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Electronics manufacturing trends

Electronics manufacturing trends. Production increasingly concentrated in developing countries Global employment estimate 14 million workers manufacturing electrical and electronic products China by far the largest employer: more than a fifth of global workforce. Industry characteristics.

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Electronics manufacturing trends

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  1. Electronics manufacturingtrends • Production increasingly concentrated in developing countries • Global employment estimate 14 million workers manufacturing electrical and electronic products • China by far the largest employer: more than a fifth of global workforce

  2. Industry characteristics • Low wages • Appalling working conditions • Low level of unionisation • Predominantly young, female workforce, often located in EPZs • Labour intensive production • Unsafe working conditions (toxic chemicals, noise, standing operations)

  3. Precarity • Constant and rapid change in production volumes leads to ‘flexible’ (precarious) employment • Workers pay for instability in demand through: • Irregular working hours • Compulsory overtime (not necessarily paid) • Short-term contracts • Employment via agencies • Frequent plant closures

  4. Ericsson HP IBM Nokia Alcatel Lucent Siemens Flextronics Jabil Circuit Celestica Sanmina

  5. Contract manufacturing – the driving force • Brand companies outsource up to 75% production to contract manufacturers • Flextronics claims to save clients 75% on labour costs • Move to low cost manufacturing bases • In 1995 75% of production was in high-cost locations • By 2005 it had fallen to 51% of the total • Massive growth in E. Europe – Hungary, Poland, Czech Republic and Romania • These countries will face increasing competition from lower-cost countries further east (labour costs in Ukraine are ¼ of those in Hungary)

  6. Low cost versus high cost manufacturing facilities – From Flextronics website

  7. Movement from West to East • Inventec Scotland Servers moved from Hillington, Scotland to Brno, Czech Republic • Flextronics closed its plant in Oulainen, Finland, moving production partly to Poland • Assembly from Celestica in Manchester UK was transferred to Czech Republic

  8. Growth in electronics in CEE • Proximity to EU markets • Cheap, skilled labour • In 2005 Eastern Europe accounted for 11% of total European output - by 2011 it will be 18% • Hungarian annual growth rates in 1996-1999 and 1999-2001 were the highest in the world - 87% and 71%, far ahead of the rates for China • Six more CEE countries had double digit growth rates during this period

  9. Examples of Eastern Europe electronics expansion • Lenovo, the world's third-biggest maker of PCs, building new plant in Legnice SEZ in Poland, employing 1000 people and operational in 3rd ¼ 2008 • Investment by LG Philips and its suppliers in Poland will create 10 000 jobs • Samsung’s €320 million expansion in Trnava, near Bratislava, Slovakia is expected to create 1,400 new jobs. Suppliers are planning to set up around the factory in 2008 • Samsung also expanding in Hungary • Sony is investing €73 million to expand its LCD TV factory in Nitra, adding 1500 new jobs. By the end of 2008, the factory will have around 3,000 employees

  10. Companies with significant presence in CEE • Philips – Hungary, Czech Republic, Poland • Siemens – many countries – most important are Hungary, Czech Republic, Poland • IBM – Hungary • Nokia - Hungary • Ericsson – Manufacturing is done by contract manufacturers in many countries • Motorola - Hungary, Czech Republic, Poland • Sony – Hungary, Slovakia • Matsushita (Panasonic) – Czech Republic • Samsung – Hungary • Hewlett Packard – present through contract manufacturer Flextronics in Hungary

  11. Risks for electronics manufacturing in Europe • Wages and conditions are driven down • Increase in precarious work and conditions • Gender discrimination • Frequent and large scale job losses • Increased use of migrant workforces without social protections • Health and safety • Demise of collective bargaining

  12. Danish govt project:how MNCs can target SMEs in ‘sustainable supply chain management’ • Focus on 2nd tier suppliers to Hewlett Packard in Czech Republic, Hungary and Poland • Reliance on 1st tier suppliers to pass on standards • CSR approach based on EICC

  13. Contradictory findings: • ‘Most companies do not put much effort into communicating the contents of the codes of conduct to their workforce.’ • Recommendations include that MNCs encourage internal dialogue between managers and workers in supplier companies • No unions were encountered during the study and information on unions was not systematically sought • ‘All companies comply with the legal requirements pertaining to .... freedom of association’

  14. What are the keys to a sustainable industrial environment? • Decent work • Reduction of precarious forms of employment • Skills development • Social dialogue • Commitment by companies • Involvement of brands • IFAs

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