5803-Dti-EIGT Report-3
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ELECTRONICS 2015 – ELECTRONICS 2015 Making a Visible Difference – ELECTRONICS INNOVATION AND GROWTH TEAM REPORT Difference – ELECTRONICS INNOVATION Making a Visible Making a Visible Difference ELECTRONICS INNOVATION AND GROWTH TEAM REPORT A full electronic version of the EIGT 2015 report can be accessed from: www.dti.gov.uk/ Printed in the UK on recycled paper with a minimum HMSO score of 75. First published December 2004. Department of Trade and Industry. http://www.dti.gov.uk/ © Crown Copyright. DTI/Pub 7653/2k/12/04/NP URN 04/1812 The DTI drives our ambition of ‘prosperity for all’ by working to create the best environment for business success in the UK. We help people and companies become more productive by promoting enterprise, innovation and creativity. We champion UK business at home and abroad. We invest heavily in world-class science and technology. We protect the rights of working people and consumers. And we stand up for fair and open markets in the UK, Europe and the world. A large number of senior people from electronics companies, Government departments, Trade Associations, universities and research bodies have been involved in the Electronics Innovation and Growth (EIGT) team. This report reflects the broad consensus of their views, though not necessarily those of the Government, nor individuals, companies or organisations. Contents FOREWORDS Minister’s foreword 5 Chairman’s foreword 6 EXECUTIVE SUMMARY Building a successful future for the UK electronics industry 9 Key EIGT Recommendations 3.1 Establish an Electronics Leadership Council (ELC) 12 3.1.1 Create ELC workstreams for technology, skills, supply chain and public procurement 12 3.1.2 Establish ELC representation as a UK Electronics Alliance (UKEA) 12 3.2 Press for a more relevant structure for SIC codes 13 3.3 Establish an Electronics Regulatory Group (ERG) 13 3.4 Establish public procurement as a future workstream of the ELC 14 3.4.1 Allocate 2-4% of Government procurement budget for technology development 14 3.4.2 Sustain progress in Office of Government Commerce (OGC) reforms 14 3.4.3 Improve signposting by Government procurement departments of opportunities for partnership between SMEs and large companies 14 4.1 Use public sector purchasing as a driver for innovation 15 4.1.1 Encourage closer dialogue between Government and electronics industry 15 4.1.2 Boost opportunities for SMEs to participate in publicly procured projects 16 4.2 Replicate ability to succeed in Asian markets, and best practice in IPR protection 16 4.3 Promote a national enthusiasm for new technology 16 4.3.1 Set aspirational visions that engender enthusiasm for new technology 17 5.2 Encourage growth of successful indigenous UK electronics SMEs 18 5.4 Treasury should simplify and broaden scope of R&D tax credit 19 5.5 Develop core competencies, incubators and clusters 19 5.6 Encourage DTI Technology Strategy Board to adopt disruptive technologies as a priority technology area 19 5.8 Encourage global electronics companies to establish UK R&D centres 20 5.9 Protect UK design base by encouraging integration of related activities into core-competency clusters 20 6.1 Create a toolkit as a single access point to source information on which to base supply chain management decisions 20 6.2 Encourage training provision of global supply chain management skills 21 6.2.1 Encourage benchmarking of supply chain management 21 6.3 Promote common open standards to facilitate e-business uptake 22 1 ELECTRONICS 2015 – Making a Visible Difference 6.4 Encourage participation in an Electronic Regulatory Group (ERG) to influence the detail of regulation more effectively 23 7.6 Align training provision closer to the needs of the electronics business 23 7.1 Create a mechanism for recognising outstanding leadership 24 7.2 Review recruitment and employment practices for more diversity 24 7.4 Present more exciting career opportunities in the electronics sector 24 KEY RECOMMENDATIONS (Tables) 25–32 Chapter 1: The EIGT approach 33 Chapter 2: What is the UK electronics industry? 35 Chapter 3: Building Government and Business engagement 45 Representation and networking 45 Measurement 53 Legislation and influence 55 Intelligent public procurement 59 Investment decisions 62 Accessing UK Government and EU support 64 Priorities for DTI 70 Recommendations 3.1 Establish an Electronics Leadership Council (ELC) 51 3.2 Press for a more relevant structure for SIC codes 55 3.2 Establish an Electronics Regulatory Group (ERG) to increase industry influence on EU regulation 58 3.4 Establish public procurement as a future workstream of the ELC 61 3.5 Monitor and where necessary challenge state aids that distort competition and investment decisions 64 3.6 Identify and signpost all existing support initiatives that are appropriate to the electronics industry 70 3.7 Resource and restructure DTI electronics Unit to support implementation of the EIGT report 71 Chapter 4: Global market sector and technology opportunities 73 Market sectors and technologies 73 Global markets 83 Emerging technologies 87 