The idea that UK electronics companies are fighting for higher margins is no longer representing the entire truth (this might still be the case in other areas of UK manufacturing – usually not associated with advanced technology).
Manufacturing of consumer electronics and mass production in general has moved elsewhere, but industry has adjusted and is adapting to a new world where complex electronics and flexible added-value services have become the norm. With low volumes come high margins if technology and quality of services justify the premium price. It’s no chance that Germany is the world’s second biggest exporter of goods after China. Excellence, complexity, flexibility and creativity make products and processes harder to reverse engineer or copy, hence give early adopters enough room to innovate further through R&D investments and keep ahead of the curve. Germany is known for the quality of its engineering base but the UK is known for its world-class services (second only to the US).
If British manufacturing is to be profitable again, it needs to keep on investing in cutting edge technology like industrial automation (join us at ‘Automated Britain 2012 – Renaissance of UK Manufacturing’, a joint initiative between Intellect and GAMBICA on 06 March 2012 with keynote speaker Mark Prisk MP, Minister of State for Business and Enterprise and Juergen Maier, MD Siemens UK – Industry Sector) but also added value customised services such as technical design, ‘manufacturability’ advice, full product box build, maintenance and repair, etc. Advanced manufacturers no longer just ‘make things’ – they perform services ranging from R&D, product design, technical advice, etc. For example, Foxconn – the manufacturing partner of many well known OEM brands – is an IP-rich company with plenty of patents which could bring higher margins if exploited properly. The only way for Foxconn to sacrifice margins is to offset them with volumes and scale. But the mantra in this part of the world is innovation and not volumes – that’s why UK electronics companies are focusing on (and partnering with) customers who specialise in unique highly reliable products made to last several decades rather than fast moving consumer electronics devices. The latter products can only be prototyped here (that’s where the value is generated) but mature economies like the UK are no longer the hub of mass production (even for relatively complex assemblies such as the iPhones and iPads).