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In his last column, your correspondent was lamenting the fact that Australian companies were forced into collaborations with overseas firms in order to commercialise local intellectual property (IP). The risk in these collaborations is that export dollars are potentially lost, IP can be stolen and the chance to build Australia’s skills base is lost.
This week Sydney-based EDA vendor Altium has gone one better (or should that be worse?) by announcing its decision to move its HQ and R&D en masse to Shanghai.
Your columnist has been following the fortunes of the Altium since its Protel days, and has seen many executives come and go, and lots of changes to the company’s strategy, but its commitment to Australia has never been in doubt. However, that all changed yesterday with a terse press release published on the ASX’s website.
Emotions following the news are running high. Comments on Electronics News’ report on Altium’s announcement – or at least the ones that the editor has deemed fit to publish – run the full gamut.
“Altium’s so-called commitment doesn’t extend to maintaining investment in Australian R&D talent, or rewarding said talent for past hard work,” said ‘Mark’ on Electronics News’ forum. “This move stinks of desperation. Altium’s finances tell the real story of a last ditch attempt to cut costs, survive a while longer and hope [its] strategy pays off.”
The company’s Head of Corporate Communications, Alan Smith, chipped in on the forum with a defence of the company’s decision, pointing out, “the notion of national boundaries defining the opportunities and options of any company in Australia or elsewhere seems to me to be an outdated concept”.
“This is not a case of ‘offshoring’ jobs to save money,” Smith told Electronics News in a later interview. “Many of our engineering and technical staff will be moving to Shanghai, to ensure that the company’s ‘DNA’ is retained.”
Smith was quick to acknowledge the disruption the move will cause but said that the company has done all it can to minimise upheaval.
“Of the staff that didn’t want to move to China, many will remain in Sydney where we are keeping a small software development presence and will continue to offer sales and support,” he said. “Sadly, some have been retrenched, but with compensation at a level expected from a company like Altium.”
Smith explained that the company could have set up a satellite R&D operation in Shanghai and kept the HQ in Australia. “But we wanted to make a full commitment to our operation in China by moving most of the key personnel there and then [over time] building the company by recruiting from the large pool of Chinese engineering graduates.”
Your columnist’s sentiments are mixed. On the one hand, this move is not good for Australia’s economy or employment prospects, on the other, Altium is in business to make profit – something that’s proved difficult in recent years – and has to do what’s necessary to survive during tough economic times in order to prosper when markets improve. And it won’t be the first company, and probably not the last, to up and leave for foreign shores.
Altium’s board is reacting to an economic environment that’s created partly by our own politicians and partly by those of other countries that influence the global economy. Its business in Australia is small compared to that in other markets, and the prospects for growth in China are bright. The company has simply followed the money.
“China is investing a trillion dollars in building an indigenous design sector so that ‘made in China’ will become ‘designed in China’,” Smith explained. “The centre of gravity of the electronics industry is moving to the country and we have made a decision to be part of that shift.”
Our politicians seem unable to see past our glorious commodities boom to cultivate a diverse economy. One day, commodity prices will drop, and with them, so will Australia’s growth because manufacturing (which contributes about 10 percent to GDP), tourism and services will be too enfeebled to make up the difference – especially as exports are being severely eroded due to a record-high Aussie dollar.
This, though, is of little immediate consequence to those that have been retrenched. Hopefully, they will find their skills in demand elsewhere. Unfortunately, your columnist suspects that demand won’t come from our country’s struggling technology sector.
Elsewhere this week, a report states that between seven and eight million Australians lack the numeracy and literacy skills to be “effectively trained for higher level jobs”.
The report, by the Industry Skills Councils, notes that as Australia’s educational skills have stagnated, competitors in the Asia-Pacific region have forged ahead. One of the councils notes that a lack of technical skills risks stalling projects like the National Broadband Network.
At a time when Australia is desperately short of skilled labour, the revelation that our schools aren’t churning out decent raw material for universities and industry is worrying. The mining sector is the only industry that can afford to offer the kind of wages needed to attract scarce technicians and engineers, which exacerbates the problem for other industries.
Christopher Janssen, MD of Sydney-based CEM GPC Electronics, concedes that things have changed but remains optimistic.
“I don’t get people knocking on the door for jobs like I did a few years ago,” Janssen told Electronics News, “but there are still good people out there. It’s just a matter of searching them out.”
Janssen was also keen to point out that there will continue to be Australian electronics industry jobs, noting that “although much of the commodity electronics equipment production has gone to Asia, electronics has become so ubiquitous that there will always be opportunities for Australian, North American or European companies to add more electronic technology to a range of existing appliances to improve performance, add features or enhance efficiency”.