The Canadian electronics industry was valued at about $15 billion annually as of 1993, accounting for 2% of the world market. More than 5% of Canadian manufacturing jobs are in this industry.
Worldwide, the output of the electronics industry is expected to reach about $1.3 trillion and account for roughly 4% of world gross domestic product and 14% of value added in manufacturing by the year 2000, according to a 1993 study by the World Bank. The value added in manufacturing by the electronics industry is growing at about 6% annually, versus about 3.8% across all manufacturing industries.
Effect on Other Industries
Not only is electronics one of the world's fastest growing industries, but it has a major effect on other industries because the products it produces can increase productivity, change cost structures, and make possible new products and services. An industry's competitiveness depends significantly on its ability to incorporate electronics. Electronics have replaced mechanical and electro-mechanical parts in many goods such as telecommunications switching equipment, electric motor speed controls and automobile ignition and control systems.
For instance, electronics accounted for about 3% of the cost of an automobile in 1988, and the increasing use of the components will make the cost proportionately more. Avionics, or aviation electronics, already makes up about 20% of the cost of a civilian aircraft, and this also is growing. Electronics have made possible new machine-tool designs as well as improvements in existing tools, and have affected such traditional industries as textiles and food processing.
The Canadian electronics industry can be divided into 3 main subsectors: COMMUNICATIONS and components, 71.5% ($9.84 billion); computers and office machines, 26.5% ($3.66 billion); and consumer electronics, 2.0% ($273 million). The communications sector, long seen as a particular strength for Canada, accounts for a much smaller portion of the industry on a worldwide basis than it does in Canada, while the computer and consumer electronics segments are larger, with computers making up almost one-third of the worldwide industry. Semiconductors, produced in Canada mainly by telecommunications manufacturers for use in their own products, are a fourth significant subsector of the worldwide industry.
While the industry can be roughly divided along these lines, the lines are not sharp. The communications sector, for instance, makes switches used to run telephone networks that are essentially specialized computers. Much of the semiconductor sector's output is used in computers, communications equipment and consumer electronics. Controls and software developed for computers have come to be used in consumer electronics, while high-volume manufacturing techniques invented in the consumer electronics industry have been applied to other sectors. Essentially the same optical storage technology is used for audio and video reproduction in consumer electronics and for data storage in computers.
Research and Development
In 1993 the Canadian electronics industry employed about 70 200 people. It is the largest employer of technically and scientifically trained people in Canada and in 1995 accounted for more than 27% of all industrial R&D in Canada, according to Statistics Canada, more than any other industry. Total spending on electronics R&D in Canada in 1995 was about $1.9 billion, with the telecommunications equipment sector accounting for slightly more than half of this, or $1.06 billion. The electronics industry spends a greater percentage of sales on R&D than virtually any other sector of industry.
Pace of Change
This emphasis on R&D goes hand in hand with the fact that change is very fast in the electronics industry and the life cycles of specific products are short and getting shorter. The product life cycle of a personal computer - from its introduction to its replacement by a new model - may be a year or less, with some manufacturers routinely introducing whole new lines at intervals as short as 6 months. Product life cycles in consumer electronics have also dropped to about a year, while those in the instrumentation and microprocessor sectors are estimated at about 3 years.
Part of what makes this possible is the effect of the electronics industry's own creations on the industry itself. For example, computer-aided design and engineering (CAD/CAE) systems are used more and more in designing new devices, making it possible to develop and manufacture increasingly complex new products faster and cheaper than before.
Most of Canada's electronics output comes from firms located in Ontario and Québec, mostly in large cities such as Montréal, Ottawa and Toronto, which provide the necessary technological support structure and skilled workers. The main centre in the west is Vancouver.
Canada continues to be a net importer of virtually every type of electronics, although a few Canadian companies are significant players in world electronics markets. Canada is especially strong in the telecommunications sector, a fact often partly credited to the country's geographical size and low population density, which has made telecommunications especially important to Canadians. Canada has one of the world's most developed communications infrastructures: more than 98% of households have telephones and 74% have cable television as of 1993.
A few Canadian companies have enjoyed international success in some other fields; while Canada is a minor player in most aspects of the world consumer electronics market, for example, Canadian audio speakers enjoy a good reputation.
