Electronics is now the biggest manufacturing industry in the world. What's more, it is growing at an average annual rate of 8 percent, and getting even bigger. Driven by the relentless advances in semiconductors, electronic circuits are fundamentally changing the world in which we live, and with it creating vast new industries and economic potential.
Thankfully, Europe's microelectronics companies are playing a full role in the digital economy by providing either the ICs or the means to produce them. With rare exceptions, the same cannot be said for Europe's OEM industry, which has been hit by a steady decline in local electronics equipment production and now faces a $40 billion (20 percent) trade deficit.
So who then is to blame for this sorry state of affairs? Certainly the governments and the European Union, who collectively have burdened Europe's manufacturing industries with ever-increasing red tape and taxation. But governments and politicians are only partly to blame-their role in life is to create an environment whereby business can flourish. The main criticism must therefore be leveled squarely at Europe's OEM leaders, who seem content to allow Europe's lack of competitiveness to fester.
All too often, Europe's electronics industrial elite take the path of least resistance-moving production to the Far East and focusing on design in Europe. There are two fundamental flaws to the implied notion that Europe ought to focus on intellectual rather than manufacturing.
First, the potential for the creation of wealth is imperiled: The further away you are from the end product, the less your share of the profit will be.
Second, time-to-market and market windows grow increasingly short. Both of those trends are closing the physical gap between the IP and end-product development teams, with the underlying need for design to be close to the end market.
To give up on manufacturing is to give up on technology, not just because other regions will be more than capable of developing their own IP, but also because there will be no local driver to pull through demand. What is required is industrial drive first, followed by government and politically friendly initiatives. Politicians will react once they feel the political heat, but, right now, the heat from Europe's industrialists is nonexistent.
Just where are Europe's electronics men on vision?
Malcolm Penn is the chief executive officer of Future Horizons (Sevenoaks, England; www.futurehorizons.com), an industry analysis firm.