A Competitor for ‘Tech-City’ Adelaide

The New South Wales Government plans to reposition Sydney as ‘Australia’s Silicon Valley’– as part of their plan to boost Hi-Tech industry to overcome budget deficits caused by the corona virus.

With international education, tourism and other sources of revenue flattened by the pandemic, NSW Premier Gladys Berejiklian has identified the need to transform the “dormant manufacturing sector” in NSW into an economic lifeline. She wants her State to “lead a manufacturing revival” through artificial intelligence and 3D printing which she says would make production cheaper. There is no reason, she adds, why these new industries should not form the backbone of the economic recovery of NSW. (Weekend Australian 2-3 May: 4)

The plan includes the State’s first designated ‘tech and innovation precinct’ stretching from the area around Sydney Central Railway Station one kilometre along the railway line to include the Australian Technology Park (ATP) in the former railway workshop buildings at Redfern. The precinct plan includes a 40 level 180-metre building, near Central Railway Station to house the head office of Atlassian plus other growing tech businesses and startups. The project of this determined government and the large (5+ million) and capable population of Sydney could challenge Adelaide’s position in the technology space.

Reindustrialisation

The environment at the ATP in the old railway workshop buildings at Redfern (below) has similarities with the former Mitsubishi assembly plant, now repurposed as the Tonsley Innovation District in Adelaide’s southern suburbs.

The outer fabric of these ‘Industrial-Age’ buildings in Sydney and Adelaide has been retained and redeveloped internally to meet twenty-first century ‘Knowledge-Age’ industry, research, design, manufacturing and education requirements. These old but ‘cool’ environments appeal to many engineers, scientists, creatives and students in these disciplines. The Tonsley site is co-located with Flinders University computer science, engineering and mathematics faculties plus the Medical Device Research Institute and the Centre for NanoScale Science and Technology.

The Australian and South Australian Governments will invest more than $550 million on a ‘technology and innovation precinct’ at Lot Fourteen on the site of the old Royal Adelaide Hospital. Renovated nineteenth century hospital buildings and new developments will house technology-based and innovative companies, start-ups and researchers. The Massachusetts Institute of Technology (MIT) will establish its ‘Living Lab’ on the site. The Australian Space Agency and their new Mission Control Centre will provide onsite access for SMEs to control small satellite missions, national or international joint missions, provide access to space-enabled data and participate in training, research and development.

Hi-Tech industry

The emphasis in government promotion of industry development in both Sydney and Adelaide is on technology-based ‘industries-of-the-future’ including machine learning, 3D printing, artificial intelligence, photonics, cyber and also on fast growing industries including robotics, health and medtech and particularly in Adelaide on the space industry. Electronics is a critically important technology to the products and systems in these and in all Hi-Tech sectors. Electronic components and systems are used to sense, monitor, measure, store, process and transmit data and information to inform and control external processes and systems. Without electronics the sectors discussed above could not function.

Beyond Lot Fourteen, innovative and entrepreneurial technology-based companies flourish in other locations in Adelaide and its suburbs in a range of established ‘Knowledge-Age’ industries including biotechnology, defence, electronics, environment, medtech, scientific, software and telecommunications. Adelaide-based companies in these sustainable industries employ tens of thousands of engineers, scientists, technical and support staff. Many of these companies have also established interstate and overseas markets and branches.

The large electronics design and manufacturing industry centred in and around Adelaide is one of the largest employers in the State’s manufacturing sector with 11,000 well-trained and well-paid staff.  With its high annual productivity of >$340,000 per person it is also one of the most valuable manufacturing industries in our regional economy.

Despite its size, value, capability and firm-to-firm interdependence, Adelaide’s electronics industry cluster is relatively unrecognised by our community and governments. This established, productive and sustainable Hi-Tech industry is overlooked while the new, shiny and popular sectors are promoted in the media.

Growth State Plan

Last year the State Government announced the development of its ten-year Growth State Plan to be launched later in 2020. The Plan will focus on

nine sectors, one of which is: ‘Hi-Tech’ and this category includes:

*Creative Industries, *Defence, *Energy and Minerals, *Food/Wine/Agribusiness *Health and Medical,   *International Education,   *Space Industry,  *Tourism
Note that the Adelaide-based electronics design and manufacturing industry is NOT yet included in the ‘Hi-Tech’ category of this long-term Growth State Plan.

