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Recent key developments in MAKE│NZ
• Our History – Part 4:
• The economic reforms that started in 1984 dramatically changed the world for New Zealand manufacturers. Gone were the mechanisms that had largely protected their domestic market. Import licenses were phased out between 1984 and 1992, and tariffs were significantly reduced, with the average rate falling from 28% in 1981 to around 5% by 1999. However, other reforms that were also ‘part of the package’ helped to lessen the impact: labour market legislation was introduced to facilitate more flexible wage bargaining, and the wage and price freeze of the early 1980s was lifted. Still, the reforms meant that thousands of manufacturing jobs were lost as companies struggled to compete with cheaper imports. The removal of subsidies and protection required companies to restructure and modernize. More productive and internationally competitive manufacturers were able to survive and thrive, and there was a shift towards higher-value manufacturing in some sectors.
• One particular industry that mastered these challenges really well in Canterbury was electronics manufacturing. Roland Sommer, CEO of Argus Group, was in the midst of these exciting developments right from the start and has been playing a key role working in and promoting hi-tech manufacturing in Canterbury ever since. He sent us an account of what it was like then that begins “In the 1990s Christchurch had a buoyant Hi-Tech electronics manufacturing industry.” … and ends with “Christchurch has a proud history in technology manufacture and if we learn from our past, a bright future!” Read the full story here
Read the full story here
In the 1990s Christchurch had a buoyant Hi-Tech electronics manufacturing industry. The advent of Surface Mount Technology (SMT) saw companies making the change from the traditional and labour-intensive Plate Through Hole (PTH) technology, with rows upon rows of manual insertion stations and hand soldering, through to automated machine-based component placement and soldering. This led to far better first-pass yields in the factories. Against expectations and fear, there were no job losses, as this was a time of rapid growth driven by the global market appetite for electronics, and the competitiveness of New Zealand manufacturers from early adoption of automated assembly meant they could compete in global niche markets.
The growth of the Christchurch electronics industry was firmly rooted in the ‘Mothership’ – Tait Electronics Ltd. Some companies, such as Swichtec Power Systems and Salcom, were set up by former Tait employees and others, such as Aucom, Dynamic Controls, and Trimble, benefited from the pool of engineers with high frequency power electronics experience created at the time. In the early 2000s, there was a second wave with the former leadership team at Swichtec doing it all again after selling Swichtec and founding Enatel, and with Enphase setting up their engineering facility in Christchurch with the help of the ex-Swichtec (by then Eaton) engineering manager.
Tait Communications, Enatel, and Aucom are all examples of how Christchurch can compete in electronics manufacturing without offshoring. Other companies have elected to move manufacturing offshore, mainly to China and have also met with success. Key personal observations on the drivers for success after over 30 years in this industry in Christchurch include, in no particular order
- the willingness to adopt new technology and techniques, including empowered production teams, Lean principles, automation and now digital transformation / Industry 4.0
- the willingness to collaborate and share knowledge both within industry and across industry, a prime example being the Teaming New Zealand initiative headed by Bruce McIntyre of Macpac that introduced a number of the electronic manufacturing companies to the concept of self-directed teams
- the compact size of Christchurch as a city which enables face-to-face collaboration and networking – something that we must strive to keep in this post-Covid era where MS Teams/Zoom and online meetings (MS Teams/Zoom, etc.) have become normalised.
Christchurch has a proud history in technology manufacture and if we learn from our past, a bright future!
• The CMA continued to play a key role during that period, supporting manufacturers during what were hard times that required a lot of resilience and the ability to implement changes quickly.
The CMA operated from its own premises (Mancan House) on Cambridge Terrace, which included facilities to host and cater for its events. Unfortunately, Mancan House didn’t survive the earthquakes and had to be demolished.
