South Africa has a lot to offer to the global electronics industry, such as top design engineers and world-class electronics manufacturing companies.
It is often said that the electronics manufacturing industry can play a bigger part in South Africa’s industrial development and grow the country’s exports – thereby creating more real jobs.
We have the technological expertise and skills but it seems that the Department of Trade and Industry (DTI) is hardly walking the talk.
A key element of the electronics manufacturing is the component suppliers. South Africa does not manufacture electronic components except for some transformers and of course printed circuit boards.
I met with Hannes Taute, the MD of Avnet South Africa to talk about the future of our country’s component supply industry and its effect on the electronic contract manufacturing industry.
“I believe that we are holding our own in a very tough economy. The biggest disappointment is the lack of government support for local companies and projects,” he said.
“A good example of this is the whole digital terrestrial television (DTT) rollout. If managed correctly this could have given the local industry a massive boost with lots of jobs being created.”
“The initial specification was for a locally designed and manufactured set top box (STB) – this has unfortunately changed. If this project eventually goes ahead only a small portion of the electronics manufacturing industry will benefit by assembling imported knock-down kits.”
Taute said that growth in the electronics manufacturing business mainly comes from innovative entrepreneurs who are developing their own products in the areas of safety and security systems, renewable energy control equipment and the lighting industry.
“There is no doubt that the economy is taking strain. We see it on all fronts and yet there are still companies coming up with innovative products that provide moderate growth for the electronic components supply industry.”
“I know there are views within the DTI that each sector should have its own member organisation to interact with them. I disagree with that. Some years back a lot of effort was put into reviving the South African Electronics Industry Federation (SAEIF). Unfortunately it failed.”
“The Association of Distributors and Manufacturers of Electronic Components (ADEC) decided to unite the industry and was renamed AREI (Association of Representatives for the Electronics Industry).”
“The idea was to bring together all industry players related to electronics manufacturing in some way. Coming from a strong base of distributors and suppliers, AREI is making progress and has signed up some of the largest electronic product manufacturers.”
“South Africa is rich with technical expertise and we should be exporting more of our local electronic production. Yes the component costs have gone up as we pay higher prices because of the weaker rand, but if you think about it, the other input costs are pretty stable so local electronic manufacturers should benefit from the weaker rand by making their products more competitive on the world market.”
“We have world class manufacturing facilities that we can really be proud of, manufacturing high tech products that are being shipped all around the world.”
Taute makes an interesting point. Given that South Africa produces electronic products of a very high quality, it is the volumes that need to increase.
As many of the processes today are automated, higher volumes will not materially increase labour cost. I asked him what he believes the local component industry can do to help contract manufacturers grow their business.
“Our offering enables companies to grow. The component supply industry needs to keep customers up to date with the latest technology to enable them to develop and introduce interesting products all the time.”
“Electronics is so fast-moving that if you look at a supplier base there are new products launched almost daily. From a semiconductor point of view there is a lot of consolidation and repositioning going on and it is important for us as a supply industry to keep our customers informed of these developments as it ultimately can affect their future production.”
At one time most component distributors had exclusive product lines. That has changed over the years as virtually all component distributors today have access to most manufacturers.
Taute says that the focus has changed from taking an order and supplying to quite complicated logistics.
“When a new product enters from the development and testing phase into production, the component supplier has to ensure that components are delivered just in time.”
“Today nobody wants to keep massive stock. It is a fine line to manage between the component manufacturers, the shipping agents, customs clearance and delivering what your customers require to keep production lines running efficiently without stoppages because a component is late.”
“Avnet has the necessary systems and logistic support to offer customers this type of service. It is also important to ensure that high quality products are supplied coming from legitimate component manufacturers.”
“Should something go wrong customers want to have the peace of mind that they have recourse to the manufacturer. Unfortunately our industry is still plagued by a lot of grey imports.”
The South African industry still suffers unfair competition fuelled by import duties on many items such as switches and other electro-mechanical components.
Taute said that it is ironic that a local manufacturer of a remote control unit has to pay duty on the switches used in the remote while the completed product from China can enter South Africa duty free.
“It is this kind of issue that needs to be addressed to grow our electronics industry by making local manufacturers more competitive. I know that AREI is continually working on this problem; government needs to understand the urgency for this to be resolved.”
Taute is positive about the future of the industry.
“I believe that South Africa has a lot to offer to the global electronics industry – top design engineers, and world class electronics manufacturing companies supported by leading electronic component suppliers.”
“By working together, support from the export council and AREI and with a more proactive DTI, I believe we can become an export industry of note. In this way we can create more real jobs. From the industry side they should support industry associations, take part in electronics shows and really showcase our local ability to the global market.”
“Together we can grow and develop our industry.”