Four Challenges for the Electronics Industry

Dimitrios Matsoulis

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The electronics industry has a guaranteed future of growth for many decades. Electromechanical designs replace their purely mechanical counterparts, sensors spring up everywhere and IT growth implies a steady need for hardware evolution and support. That does not however mean that any electronics manufacturer is having an easy time in the marketplace. If the last two decades are any sign of the things about to come, the following years will see increased competition and further changes. The following challenges are probably the most important that the electronics industry will face on a sector basis.



1. Supply Chain Worries


With very few exceptions, every electronics manufacturing activity has been transferred to China. A huge supply chain takes finished goods to every corner of the globe on the assumption that Chinese manufacturing costs will continue to be the lowest available and that transport costs will stay within the boundaries of acceptability. But what if these parameters change dramatically? Every indication from China points towards rising labor costs and increasing competition from local brands that learn very quickly from foreign know-how. Although most electronics manufacturers are stuck in the existing model, we have certainly passed the stage of unquestioned production in Asia. And then we also have the parameters of quality and traceability. Long supply chains that span the entire globe make it more difficult to trace defects and increase inertia once a product has started being supplied to markets. Automotive manufacturers have turned to continental organizational models, an option that could also be considered for electronics.



2. Cost Control


Whether Moore's law stops being valid immediately or holds for decades, the expectation of steeply declining costs is deeply ingrained in the minds of both consumers and business decision makers. In other words, the electronics industry has to follow this trend and find ways to come up with better and at the same time cheaper goods. In terms of manufacturing this means turning to ultra automated and flexible factories, something that will shake the boundaries of Asian mass employment models and bring changes in the supply chain conditions described in (1) above.



3. Environmental Concerns


The way we deal with the retiring stage of electronics is clearly irresponsible and hugely damaging for the environment. This can be attributed to two major factors. Firstly, the electronics industry still uses materials that are tolerated on a cost basis. Secondly, the mechanisms of dealing with retired products are very inefficient or non existent and completely lack traceability. Sadly, the burden is transferred to poor countries that do not have the funds and the knowledge to deal with the problem. Sooner or later manufacturers, distributors and retailers will face tighter regulatory restrictions. It is probably best to start planning now, as a gradual transition is much better than suddenly facing a mountain of unsolvable and expensive problems.



4. The New Technology Bandwagon


Electronics and IT guarantee a constant state of flux and huge developments that render older technologies obsolete. Under these conditions, no single industry or country has a guaranteed position. As our lives move towards more connectivity, home automation, AI applications and a whole host of exciting new developments, the pace is definitely increasing and the electronics industry is on the front lines. At the same time that manufacturers ensure their everyday tasks, survival in the near and longer term future can only be ensured by transitioning to technologies that come into demand. Managing R&D, strategic cooperation or even buying necessary technologies from others are vital in ensuring that there will be a market for what a manufacturer has to offer. What should be pointed out here is that few companies have the sheer power to "brutally" develop new technologies and get them into the marketplace on their own. In many cases it is a matter of taking advantage of innovative promotional methods and new "smart" platforms that can take small/medium manufacturers much further that they can on their own.