Under the previous SA administration electronics was incorrectly classified as an ‘enabling technology’ and not as a major design and manufacturing industry.

At an industry launch event the responsible Minister in the previous government promoted photonics as “the electronics of the twenty-first century” which could imply that electronics was part of the past century and possibly no longer relevant. This belief may have influenced the present administration to overlook the electronics industry in the early iterations of the Growth State Plan.

Government recognition of Adelaide’s Hi-Tech, high value-added electronic design and manufacturing industry and its inclusion in the Plan is necessary to complete the range of capabilities already included in its Hi-Tech sector.

A Growth State Plan without the large, capable and sustainable Adelaide electronics industry in its ‘Hi-Tech Sector’ would be incomplete.

This is not a call for government subsidy. With its annual revenue of A$3 billion, the Adelaide electronics industry needs no Government support, but the industry does need government and community understanding, recognition and the promotion by the government of its capability and sustainability – directed to entrepreneurs, investors, potential employees and to our community.

Export growth

Adelaide’s electronics industry exports products and systems worth about $1.0 billion annually to more than 130 countries, principally in the America’s, the EU, Asia and Africa. Sales of these high value-added products have grown with the recent low A$ conversion rate to other international currencies.

Australia’s export revenue from the undifferentiated commodities of the agricultural and mining sectors is vastly greater than for electronics and other value-added, Hi-Tech products. However, these bulk commodity sectors now face foreign trade battles on multiple fronts – coal shipments, beef, barley and now wine and other agricultural exports face renewed challenges.

A small survey of Adelaide electronics industry firms shows that while some have battled supply shortages on components and materials; most have developed new, exportable products during the shut-down. Many respondents estimate an increase in staff numbers as they trade out of the COVID-19 disruption.

Economic and social recovery     

Many economists suggest that a quick ‘V-.shape’ return to pre-pandemic economic conditions is unlikely and the more probable slower recovery cannot return all sectors of the global economy or our regional economy to their previous levels. The economic disruption of the pandemic to our local, national and export markets plus the NSW push into Hi-Tech manufacturing requires a strong South Australian response. We now have the opportunity to consciously move up the value-chain, to focus on sustainable ‘Knowledge-Age’ products and services.

We must encourage and support established and viable industries – those with a future in the 2020’s and beyond and particularly those with diversified local and defensible export markets. We must also promote Hi-Tech industries where their use of controlled intellectual property (IP) and their high levels of internal R&D investment generates premium returns. These businesses will continue to succeed despite our high wage structure. Their customers buy on performance not price. The Adelaide electronics industry cluster with its interdependent firm-to-firm relationships and others across the range of established Hi-Tech industries will be important to the sustainable regrowth of our regional economy.

Governments must encourage and support new and potentially valuable industry sectors to add to the growth and diversity of our regional economy. Ongoing support and development of established and sustainable high value-added ‘advanced manufacturing industry’ will also be critically important in our region.

We must also value add to the many undifferentiated bulk commodities that are currently our major export earners. A great example of ‘value-adding’ to bulk materials is the plan by Sanjeev Gupta and his GFG Alliance to further develop the Whyalla steelworks through renewable power to become a major steel exporter. Mr Gupta said “Australia exports enough iron ore annually to produce 500 million tonnes of steel, over a quarter of the world’s demand and – steel demand will double over the next 30 years” (Weekend Australian 25-26/4).

Our world has now changed forever: “Even before the pandemic, globalisation was in trouble. The open system of trade that had dominated the world economy for decades had been damaged by the financial crash and the Sino-American trade war. Now it is reeling from its third body-blow in a dozen years as lockdowns have sealed borders and disrupted commerce.” (Has COVID-19 killed globalisation?) – The Economist 15/5/20.

The regional economy of Adelaide is in transition from its past dependence on ‘Industrial-Age’ manufacturing to its logical future as an education, research and Knowledge-Age’ industry region.  With the right policies and assistance to our established Hi-Tech industries, this transition will benefit all South Australians.

The sustainable, Hi-Tech design and manufacturing capability and resources of the Adelaide electronics industry and related Hi-Tech industries discussed above will be critical factors in this regional transition and in our recovery from the economic and social shock of the COVID-19 virus.

Comments invited: Editor, EIDA Newsletter   info@eida.asn.au