The electronics industry has a great future in South Africa

rpm

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The electronics industry has a great future in South Africa

It is often said that the electronics manufacturing industry can play a bigger part in South Africa’s industrial development and grow the country’s exports – thereby creating more real jobs. We have the technological expertise and skills but it seems that the Department of Trade and Industry (DTI) is hardly walking the talk. A key element of the electronics manufacturing is the component suppliers. South Africa does not manufacture electronic components except for some transformers and of course printed circuit boards. I met with Hannes Taute, the MD of Avnet South Africa to talk about the future of our country’s component supply industry and its effect on the electronic contract manufacturing industry.
 

Ice2Cool

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Being a contract manufacturer of electronics, I whole heartedly agree with this article. Well done for shedding some light on the issues our sector faces. Another example is the way economic zones are working against our local companies. Case in point, Samsung setting up its own manufacturing plant in Dube and importing its own components - thereby costing jobs for companies that were manufacturing on behalf of samsung, costing the local component distributors the components they would have distributed, and lost jobs in other areas as Samsung brings its own employees down to operate key positions in our plant, and lost tax due to the special zone dube is in. The DTT contract was another failed example of how corrupt tenders hurt the local economy.
 
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Drunkard #1

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Being a contract manufacturer of electronics, I whole heartedly agree with this article. Well done for shedding some light on the issues our sector faces. Another example is the way economic zones are working against our local companies. Case in point, Samsung setting up its own manufacturing plant in Dube and importing its own components - thereby costing jobs for companies that were manufacturing on behalf of samsung, costing the local component distributors the components they would have distributed, and lost jobs in other areas as Samsung brings its own employees down to operate key positions in our plant, and lost tax due to the special zone dube is in. The DTT contract was another failed example of how corrupt tenders hurt the local economy.
As far as I'm aware, the ONLY reason Samsung even has a local plant is to get around the 50+% duties that the anc has imposed on TV imports (for purely selfish reasons).

The first world seems to do just fine importing their TVs from Korea; then again, the first world has industries producing export-worthy products to pay for those TVs...
 

Ice2Cool

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Local companies were already subcontracted for many years to manufacture Samsungs tv's before Samsung entered the country. When they did set up their own plant, those local companies were given no notice and basically got screwed royally. So the end result is, the country got screwed royally with Samsung winning big time.

Edit: btw I had no relationship with Samsung so I am speaking on heresy and what I've heard through the industry.
 

Drunkard #1

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Local companies were already subcontracted for many years to manufacture Samsungs tv's before Samsung entered the country. When they did set up their own plant, those local companies were given no notice and basically got screwed royally. So the end result is, the country got screwed royally with Samsung winning big time.

Edit: btw I had no relationship with Samsung so I am speaking on heresy and what I've heard through the industry.
Seems like that's the way Samsung does business. I heard the cell-phone repair workshops contracted to do their repairs were similarly screwed when they changed policies.

Then again, basing your entire business on the whim of ruthless company (operating in an artificial, dynamic environment controlled by anc bureaucrats) perhaps isn't the smartest move you can make.
 

Ice2Cool

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Agree 100%. My point was more about how government policies are hurting local business inadvertently.
 

msquared

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Local companies were already subcontracted for many years to manufacture Samsungs tv's before Samsung entered the country. When they did set up their own plant, those local companies were given no notice and basically got screwed royally. So the end result is, the country got screwed royally with Samsung winning big time.

Edit: btw I had no relationship with Samsung so I am speaking on heresy and what I've heard through the industry.
There were only 2 companies that manufactured for Samsung (It's SKD and CKD btw). Also, all the components were imported anyway for those suppliers so local content short of labour is debatable. Samsung is also not the only multinational that assembles in South Africa.

One of the local companies you refer to, was based in Swaziland manufacturing for another multinational before there was a "fallout". They came across to South Africa and started their operations here.

EDIT: I am also not affiliated to Samsung.
 

Drunkard #1

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Agree 100%. My point was more about how government policies are hurting local business inadvertently.
I just don't see a business that exists solely because of a government tax policy as the sort of business that should be encouraged.

What happened with DTT? Last I heard, the boxes were being built here.
 

freddster

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Thats the problem of opening the economy. Everyone comes in here, bring all their products in or open their manufacturing plants here and the local guys suffer.
 

Ice2Cool

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There are probably only 5/6 contract manufacturers that can manufacture the set top box locally. Around 30 companies won a chunk of the manufacturing - that alone says a lot. As far as I am aware, only one company is currently manufacturing these set top boxes, others have spent a fortune gearing up for the chunk that they supposedly won and have yet to receive a single order.

Also need to bear in mind that the set top box is a knock off of a Chinese product - a lot of the parts are knock down imports (enclosure, remote, batteries, cables etc). So allot of the value chain has been lost to foreign companies. South Africa is more than capable of producing the entire product locally (save for the electronic components themselves)
 

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Thanks for the coalface realworld perspective, Ice2Cool.