2 Contents Recommendations 4.1 Use public sector purchasing as a driver for innovation 82 4.2 Replicate ability to succeed in Asian markets across electronics sectors, with corporate mentoring and best practice in IPR protection 86 4.3 Promote a national enthusiasm for new technology 95 Chapter 5: Supporting a strong environment for innovation and R&D 97 Innovation and R&D performance 97 Finance for innovation and R&D 102 Taxation and fiscal environment 104 Knowledge transfer and collaboration 106 Intellectual property 112 Industry structure 113 Recommendations 5.1 Revise methods of collection of statistics for the R&D Scoreboard 101 5.2 Encourage growth of successful indigenous UK electronics SMEs 101 5.3 Encourage the finance sector to work closer with the electronics industry 104 5.4 Treasury should simplify and broaden the scope of R&D tax credit 106 5.5 Develop core competencies and create incubators and clusters 112 5.6 DTI Technology Strategy Board should consider disruptive electronics as a priority technology area 112 5.7 Commission a study on how to reduce EU patent costs 113 5.8 Encourage global electronics companies to establish UK R&D centres 115 5.9 Protect UK design base by encouraging integration of related activities into core-competency clusters 115 Chapter 6: Operating effectively in a global supply chain 117 New supply chain challenges 117 Strategic supply chain decision-making 118 Supply chain management skills 120 Lack of e-business uptake 122 Environmental legislation impact 125 Recommendations 6.1 Create a toolkit to source information on which to base supply chain management decisions 119 6.2 Ensure appropriate training provision of global supply chain management skills is provided in regions 122 6.3 Promote the cost effective adoption of common open standards to facilitate greater uptake of e-business 125 3 ELECTRONICS 2015 – Making a Visible Difference 6.4 Encourage participation in the Electronic Regulatory Group (ERG) in order to influence the detail of regulation more effectively 130 Chapter 7: Growing skills to meet the challenge 131 Skills challenges 131 Management and leadership skills 132 Business response to the challenges 139 Access to Government funding 140 Engaging with further education 142 Connecting industry and education 145 Recommendations 7.1 Create mechanism for recognising outstanding leadership 135 7.2 Review recruitment and employment patterns and practices to attract and retain a more diverse workforce 138 7.3 Establish a skills working group, which should be led by SEMTA 140 7.4 Electronics Alliance, SEMTA and the professional institutions must work closer together to represent exciting career opportunities 141 7.5 DfES, HSE and teacher representatives should address the barriers to practical science teaching 145 7.6 Consider innovative mechanisms for tackling the market failure in matching training provision to the electronics business cycle 148 Chapter 8: Electronics 2015 – peak and bleak scenarios 149 APPENDICES Annex 1: The electronics supply chain 157 Annex 2: The five stages of the Internet revolution 163 Annex 3: Semiconductor market cycles 164 Annex 4: A question of productivity 165 Glossary: acronyms and terms 169 EIGT Membership & Consultation lists 171 Sources of information 176 4 Ministerial foreword I would like to introduce my remarks on the valuable work done by the Electronics Innovation and Growth Team by first extending my thanks to the wider electronics industry – the businesses, trade associations, employees’ representatives, financiers and others from outside Government – for engaging so constructively with officials in the DTI, the Regional Development Agencies, the Research Councils and UK Trade and Investment in this significant consultation exercise. The EIGT has taken a candid and refreshing look at some challenging issues that must be resolved if we are to secure a bright future for UK electronics and UK plc. The EIGT 2015 review differs from other IGTs in that it had no preconceptions. It took a clean sheet of paper as the starting point, and was not afraid to take criticism from industry or Government circles. The criticism is constructive and the recommendations are designed to strengthen the relationship between Government, industry and the wider stakeholder community. The report findings reflect on the profound changes that are occurring throughout society, business and the global technology environment. Support for the electronics sector is a vital feature of the DTI’s Manufacturing Strategy, and is already delivering an infrastructure to enable UK-based manufacturers to thrive. However, the electronics sector is operating against a backdrop of continuous change, fierce global competition, and a need to generate carefully controlled exploitation of intellectual capital. The skill set required is changing and the EIGT recognises we need greater diversity to bring forward the people with the skills needed for tomorrow’s business successes. Electronics today tends to be invisible but in fact is all pervasive, and is commonly an enabler in most sectors – from retail to defence and healthcare.