Are Canadian companies missing the electronics party?

There is probably no better setting for a trade show (in January!) than Las Vegas. The venue seems especially fitting for the annual Consumer Electronics Show. After all, what could be a more natural pairing than legalized gambling and the high-tech, high-risk, razzle dazzle of today’s electronics market?

Perhaps it was just the sheer concentration of product, but once on the floor the reality that we are truly living in a new economy hit me with full, glitzy force. Here, in the middle of it all, it seemed irrelevant to point out that the bulk of the new economy’s paying corporate customers are from the old economy production sector. Likewise, it was petty to observe that the high-tech “e-volution” is being powered by a technological artifact of the industrial-age — electricity. What was obvious at the CES was that the digital age is ushering in a magnitude of economic (and cultural) changes unlike any we have ever seen.

It was also apparent that, up till now, many of the macro-economic benefits of the new economy have by-passed Canada. Several hundred Canadian companies were indeed listed in the CES show guide, but the majority of those were distributors.

So what has been Canada’s harvest from the new economy? Sure, Canadian retailers have profited from the sale of computers, cell phones and other electronic gadgets. A handful of software companies based in Canada have made their mark with innovative products. And of course Nortel and Celestica have built global reputations as, respectively, a telecommunications OEM and an electronics contract manufacturer.

Yet, by and large, Canada’s electronics industry has yet to reach a self-sustaining critical mass; certainly nothing approaching the automotive industry. Other than Nortel, there is very little electronics hardware design and development and done here. Other than Celestica, there is very little electronics manufacturing done here. The situation contrasts with another high-tech sector, biotechnology, in which hundreds of Canadian companies are either doing cutting-edge development work or have already brought promising products to the market.

The difference in the level of Canadian presence in electronics versus biotechnology is largely the result of historical precedents. Biotechnology is being driven by agricultural and health/drug sectors, two traditionally strong areas of growth and investment in Canada, spurred both private and public funds. Growth and innovation in electronics, on the other hand, has been driven by aerospace/military industries, as well as the consumer/appliance market, thus accounting for the dominance of both the U.S. and Asia.

Can Canadian companies at this late stage make up ground and become larger players in the electronics/technology market? As this month’s cover story details, the answer is yes, if a company is willing to invest and make certain adjustments to its business strategy. Tooling expertise, one of Canadian industry’s strengths, is an especially important ingredient for success in the electronics market. As well, with a supply base honed by the high standards of automotive customers, Canadian industry would seem to be more than up to the task of delivering on whatever design, pricing, production or logistic demands are thrown its way.

It’s already happening in places like Calgary, where a technology park is fostering the influx of hundreds of high-tech companies. The truth is that much of the design and development work for consumer electronics products is still done in the U.S. If a Canadian manufacturer can put a solid, competitive business proposal on the table, I believe these OEMs would listen. After all, do you think they’d rather fly their managers to China with an interpreter, or have them fill-up the company car and drive it across the Ambassador Bridge?

e-mail: mlegault@corporate.southam.ca