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Outlook 2011: Challenges or opportunities?

Change is constant in the electronics industry; something that has been discussed many times. Change is being driven from many directions. It could be the change imposed by new design methodologies or new manufacturing techniques; change imposed by greater customer expectations; or change imposed by the need to think about offshore manufacturing.

In the introduction to Outlook 2010, I pointed out one change over which the industry had no control; the fact that a General Election would be required by the middle of 2010 and that it was likely that, by this time, the UK's electronics industry would be talking with a new set of ministers.

And the industry is, indeed, talking with that new set of ministers; or, at least, starting to introduce themselves to each other. Those initial meetings are taking place in turbulent times; a major Government spending review is about to be announced and its effect on UK industry, and the electronics industry will not be immune, could be profound.

One of the continuing aims of the Electronics Leadership Council (ELC) is improve the ability of the UK's small and medium enterprises – SMEs – to take part in the Government's procurement programme. Despite a cutback in Government spending, the procurement programme is substantial; at least for the time being. Even a very small part of the action would be good news for a small company. But the process is layered in bureaucracy and far more suited to international companies with government relations departments, rather than companies with a few employees, all of whom are trying to keep many balls in the air.

At the time of writing – always an opportunity to be proved wrong – the Government is set to announce cuts amounting to 40% of public spending over the next four years. The National Health Service is, apparently, ring fenced; all other departments are expected to make the necessary cuts.

Defence is a major market for electronics companies and one of those sectors in which the ELC would like to see greater SME involvement. Yet if the defence budget is cut by the amounts being discussed, what chances will there for small companies? And if the amount of business available in the UK declines sharply, what is the likely course of action for the multinationals currently located here?

Multinationals can, within reason, put their businesses anywhere in the world. One of the reasons why they choose the UK over other locations is the availability of top quality technical skills. But another important reason is an attractive environment for business. Included in this is the R&D tax credits currently available.

As trade association Intellect says in its contribution to this publication, 'while governments are ill equipped to pick 'winners', they can create losers with badly thought policies on, for example, taxation and regulation'.

Intellect has been campaigning for R&D tax credits to be refocused on the hi-tech sector. Research intensive multinational companies support the kind of jobs this Government and its predecessor have been keen to create. These kinds of investment often lead to a growth in exports – and the coalition Government is said to be keen to make the UK the leading high tech exporter in Europe. But R&D tax credits are applicable to all technology companies in the UK and it is incumbent upon them to make full use of the facility.

The skills issue remains unresolved. The average age of an electronics engineer in the UK continues to increase, a trend mirrored by the decline in the number of UK students pursuing electronic engineering courses. In some corners, this issue is now seen as critical.

A recent initiative set up in an attempt to counter this is the UK Electronics Skills Foundation (UKESF). Its mission is to help to attract, prepare and retain talent for the UK electronics industry, allowing it to maintain and grow its global leadership position. Despite appearances to the contrary, the UK electronics sector remains globally important. The UK still has the fifth largest electronics sector in the world and that sector employs, directly and indirectly, more than 250,000 people. The consequences of letting the electronics industry wither are obvious.

What UKESF wants to do is to increase the number of companies who get involved at the school level. Through this, it believes the value of the electronics industry can be better explained, while demonstrating that the industry has exciting careers on offer. But whether students will want to follow university courses in the future is a matter of debate. The Browne Review into Higher Education has recommended that tuition fees for UK universities are doubled to £7000 a year. Will tomorrow's electronics engineers want to leave university with a staggering level of debt to put alongside their degree?

UKESF is looking to at least take the sting out of that by linking with industry to provide bursaries for high calibre students. At the moment, it plans to offer up to £1500 a year to these students, while providing them with paid summer work placements.

But these are structural issues. What does the future hold when it comes to technology? Dr Steve Welch is the chief executive of the newly formed Electronics, Sensors and Photonics Knowledge Transfer Network (ESPKTN). He says that, despite the recent economic uncertainty, significant opportunities are emerging for UK companies. "Not least in the areas of power conversion, MEMs, medical and healthcare, rf technologies, embedded design and 'big iconic science' projects, such as the Square Kilometre Array.

"Our job," he notes, "is to bring together the multidisciplinary aspects needed to develop innovative products or systems that meet opportunities and solve problems; hence our 'challenge led' agenda."

One of the responsibilities for KTNs is to bring together those doing the research with those with a more commercial outlook. "We know that we have some undisputedly world class academic research institutions for Electronic and Electrical Engineering," he adds, "and we recognise the potential still to be realised through improved performance to commercialise this work for the benefit of the UK plc."

The ESPKTN's agenda covers five broad themes: electricity for the future; connected world; smart moves; quality of life; and a secure world. Between them, these areas are believed to contribute some 10% of the gross value-add in the UK economy and to employ about 6% of the workforce.

Despite the financial uncertainties of the last couple of years, the pace of change in the high tech sectors continues to increase and new challenges are thrown up. But as the pace of change increases so too does the rate at which technology providers come up with new solutions.

In particular, the development of multicore processors is likely to have a significant impact in the near future as software companies bring out the tools that allow engineers to take full benefit of the potential of multicore.

Programmable logic is continuing its journey from glue logic to technology platform and it is a fair bet that one – or both – of the leading fpga companies will soon be bringing multicore devices to market. And mixed signal and analogue continues to become even more important as designers look to not only manage power more effectively, but also to provide more intuitive interfaces for the products they are developing.

Whether these issues represent challenges or opportunities depends upon your point of view, but there will be no shortage of excitement in the electronics industry in the near future.

Graham Pitcher is Group Editor at Findlay Media

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Graham Pitcher

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