1 The Production of Electronic Components for the IT Industries: Changing Labour Force Requirements in a Global Economy (Meeting: 16 – 17 April 2007) Paul.

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The Production of Electronic Componentsfor the IT Industries:Changing Labour Force Requirementsin a Global Economy(Meeting: 16 – 17 April 2007)

Paul Bailey: [email protected]

Sectoral Activities Branch (SECTOR)

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Definition of IT sector

• ISIC 30 (office, accounting and computer equipment)

• ISIC 31 (electrical machinery)

• ISIC 32 (radios, TVs and communication equipment)

International Standard Industrial Classification

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IT, telecommunication and content activities of firms

Telecommunications (goods and services) including manufacturing and disposal

IT (goods and services) including manufacturing and disposal

Offline multimedia

Online including interactive

Transmission

Information content (film production, information services, the media)

Networking

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The major players

• Original equipment manufacturers (OEMs) – brand name companies(HP, Dell, Toshiba, Sony, Lenovo, Apple, etc.)

• Contract manufacturers, Electronics manufacturing services (EMS) providers(Selectron, Flextronics, Jabil Circuit, Celestica, Foxconn, Sanmina-SCI)

• Original Design Manufactures (ODM)(Acer, BenQ – also OBM; Quanta, Asustek, Compal)

• Suppliers

• Assemblers

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OEMs: Why outsource?

• Reduce time-to-market, time-to-volume• Lower operating costs, investment, etc.• Improve inventory management• Access leading technology, etc.• Produce on a global scale using parallel

production facilities• Focus on core competencies• Organise supply chain• Enhance purchasing power

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Why be an EMS or ODM?

• Acquire knowledge from OEM• ... work for other OEMs, with knowledge• Achieve economies of scale• Facilitate local borrowing• No need to worry about market research,

distribution, sales and service networks• Guaranteed purchase of production run

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Globalization, FDI, education and training

• receiving FDI

• exporting products

• migration (out migration, return migration)

• Education

• remittances

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WTO - Information Technology Agreement (ITA)

• Signed 1996 in Singapore. Most favoured nation (MFN) status now provides for “zero” tariffs on IT products

• Question: Does the elimination of tariffs lead to increased trade, lower prices and increased employment?

• ILO and WTO now examining the question of the relationship between trade and employment.

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Employment

• declines in the United States (half a million jobs, or -30%) and Japan (400,000 jobs or -20%), but still the largest employers

• rapid growth in employment include: the Russian Federation, Mexico (for office, accounting and computer equipment)

• India, Brazil, Republic of Korea, Italy and France (with regard to electrical machinery)

• Philippines, Thailand, India and Italy (with respect to radios, TVs and telecom equipment)

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Employment

Chart 3. Global Distribution of Employment in the Electrical and Electronic Products Manufacturing Industries, 2004 (Percent)

China, Taiw an 3%

Germany 4%

Indonesia1%

Italy2%

Mexico 3%

Korea, Rep4%

Russian Fed5%

United States7%

United Kingdom 1%

Spain 1%

India 2%

China35%

Canada 1%

All other19%

Brazil 2%

France 2%

Japan 9%

Source: Estimated by ILO Sector Activities based on data from SECTORSource

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ISIC 30: Office, accounting and computing equipment

Chart 4a. Employment in ISIC 30: Off ice, Accounting and Computing Machinery Manufacturing

(Top 25 countries, thousands)

0 50 100 150 200 250 300

Poland Serbia&Montenegr

Ukraine Macedonia

Hungary Netherlands

Czech Republic Philippines

Spain India

Brazil Ireland

Canada France Mexico

SingaporeUnited Kingdom

Italy Korea, Republic of

RussianMalaysia Thailand

Germany Japan

United States

Source: ILO SECTORSource database

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ISIC 31: Electrical machinery and apparatus

Chart 4b. Employment in ISIC 31: Electrical Machinery and Appratus Manufacturing

(Top 25 countries, thousands)

0 200 400 600 800

Slovakia Iran, Islamic Rep. of

Turkey Romania

Indonesia Malaysia

Czech Republic Hungary

Spain South Africa

Canada Poland

Ukraine Thailand

United Kingdom Korea, Republic of

Brazil France

Italy India

Mexico United States

Germany Russian Federation

Japan

Source: ILO SECTORSource database

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ISIC 32: Radio, TV and communications equipment

Chart 4c. Employment in ISIC 32: Radio, TV, Communication Equipment and Apparatus

(Top 25 countries, thousands)

0 5 10 15 20 25

Slovakia

Sw eden

Canada

Ukraine

Israel

Czech Republic

Finland

Spain

Netherlands

Hungary

Singapore

United Kingdom

India

Italy

France

Thailand

Indonesia

Mexico

Philippines

Germany

Malaysia

Korea, Republic of

Russian Federation

United States

Japan

Source: ILO SECTORSource database

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Exports

Leading exporters Billions of dollars

Share of world

Share in economy

EU 25 361 28 9

China 226 18 30

United States 125 10 14

Hong Kong, China 109 8.3 37

Singapore 101 8 44

Japan 98 7.7 16

Korea, Rep. of 83 6.5 29

Malaysia 60 4.7 42

Taiwan, China 56 4.4 17

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Exports

EXPORTER Billions of dollars

Share of world

Share of economy

Mexico 37 3 17

Thailand 24 1.9 22

Philippines 24 1.9 58

Canada 14 1.1 4

UAE 7 0.8 7

Indonesia 6 0.5 8

Above 15 1228 96.6

World 1275 100

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Country strategies

• US and Japan• Malaysia, Indonesia• China• Taiwan, China• The Philippines, Thailand• Mexico, Costa Rica• Rep. of Korea (case study)

• Export processing zones (EPZs)

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Training needs and skills acquisition

• Formal education and training limited• Companies and workers must continue to

invest through lifelong learning.• Examples given of IT vendor certification

(portable skills).• Also wider community efforts and cooperation

with school systems (best practice).• But, how far down the supply chain?

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Social and labour issues

• Employment security• Restructuring• Contract manufacturing, temporary workers

“perma-temps”• Freedom of association (union recognition) and

collective bargaining• Safety and health• Wages• Hours of work

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Industry responses

• Corporate Social Responsibility (CSR), GRI

• Global e-Sustainability Initiative (GeSI) & Electronics Industry Code of Conduct (EICC)

• contents, implementation, monitoring (auditing), inspection?

• Mobile Phone Initiative (Basel Convention)= e-Waste

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Lifelong learning to remain competitive

• Lifelong learning is a shared responsibility ... . It is an investment, it needs to be attractive and accessible; incentives are essential and the acquired skills need to be certified. It can increase employee adaptability and maintain competitiveness.

• It is more important to train for long-term competencies than specific skills. Skills development policies and curricula and training programmes need to be developed. Need to develop better comprehension, promote partnership and open novel avenues of cooperation.

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Priority areas for ILO action

• The ILO should identify and promote best practices on improving working conditions, occupational safety and health as well as lifelong learning.

• It should encourage enterprises to share information on these issues with each other as well as with their suppliers and contractors.

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Adherence to standards throughoutsupply chains

• Long-term relationships between customers and suppliers are challenging in a fast-paced and highly competitive IT industry.

• In order to embark on long-term relationships, it is paramount that suppliers can rely on a productive and motivated workforce.

• Therefore, companies are interested in retaining such a workforce and benefiting from the resulting improvements to competitiveness, as are workers who strive to benefit from long-term employment relationships and good working conditions.