Ashridge

Virtual Learning Resource Centre

Electronic industry – October 2007

The Gadget Helpline is a new helpline aimed at guiding consumers struggling to understand the digital age. Carphone Warehouse has launched a “GeekSquad” help service. Despite recent and threatened closures, the Scottish electronics industry exports twice as much as the whisky industry.

Russia’s industry and energy ministry has approved a development strategy for the national electronic industry for the period to 2025. The US electronics industry slightly reduced its excess inventory in the June quarter, but there are indications from the larger economy that the market might not be able to sustain the trend. Malaysia is ranked as one of the top three producers of electrical and electronics (E&E) products in the world: the challenge for the sector is to move further up the value-added and technology chains. A Sony insider says in the world of consumer electronics, wars in the consumer marketplace are good, but they need to be quick and decisive. Japanese electronics companies Sharp and Pioneer have announced a business and capital tie-up while JVC and Kenwood Corp are to form a capital alliance.

Apple cut the price of its iPhone only 68 days after its launch in the US; it goes on sale in Britain on 9 November at a starting price of £899. Apple has also launched iPod touch, the latest version of its music player. A new generation of humanoid assistants could appear after Microsoft formed an alliance with Tmsuk, one of Japan’s largest robot makers, to develop a software standard.

UK

The Gadget Helpline is a new helpline aimed at guiding consumers struggling to understand the digital age. It will provide 70 experts to answer questions on anything from MP3 players and mobile phones to DVD players and satellite navigation devices. Crispin Thomas, a former Ernst & Young regional entrepreneur of the year, is co-owner with his brother, Geremy, of Talk Me Through It, a company already offering a gadget support service on a business-to-business basis. Woolworth will offer the service, which is also of interest to insurance companies who want to include the offering into household policies. Devices, such as the latest digital cameras or widescreen televisions, Thomas says, have become increasingly complicated as manufacturers seek to gain a competitive edge over their rivals by cramming in more features. Separately, Carphone Warehouse has launched a “GeekSquad” help service, through which experts visit homes (at £99.99 a visit) to help to solve customers’ computer problems.

Peter Hughes, chief executive of Scottish Engineering, says the electronics sector is double the size of the Scotch whisky industry in export terms despite being adversely affected in recent years by large-scale closures – Motorola closed its plant at Bathgate and NEC its factory at Livingston. Now Freescale says it plans to stop production at its East Kilbride plant with the loss of up to 900 skilled manufacturing jobs. Motorola built the plant in 1969.

Europe

Russia’s industry and energy ministry has approved a development strategy for the national electronic industry for the period to 2025. R230bn (£4.6bn) will be invested in the scheme. By 2025, the ministry expects a breakthrough in new technologies including nanotechnologies, bioelectronics, optoelectronics and quantum computers. In 2011, annual sales of Russian electronic industry products should amount to at least R45bn (£900m), rising to R350bn (£7bn) by 2025.

Rest of the World

The US electronics industry slightly reduced its excess inventory in the June quarter, but there are indications from the larger economy that the market might not be able to sustain the trend. The latest inventory data from Thomas Weisel shows that the number of days of inventory outstanding at OEMs (original equipment manufacturers), EMS (electronics manufacturing services) companies and IT and component distributors fell to 47 in the second quarter from 49 in the first, still above the five-year historical average of 43 days.

Malaysia is ranked as one of the top three producers of electrical and electronics (E&E) products in the world. The sector has helped propel Malaysia into the top 20 largest exporters in the world, with E&E exports of RM281bn in 2006, up from RM265bn in 2005. In the beginning, the sector was low technology and labour intensive, with most of the E&E firms producing basic parts and components. Going forward, the industry is facing intense competition from South Korea, China and India, and the country is no longer a low-cost labour manufacturing hub. Multinational companies are setting up plants in Vietnam and China, where labour costs are lower. The challenge for the sector in Malaysia is to move further up the value-added and technology chains. The projection of IMP3 (Industrial Master Plan 3), which was launched this year, is that over the next five years the E&E sector will grow 6.5% per annum and be able to generate revenue of $318bn (about RM1.11 trillion) by 2010.

According to a Sony insider, in the world of consumer electronics, wars in the consumer marketplace are good. This year there are a large number of showdowns. In video games, Nintendo’s Wii is taking on Sony’s Playstation 3 and Microsoft’s Xbox 360. In the next-generation DVD formats, Blu-ray takes on HD-DVD, with each standard backed by a 150-strong consortium of hardware and software makers, while in flatscreen televisions, liquid crystal (LCD) competes against plasma as old cathode ray tube sets disappear. In the world of mobile phones, Apple’s iPhone is up against established players such as Nokia, Sony Ericsson, Samsung and Motorola. However, the wars need to be quick and decisive. As one Japanese memory-chip maker says: “If battles are swift, companies are instantly in better strategic shape, even if their bottom line is temporarily in tatters.”

Sharp and Pioneer have announced a business and capital tie-up. Pioneer plans to strengthen its flatscreen television business by having Sharp supply it with LCD screens. At the same time, Sharp plans to take advantage of Pioneer’s strength in audio technology. In a further realignment of the Japanese electronics sector, JVC is to form a capital alliance with Kenwood Corp, with the target to integrate under a holding company in 2008. Prior to the integration, JVC and Kenwood are to enter into a business alliance establishing a 50:50 joint venture in October for the development of such products as televisions, audio equipment and automotive electronics.

Apple cut the price of its iPhone by 33% only 68 days after its launch in the US. The $200 cut, to $399, was unprecedented for an Apple product. Apple’s chief executive, Steve Jobs, admits that the company failed to look after its early iPhone customers. It is to offer those who bought a phone before the price cut a $100 credit note to spend in Apple stores and those who bought in the past 14 days a full $200 refund. The iPhone goes on sale in Britain on 9 November at a starting price of £899, comprised of the price of the basic handset (£299) and an 18-month minimum contract with O2 for £35 to £55 a month. While some analysts questioned whether the gadget was too expensive to have mass-market appeal, Ben Wood of CCS Insight says: “There is no doubt this will be one of the hottest consumer electronics items out there this Christmas. It’s a ‘wow’ product.”

Apple has also launched iPod touch. The latest version of the music player is only 8mm thick and comes with a 3.5in colour screen, built-in wi-fi access and Apple’s Safari internet browser. An 8GB version will cost £199, a 16GB version, enough to hold 4,000 music tracks, £269. Both were expected to be available in shops in Britain in late September. Saying that it had planned a price cut “for months”, Microsoft reduced the prices of the Zune, its 30GB digital music player and a rival to the iPod, by $50 to $199.

A new generation of humanoid assistants could appear after Microsoft formed an alliance with Tmsuk, one of Japan’s largest robot makers, to develop a software standard. At present the robotics industry uses several operating systems, which analysts say, is holding back advances. Microsoft hopes to accelerate progress by engineering a common standard. According to the Japan Robot Association, the robot sector is estimated to be worth $11bn a year and is set to double by 2010 and exceed $66bn by 2025. Most of the growth is forecast to be in non-industrial applications, in areas such as toys and healthcare.

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