I'm implacably opposed to these sorts of market manipulations by government. Your experience is Example #763865284 of how governments ruin things when they meddle with market mechanisms.
 

Drunkard #1

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There are probably only 5/6 contract manufacturers that can manufacture the set top box locally. Around 30 companies won a chunk of the manufacturing - that alone says a lot. As far as I am aware, only one company is currently manufacturing these set top boxes, others have spent a fortune gearing up for the chunk that they supposedly won and have yet to receive a single order.

Also need to bear in mind that the set top box is a knock off of a Chinese product - a lot of the parts are knock down imports (enclosure, remote, batteries, cables etc). So allot of the value chain has been lost to foreign companies. South Africa is more than capable of producing the entire product locally (save for the electronic components themselves)
Yeah, but that would require someone ethical and competent to project manage the whole thing from start to finish. Assuming that someone qualified still exists in this third world ****hole, what are the chances of government hiring him? BEE, corruption, incompetence, poor working conditions, poor salary, etc, etc. It's a wonder they were even able to get as far as they have.
 

Ice2Cool

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Again agree with you 100%. We actually have some phenomenally good engineers in the country. The tender was just handled incredibly poorly. It should have been split into two or three tenders - the first being the design of the set top box. The second being the sourcing of electronic components. And the third being the actual manufacturing of it. assuming everything is done above board and it was an invited tender with only compotent companies being invited to tender, I'm sure this would have been a much more successful project. But we all know this wasn't the case. Chinese companies ended up partnering with local companies, who I am assuming took a cut and I am assuming a lot of it is being made in China.
 
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Ice2Cool

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Also, another piece of information. This was a 3 year tender. Can you imagine 30 odd companies trying to gear up for a tiny chunk of a short term contract? It makes no sense. This tender should have been awarded to max 3/4 companies. Also, to the industries discredit, electronic manufacturing generally has piss poor BEE ratings.
 

Drunkard #1

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Again agree with you 100%. We actually have some phenomenally good engineers in the country. The tender was just handled incredibly poorly. It should have been split into two or three tenders - the first being the design of the set top box. The second being the sourcing of electronic components. And the third being the actual manufacturing of it. assuming everything is done above board and it was an invited tender with only component companies being invited to tender, I'm sure this would have been a much more successful project. But we all know this wasn't the case. Chinese companies ended up partnering with local companies, who I am assuming took a cut and I am assuming a lot of it is being made in China.
Also, another piece of information. This was a 3 year tender. Can you imagine 30 odd companies trying to gear up for a tiny chunk of a short term contract? It makes no sense. This tender should have been awarded to max 3/4 companies. Also, to the industries discredit, electronic manufacturing generally has piss poor BEE ratings.
To be honest, I don't think they're capable of any of that. Just to get to the design stage took 15(?) years, changed direction a few times, and (it sounds like) ended up being sub-contracted to the chinese. This is africa - we need to make sure our expectations are realistic.
 

Ice2Cool

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To be honest, I don't think they're capable of any of that. Just to get to the design stage took 15(?) years, changed direction a few times, and (it sounds like) ended up being sub-contracted to the chinese. This is africa - we need to make sure our expectations are realistic.
Our private sector is more than capable of designing and manufacturing a set top box (UEC and Pace are experts in this). Dont forget, South Africa is also renowned for power metering and vehicle tracking (last i heard we have something like 80 different tracking companies all manufacturing their own device).
 

Drunkard #1

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Our private sector is more than capable of designing and manufacturing a set top box (UEC and Pace are experts in this). Dont forget, South Africa is also renowned for power metering and vehicle tracking (last i heard we have something like 80 different tracking companies all manufacturing their own device).
You can't start designing until you've got a spec sheet from the client. The client who decided on DVB-T, switched to (IIRC) the Japanese standard, then back to DVB-T, then to DVB-T2 and required how many court cases to decide whether to include encryption or not. And you expect them to decide on the minutiae of a consumer product?
 

Ice2Cool

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Yes there was alot of flip-flopping, but ultimately the specs were decided on eventually (the decoder is being made somewhere aftera ll to the required standards). At that point a tender should have been issued for the designing of a decoder which met these requirements. It would not be the governments decision on having input into the design, only what transmission protocol and access restrictions needed to be used - things that were already decided.

Anyway - my point is - it was in governments power to handle this tender differently so that it benefited local business but they didnt. Instead the tender was issued to a bunch of BEE companies who I imagine were either fronting or were cronies of government agents.

Its no different to government tenders on power metering - they call for a meter that has certain features and companies then design a product that meets those specifications.
 

spipie

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The article says...

"Taute said that it is ironic that a local manufacturer of a remote control unit has to pay duty on the switches used in the remote while the completed product from China can enter South Africa duty free.'

Thats basically the problem with our manufacturing market. Competing with cheaper Chinese products, that are given special treatment by government policy makes it very difficult to compete. I welcome the weakening of the chinese economy, so we can bring manufacturing, jobs and innovation back home.
 
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