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The Financial Express

Seizing booming global trade in electronics

| Updated: October 18, 2017 21:40:42


Seizing booming global trade in electronics

Bangladesh did not have a thriving electronics industry decades ago. Only in 1980s, the country used to observe a few operations assembling televisions of foreign brands only for local consumption. In early 1990s, a few local initiatives came with production of a limited number of low-end electronic products. But with the dawn of the 21st century, Bangladesh virtually lost all industrial activities in electronics. The policy of duty-free import of finished high-tech hardware to fuel growth of software appears to be partly responsible for such extinction. Along with diminishing duty on finished electronic products, duty on components remained unattractive for local production. 
Over the last two decades, all our attention fell on software and business process outsourcing services. Starting from investors to politicians to academics, everyone virtually forgot the possibility of globalisation of trade of semiconductor and electronics. Does it mean that Bangladesh did not have any opportunity in this industry? 
Over the last couple of decades, like textiles and garments, semiconductor and electronics industry (SEI) has gone through transformation with vertical segmentation and globalisation of the value chain. It has been a common practice of designing silicon chips in one country and processing them in another and testing and packaging is being done in a third country. Although Bangladesh overlooked this transformation and did not seriously attempt to take advantage from it, several regional  countries laid highly successful footprint in the global value chain of SEI. The chip design requires very high-end professionals. The processing is very capital-intensive. 
On the other hand, bonding, testing and packaging require significant amount of labour inputs. Similarly, assembling of components into finished products also demand low-end labour. Singapore took the advantage of capital-intensive silicon processing segment, so did Taiwan. But, Thailand, Vietnam, and the Philippines took the advantage of labour-intensive segments of the SEI value chain.  
Among regional countries, Thailand's SEI employment was the biggest in 2015 in the region, employing approximately 780,000 workers and representing 12 per cent of the total employment in manufacturing. In 2015, the manufacturing activities in hard-disk, microchips, air conditioning units, and refrigerators contributed 15 per cent to Thailand's GDP and 24.1 per cent to exports.  But in terms of contribution to export, the Philippines' SEI export reaching US$31 billion in 2016 contributes more than 50 per cent to total export, the highest in the region. As of first-quarter 2013, there were over 424 electronics firms in the Philippines. The Philippines semiconductors and electronics industry specialises in manufacturing, assembly, testing, packaging and distribution. 
Over the last two decades, Vietnam has made significant progress. From virtually nothing, Vietnam's export of integrated circuit, semiconductors, printed circuit boards and finished products have reached over US$25 billion. Major global firms like Texas Instruments, Fairchild, Amkor, Toshiba, Epson, Fujitsu, LG Electronics, Samsung, Seagate, Sony, Western Digital Bosch, Daikin, Electrolux, Panasonic, Siemens, Toshiba and Intel are in operation in these countries. Intel has built the world's largest semiconductor testing and packaging plant in Vietnam by making an investment of US$1 billion. 
Wage of industrial workforce in Bangladesh is far lower than that of Vietnam, Thailand, and the Philippines. The minimum wage of a factory worker in Bangladesh is about 50 per cent and 25 per cent less than the amount being paid in Vietnam and Thailand respectively. The question could be the skill-level, which apparently does not have a clear answer. An example could draw some meaningful insights. A Japanese electronic firm has been in operation at Chittagong Export Processing Zone since 1989. More than 200 workers in this factory perform high-end jobs like wire and die bonding to silicon chips for producing high-precision LED lighting systems. Products of this company are designed in Japan, manufactured in Bangladesh and are fully exported to mainly Japan and Germany. Mitsubishi, Toshiba and Hitachi depend on this firm to supply customised and specialised LED lighting systems. 
But the minimum qualification for workers of the factory in Chittagong in performing this high-precision manufacturing job is Secondary School Certificate (SSC), with no technical background. On having some on-job training, workers holding simple SSC are performing jobs meeting extremely high-quality requirements of demanding customers of Japan and Europe. 
In 2016 alone, 88.29 per cent of 16,51,523 students succeeded in SSC examinations in Bangladesh. Many of these students will not pursue further education. If we can engage them in performing labour-intensive SEI jobs, it could offer an enormous opportunity for Bangladesh. Over the years, Bangladesh has also made substantial progress in technical education. There has been significant expansion in both polytechnique and university education in areas of electrical and electronics expertise. Many of these graduates are finding extreme difficulty in getting jobs. There is no denyingl that the quality of these graduates could have been better. But these graduates are not even finding jobs, which those workers with SSC qualifications are performing, as necessary steps have not been taken to create employment opportunities in the suitable segment of the SEI value chain for them. 
The obvious question is: What should Bangladesh do now to step in? Should the country just follow the past steps taken by Vietnam, the Philippines or Thailand? The answer is NO. The SEI value chain has been highly dynamic. Many of the low-end jobs are now being delegated to robotics and automation. We should carefully analyse the likely unfolding scenario and position ourselves in the right place at the right time with right competence. In addition to expanding education and increasing investment for skill development, we should engage in serious dialogues with global players in SEI. Instead of waiting with the underdeveloped high-tech park anymore, we should develop a portion of the high-tech park at Kaliakoir with the state-of-the-art facilities to attract multinationals as anchor clients.  We should reach potential clients and make necessary changes at rapid pace to have their operations up and running in Bangladesh as soon as possible. It is to be noted that in order to attract Texas Instruments (TI) in India in 1980s, the Indian government had to change as many as 25 policies and regulations to allow the company to have private satellite links. Such a change was a critical step to catalyse the growth of the IT service export in India. Instead of just working on generic facilities without facing any urgency, it is time to have business initiative to negotiate deals with major multinationals in the area of semiconductor and electronics to have their operations in Bangladesh. Along the way we should take necessary steps to create virtuous effect around their entry in developing a thriving semiconductor and electronics industry in Bangladesh. As time is running out, we should pursue these business deals with outmost professionalism, speed, and sincerity.
The writer is Professor, Department of Electrical and Computer Engineering, North South University. [email protected]
 

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