The hidden value of the Adelaide electronics industry


By Dr Ronald Grill, Managing Director, Technology Management Pty Ltd
Friday, 08 June, 2018


The hidden value of the Adelaide electronics industry

The electronics design and manufacturing industry in Adelaide is significantly larger and more valuable to our regional economy than you might think.

To the wider community electronics typically means iPhones, microwave ovens and TV receivers and it is well known that these standardised ‘consumer electronics’ products are mass-produced overseas. It is true that many high-volume consumer products including passenger cars, washing machines, refrigerators and Hills Hoists are now manufactured overseas, and it is widely believed by our community that manufacturing in Australia has virtually ceased.

These same people are often genuinely surprised to learn that we have an advanced manufacturing industry in Adelaide that designs and manufactures high-technology, intellectual property-based, high value-adding, complex electronics products and systems that are sold across Australia and in more than 150 other countries. Most of our citizens do not know that the Adelaide electronics industry is one of South Australia’s largest manufacturing industries with 300 companies, 11,000 staff and $4 billion annual revenue.1

Compound annual growth rate of revenue was 13% from 1990, or 13 times over 20 years.

A significant factor in the virtual invisibility of the Adelaide electronics industry is that its sales are typically made on a business-to-business (B2B) basis with no retail display or advertising. Adelaide-designed electronics products are sold to industrial, commercial, government, education, health and research sectors. But why is the industry so valuable?

First, the products and systems of the Adelaide electronics industry enable most sectors in our modern economy and are critically important inputs to all ‘Knowledge Age’ industries including aerospace, AI, biotechnology, computing, communications, defence, education, environment, IoT, mining, manufacturing, research and robotics. These sectors and many others enabled by electronics greatly benefit our community despite our minimal awareness of them. It is sobering to note that without electronic products and systems our current lifestyle would be unsustainable.

Second, our regional economy is in transition from our past dependence on high-volume ‘Industrial Age’ manufacturing systems and products to our logical future as a Knowledge Age region where education, research and smaller scale technology-based industry provides high value-added products, more satisfying work and higher economic returns than are achievable under the older Industrial-Age paradigm.

Productivity measured across the total South Australian manufacturing sector is $113,600 per person.2 Productivity in the Adelaide electronics industry was more than three times higher at $343,600 per person.3 This large difference is principally the return on the intellectual property that is inherent in the design, in the manufacturing processes and is also embedded in the products of the Adelaide electronics industry.

These higher returns allow the electronics industry to invest more in research and development (R&D) than Industrial Age industries. This investment assists our industry to retain its leading position. Firms in the Adelaide electronics industry invest an average of 4.9% of revenue in R&D4 and many of these firms invest more than double that amount. Across all other Australian industry the level of investment on R&D is about 1% of revenue.5

One of the most valuable characteristics of the Adelaide electronics industry is the self-organised cluster structure of its firms and the value of this clustering is evidenced by the high level of firm-to-firm collaboration. Our small city size and relatively low traffic density facilitate frequent face-to-face contact between industry people, which creates trust and develops collaboration between specialist firms. Collaborating firms achieve more than could be achieved by either firm working alone.

Research shows that collaboration has developed strongly in the Adelaide electronics industry with firm-to-firm interdependence measured at 43%, whereas this factor was 13% in the industry in Sydney6 where city size, traffic density and topography inhibit face-to-face contact and thus limit collaboration and clustering.

The high levels of interdependence developed between Adelaide electronics firms and the high proportion of locally owned SMEs are important sustainability factors. The industry typically produces small volumes of technically complex products, so copying is both difficult and unrewarding. These two factors combine to further boost sustainability.

The Adelaide electronics industry is more valuable to our regional economy than is generally understood by our community and governments. Its high productivity, large and continuing investment in research and development, dense cluster structure, its high proportion of locally owned SMEs and its inherent sustainability combine to make this advanced manufacturing industry a leader in the transition of our regional economy from its past dependence on Industrial-Age manufacturing to our logical future as an education, research and Knowledge-Age industry region.

References
  1. TIA (2012) Electronics Industry Survey, Adelaide, Technology Industry Association
  2. SA Manufacturing: http://profile.id.com.au/australia/industries?WebID=130
  3. TIA (2012) Electronics Industry Survey, Adelaide, Technology Industry Association
  4. Electronics Industry Action Agenda (2003:32) Canberra, ISBN 0 642 72230 7
  5. ABS 8104.0 (2017) Research Expenditure, Australian Bureau of Statistics, Canberra
  6. Grill, R. (2014:265) https://digital.library.adelaide.edu.au/dspace/bitstream/2440/84962/8/02whole.pdf

Article originally written for the EIDA Newsletter and republished with permission.

Top image credit: ©stock.adobe.com/au/Elena Schweitzer

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