The Canadian electronics industry's domestic exports amounted to $9.9 billion in 1992, an increase of 59.9% from 1988. Over the same period, though, imports grew from $14.1 billion to $19.2 billion in 1992, a 35.4% increase. In spite of the higher rate of growth of exports, the trade deficit in the electronics industry grew from $8.0 billion in 1988 to $9.3 billion in 1992.
Dominant Canadian Firms
Northern Telecom Ltd of Mississauga, Ont, a public company 52% owned by BELL CANADA ENTERPRISES INC, is Canada's largest telecommunications/electronics firm, specializing mainly in sophisticated telephone and telephone-switching technology. In 1995 its sales exceeded $13 billion and it had nearly $5.5 billion in assets. In 1995, 39% of Northern's sales were outside Canada. Employees numbered 63 715, which puts Northern Telecom among the country's largest employers. Northern produces a wide range of telecommunications products.
The company's research operation is Bell-Northern Research Ltd of Ottawa. In 1995 Northern spent almost 15% of its sales, or roughly $2 billion on R&D (a good deal of it conducted outside Canada), including considerable research on semiconductors (microelectronic chips). It is among the world's top 10 users of semiconductors and one of a small handful of Canadian companies that fabricates microchips.
Another major company in the Canadian electronics industry is Spar Aerospace Ltd of Toronto. Founded in 1968, Spar designs, develops, manufactures and services space, aviation, communications, defence, and remote manipulator equipment. It employs about 2700 people, and reported sales of $527.2 million in 1995. Spar is famous as the developer of the CANADARM, the remote manipulator system used on the US space shuttle, and is also a major supplier of satellite communications systems and has developed remote heat-sensing technology for detecting ships, missiles and aircraft for defence and navigation purposes.
Mitel Corp of Kanata, Ont, is an international manufacturer of telecommunications products and semiconductor devices. The company had sales of $589 million in fiscal 1995 and employed about 3600 people; about 7% of its sales went to R&D. Mitel is one of the few Canadian companies manufacturing advanced microelectronic circuits, including VLSI (very large-scale integration) chips.
CAE Electronics Ltd of Montréal is a wholly owned subsidiary of CAE Inc of Toronto. It designs and manufactures commercial digital flight simulators for civilian and military aircraft (devices used primarily for pilot training), control-room simulators for training nuclear-power plant operators, and supervisory control and data acquisition systems for nuclear and fossil-fuel power stations, electric substations and oil and gas pipelines. The company also makes a computerized data processing and display system for use in AIR TRAFFIC CONTROL, and contributed to the development of the Canadarm.
One of the fastest growing companies in the Canadian electronics sector is Newbridge Networks Corp, an Ottawa-based firm founded in 1986 by Terry Matthews, who earlier cofounded Mitel with Michael Cowpland. Newbridge reported sales of $800.5 million in 1995, representing growth of 45% over the previous year, and its profit increased by 19%, placing the company 26th in the Globe and Mail's annual ranking of fastest-growing Canadian companies. Newbridge designs and manufactures equipment for wide-area and local-area networks. It is a significant player in the market for Asynchronous Transfer Mode (ATM) networking equipment, which can transmit data, voice, and video signals at high speeds and is increasingly in demand because of growing use of the worldwide Internet and other networks.
Although the electronics industry is generally thought of as a clean one, quite different from the "smokestack industries" that make up much of the manufacturing sector, it does raise some environmental concerns. One that has had considerable attention is the use of chlorofluorocarbons (CFCs) in the manufacture of circuit boards. Most electronics companies have committed themselves to eliminate the use of CFCs, which are considered a danger to the planet's ozone layer. Some other reactive and toxic chemicals used in electronics manufacture and cleaning present pollution concerns. Legislation and remedial programs are helping to deal with some of the problems.
Industrial trade associations and technical societies whose members belong to the electronics sector include the Canadian Advanced Technology Association, the Electrical and Electronic Manufacturers Association of Canada, the Aerospace Industries Association of Canada, the Canadian Society for Electrical Engineering, the Information Technology Association of Canada, the Canadian Information Processing Society and the Institute of Electrical and Electronics Engineers.
Author GRANT BUCKLER
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