As global manufacturers continue to flood the local market with a host of low-cost electronic and smart devices, industry observers remain pessimistic about the chances of SA being able to kick-start its own manufacturing sector on a meaningful scale.
This week alone saw local mobile giant Vodacom announce the availability of two low-cost devices - the LTE-enabled Vodafone Turbo and the Smart Tab 3G tablet - saying it seeks to fill a gap in the local device market, where cheaper devices lack technical quality.
Despite numerous past attempts to develop home-grown low-cost devices, local manufacturers seem unable to get going, and industry observers say hardware manufacturing is not a suitable platform for local companies.
Earlier this year, Seemahale Telecoms and CZ Electronics announced ambitious plans to design and assemble smartphones and tablets at a Boksburg factory, on the East Rand. Production was initially expected to start in the first quarter of this year, with the gadgets aimed to target the lower end of the market.
Yet, after numerous delays, it appears the project has run aground. In May, it was reported the two companies involved were headed for a dispute, after the potential manufacturing deal fell apart.
Similarly, a government-proposed initiative to establish a set-top box (STB) manufacturing sector in SA has also not materialised, in part stymied by countless delays of the ongoing digital migration process.
Similarly, infighting and accusations of deal-hijacking plague the National Association of Manufacturers in Electronic Components (Namec), an industry body set up to assist local black-owned manufacturers to enter the STB space.
Unable to compete
Commenting on local electronics manufacturers, ICT veteran Adrian Schofield states there is a limited local industry with a proven record - Altech (UEC) being the notable example.
"It's not that easy to set up a responsive production line that can compete with the factories in China. Also, the local companies are more interested in 'taking the cream' than creating jobs - witness the Namec debacle over STB manufacture - and they haven't even started yet."
Schofield further argues the local electronics manufacturing space does not really offer new entrants many opportunities to compete meaningfully with global players, as "we do not have the volumes to reach critical mass and our workforce is unlikely to compete with the Far East".
He also notes government has not done enough to stimulate a local industry, saying the state's opportunity to kick-start this sector would have been linked to STB manufacturing, where commercially viable quantities of a standard configuration would have made for cost-competitive opportunities for local suppliers.
"I guess there is a certain amount of local manufacture for defence purposes, but that's not so easy to quantify. Think what government could do if they specified a local tablet for education purposes instead of relying on the iPad initiative."
He points out there are also no innovation or incubation hubs that are currently supporting manufacturing initiatives, as local volumes are so low as to make it not viable. "Even if there was a locally-designed product, it is likely that fabrication would be done elsewhere. Our innovation opportunities are in software and services, not hardware."
Global forces
World Wide Worx MD Arthur Goldstuck says the reason local manufacturers can't get their act together is that there isn't really a stage on which they can perform. "They are competing with two massive global forces: giant brands that spend billions on research and development and as much on marketing; and vast factories in the East producing millions of devices to order, as well as speculatively."
Goldstuck says it is probably rash to invest in a small local factory to produce a limited range of devices that will always be outdated and overpriced, compared to what is continually evolving across a wide range of formats and always coming down in price.
"It's only justifiable if you've won large contracts to produce the devices, but even then you won't be very competitive."
In terms of local manufacturers being able to compete on a global scale, Goldstuck argues there is little scope for competing in this sub-sector of electronics, since products are almost standard across the globe and massive economies of scale have kicked in.
"Local manufacture succeeds when the products have specific localised requirements, like set-top boxes and decoders; where they offer true innovation that meets a need, and where they have access to global markets. It's not a viable environment for start-ups, except in a limited context."
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