Frustrated electronics manufacturers say they are considering retrenching staff and are literally losing millions of rands in sunken costs, due to the delay in the implementation of digital terrestrial TV.
The manufacturers have been gearing themselves up over the past eight years to manufacture set-top boxes (STBs) needed to convert digital TV signals for display on older generation analogue TV sets.
Some 9.5 million households will have to convert to the new broadcasting system once the current dual-illumination period ends on 1 November 2011. More than half of those households, about five million, would require some form of subsidy to purchase the STBs that are expected to cost around R700 per unit.
However, the Department of Communications surprised industry earlier this year when it said it was now investigating the use of the Brazilian/Japanese ISDB-T standard, instead of the European DVB-T standard that was mandated by Cabinet two years ago.
“The delay has really been frustrating for us,” says Graham Meyer, CFO of Cape Town-based electronics manufacturer Tellumat. “While we have not really been affected by the delay, because of our depth of business, we cannot realise the potential we have.”
Meyer won't say how much his company has invested into STB manufacture, but says a considerable amount of time and energy has been spent in ensuring it could meet tender requirements once they happen.
David Murray, CEO of Somerset West-based Elprom, says the delay and uncertainty surrounding the choice of standard has induced a significant amount of uncertainty in the industry.
“I have taken STB manufacture out of our budgets. There is no use banking on something that looks like it could take at least another two to three years to happen,” he says.
Elprom produces components, such as populating PCP boards, for other manufactures, and Murray says his clients have indicated they could start retrenching staff soon.
“They have geared up. They have bought equipment and have begun training staff. Now it looks like they have to slow it all down in order to reduce costs,” he says.
No one seems to know just how much the electronics sector or the broadcasting industry has invested into equipment and manufacturing capacity for migration to the European standard.
Bertus Bressler, head of STB manufacture at Reutech, says rough estimates are that manufacturers have invested between R200 million to R350 million over the past eight years.
“It is not that the Japanese/Brazilian standard is not good technology. It is just that the timing is wrong as we are at the tail end of our own process,” he says.
Bressler says the Japanese/Brazilian standard operates on a 6Mhz band, while SA's frequency plan is based on an 8Mhz standard.
“This means we have to prototype the chip sets and this could take at least 12 months, then we have to get manufacturers to ramp up production of these chips, and so we are looking at at least an extra two to three years before we start switching over,” he says.
Karen Willenberg, head of regulatory affairs at private broadcaster MNet, says: “The Brazilians see SA as their foothold into the SADC market. Their interest is singular - to sell set-top boxes. The reality is that their standard will cost more, take longer to implement and probably decimate our local manufacturing industry (in favour of Brazilian manufactured boxes), which is taking a back seat to the commercial objective of securing Africa as a market.”
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