Wanted: flexible, high-tech minds

Having a raft of high-cost industries is less important than having technologically innovative people, Keith Newman writes.

Sharp pioneering individuals who know how to do more with less, a rough rural terrain and the low cost of hiring staff have contributed to major growth in exports for the telecommunications and electronics sector.

New Zealanders have had to be adaptable and we have often customised overseas technology to meet our own needs. We are good at doing short manufacturing runs and can customise and develop solutions specifically for a marketplace or client and we know how to keep the costs down.

"We're never going to take on Alcatel, Siemens or NEC - we're more guerrilla fighters than tank regiments," says Peter Finkle, until recently executive director of the Telecommunications Exporters Association of New Zealand (Tenz).

While telecommunications may be only a small sector in terms of the number of players, its exports have grown in eight years from $43 million to $250 million.

Mr Finkle, who stepped down from his role in February after completing a contract to determine the most cost-effective way forward for the sector, says telecommunications is one of fastest-growing export sectors in the economy. The group represents about 15 players, with another five or so operators outside the membership.

The industry was in real difficulty a decade ago but is now one of the bright spots on the manufacturing horizon. While the current year has meant treading water, especially for companies with a lot of Asian contracts, others such as Tait Electronics, the largest exporter, are doing well.

Mr Finkle says globalisation means it does not matter where things are made.
"Foreign exchange earnings may not necessarily come from products exported. It may be intellectual property that brings in the money. Whether it is economically warranted to keep New Zealand as a manufacturing base for a lot of products over the next five to 10 years is questionable."

For example, Christchurch-based Switchtec, which makes power supplies for telecommunications companies, has plants in China, Malaysia and Spain.

"All the really grunty stuff is made here, but if it's in a big metal cabinet, why would you ship that around the world? Mr Finkle asks. "There's nothing intrinsically valuable about having high-cost industries in your country."

The biggest challenge facing the industry is the speed of change. The life-cycle of a product used to be five years. Now it can be as low as a year, he says.
While the industry is used to continual change, that makes it difficult to establish a five-year strategy. Flexible minds are required.

"Markets that are grand suddenly disappear. We're a new country with some first-rate minds producing customised products that are required by the customer. That's where our real strength is."

New Zealand companies are good at rural telecommunications because of our rugged and remote geography. For example, Exicom in Wellington produces stand-alone telephone and PBX equipment for remote and mobile users, exporting about 90 per cent of its output.

Other major players include Lower Hutt-based DMC (formerly MAS Technology), another manufacturer of communications equipment, which had a $50 million turnover and was last year bought out by an American company.

"It was clear that if there was going to be expansion there had to be offshore association or ownership," says Mr Finkle.

Increasingly, the line between telecommunications and electronics is blurring as they become dependent on each other. Survey group IRL claimed the total production of the electronics industry in 1997 was $880 million, with exports valued at $620 million. It is believed the industry is on target for $1 billion in output by 2000.

About 90 per cent of the industry's output is chips and software embedded in other equipment, plus products and component. Growth is predicted at between 15 to 20 per cent this year.

The chairman of the Electronics Exporters Association (Expanz), John Pringle, says most of our successes were developed for a specific market. Compuspec, for example, is such a story. Auckland-based, it recently won an $8 million contract with Cable & Wireless in Britain to produce automatic number-switching units for the rapidly deregulating telecommunications market.

But in many ways the industry is still immature, says Mr Pringle. In Auckland alone Expanz has a membership of 96 electronics companies, many just one-man bands.

So far the industry has had only four or five success stories, Mr Pringle says. There are many companies which are technology marvels, but which suffer from a lack of marketing and business skills.

To move ahead, he says the industry here needs a big injection of technology and skills through investment, takeovers and partnerships by foreign companies.