opportunities, and a lack of key skills within the recruitment pool;
  • cost pressures, which reduce the capacity of firms to support apprentices and trainees;
  • access to training for remote and regional customers; and
  • support for SMEs to negotiate training arrangements.

Marketing and industry image

• Despite the strong increase in the size and capability of the electronics industry in the last decade, there is a perception that Queensland is not a serious competitor in the national industry framework. The innovative character of the industry in prototyping, product development and small-run manufacturing needs marketing more effectively in Australia as well as overseas.
• Recent improvements in the capability of the industry have partially reversed this misconception, but it still remains an issue to be addressed. It will be important to maintain promotional efforts to key client sectors in Queensland, interstate and internationally to educate all sectors that a viable, innovative and competitive electronics equipment manufacturing industry exists.

Capability gaps and technology transfer

• Technology transfer plays a major role in the growing local capability and while industry capability is improving, it needs to be comprehensively analysed and any significant gaps addressed.
• The Queensland Government is taking action to ensure that the electronics industry is positioned to benefit from Defence aerospace opportunities. The Lockheed Martin JSF project will provide a multiplier effect in regard to technology diffusion for the development, manufacture and logistics support of a fifth-generation aircraft.

Research and Development

• Global industry arrangements need to be investigated through research institutions to gain access to significant advances in technology and training. There is potential for offset manufacturing from research through the Australian Institute for Commercialisation. The prospects for establishing strategic alliances with overseas firms, especially to tackle research into niche products, should also be explored.
• Companies at the niche end of electronic equipment manufacturing need to reduce the total time from design to sales point to minimise the risk of other companies duplicating the product or range. Protection of intellectual property is critical to industry development.

Strategic objectives

The aim of the electronics industry development agenda is:

To facilitate the development of the Queensland electronics industry and encourage global promotion and marketing activities'.

The strategic objectives of the electronics industry development agenda are to:

1. identify, improve and develop the capability of the electronics industry;
2. promote a high level of communication, networking and cooperation in the electronics industry;
3. optimise the interaction and cooperation between government and the electronics industry;
4. promote greater involvement in national and global markets and increase the level of technology diffusion through global alliances; and
5. identify industry skills requirements and improve training and education programs.