• Back to the present time: We continue with our campaign to seek feedback from members about how well we are doing. We really appreciate how people are prepared to make time for these interviews, and openly share their views with us. Of course, we can’t seek feedback from all our members, but if you haven’t been contacted and would like to share your views about what we’re doing well, and what we can do better, please do get in touch: dieter@makenz.org
One message we’ve received quite clearly from the interviews conducted so far is that we’re not telling you enough about what we are about, and what we’re actually doing to support manufacturers and manufacturing. These newsletters are part of the effort to keep you better informed, but if you want to get the ‘big picture’, find our Activities Map Here
We are working through the details of the government’s proposed changes to vocational education and training [VET] and attended a recent consultation meeting in Christchurch that was poorly attended; I don’t think there was a single manufacturing employer present. Not surprisingly, really, given the recent track record of reforms, attempted reforms, and changes that are now being rolled back before they had even come into force properly – all-in-all resulting in a muddle where only one thing is clear – the system is performing worse for both learners and employers even more than before, and the same is true for those working in VET. And yet, we can’t let go of being involved with a strong voice when the future supply of a properly trained workforce is at stake.
When it comes to the polytechs, before the original reforms there were 16 independent organisations that were rolled into a single entity – Te Pukenga. Te Pukenga is now being disestablished, and the government is proposing to replace it with a small number of independent polytechs again – those that can stand on their own feet financially, with the rest coming under the umbrella of the NZ Open Polytech and delivering most of their training online. That solution may well serve the government’s aims to save money, but it is not going to work for manufacturers, most of whom prefer to employ those that have got their training through work-based learning (apprenticeships) in the first place. It’s hard to imagine manufacturers being keen to employ people who have received most of their training online. The net result will be a smaller number of learners coming through the system that are actually immediately employable in manufacturing. Interestingly, the solution proposed by Minister Simmonds is not the one endorsed by her own ministry, and for good reason.
Recent key developments in New Zealand
• Perception and reality. We mentioned the PMI previously, which really measures perception. We don’t have good data up-to-date for overall manufacturing output, but export volumes are ‘hard data’, and they matter, because that’s how we make money as a country. Here are the export $ values (in millions) for selected (mostly high value / elaborately transformed) product categories for June, compared to June last year:
There will always be swings when we look at monthly data, but the overall result of 18% higher exports this June certainly doesn’t suggest it’s all bad! One thing, though – the positive picture for pulp is certainly not going to last, given current power prices …
• We’ll look at electricity again, but this time beyond the current winter crisis. What’s in the pipeline for future generation capacity?
In other words, there is quite a bit of consented generation capacity in the pipeline already, mostly wind power. Whether the actual installation of what’s already been consented is driven as hard as it can be is another question …
New Zealand’s total installed capacity is at just under 10 Gigawatts [GW], although in reality maximum capacity at the time of maximum demand – right now – is more like 7.9 GW. So, with 1.2 GW extra, we should have another 10%-plus of generation capacity available soon-ish. Before we got too excited, however, about half of that extra capacity has already been spoken for:
Around 600MW of additional power requirement for data centres has already been announced, and international experience shows that wherever big companies build data centres, others will soon follow.
Recent key developments in the World
• Irrespective of whether you think it should be done, especially when most of the associated expenditure is debt-funded, but government intervention through subsidies to boost manufacturing can work. We’re seeing it in Australia, and we’re seeing it in the US. Investments made by the 2022 Inflation Reduction Act, the Infrastructure Investment and Jobs Act (IIJA), and the CHIPS and Science Act (CHIPS) have sparked an American manufacturing renaissance. Investment in new manufacturing capacity for zero-emissions vehicles, batteries, and critical minerals have jumped more than 100 percent, climbing from $15 billion in the year before Inflation Reduction Act’s passage to $35 billion in the year since its passage.
Investment in new manufacturing facilities is now leaving its mark in real ‘bricks and mortar’ activity …
… even though the impact on employment has yet to be seen, as most of these new factories aren’t operational yet:
Too many facts / stats / graphs?! – Let us know! (dieter@makenz.org )
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