Eric Russell looks at the latest east/west developments in the electronics industry. At the moment Europe holds the upper hand in innovation and skill, expertise that Japan inparticular is interested in. At the same time, Asia-Pacific offers a large potential market for European companies.

The east/west electronics pendulum that has swung in Japan's favour for so long is now on the European side. Japan is now seeking technical ideas and design capabilities from the west having supplied it for some twenty years with management concepts and manufacturing techniques.
China is also warming more to the west and electronic engineers in the Asia Pacific region need to know how to make the most of the increasing two-way traffic.
Generally, AP countries are seeking the innovation and design skills of the UK and its service sector benefits are becoming more important than its manufacturing attractions. The UK is seen as a centre for design and development with the additional benefits that a sales office on the design site provides an ideal springboard for selling into mainland Europe.
In return, the AP region offers a large market within itself plus the proven global marketing capability of Japan. Joint ventures with Japanese companies can leverage the in-house resources of a small company and help boost growth.
China is an important emerging market. The Pacific Rim Electronic Business Association (PREBA) says that, by 2007, it will be larger than the US and Japan combined, with electronics as a key growth sector.
But although China appears to have a huge domestic market to develop, with over a billion inhabitants, one estimate is that only three per cent of the population, about 40 million people, can currently afford a television, for example.

Inward looking

The country is also still inward-looking although major companies such as TV set manufacturers are now investigating external markets with potential. These include Eastern Europe and South Africa rather than the mature markets of the US and Western Europe, although DVD manufacturers are targeting mainland Europe.
In company with world trends, the Chinese economy is slowing down but its growth rate is still very healthy with one prediction at about eight per cent. The country also retains tight financial and business controls so the economy is being well managed.
It is also now well on its way to achieving WTO accession, given the recent agreement with the European Union after 14 years of negotiations. This should greatly improve its internal business environment.
PREBA says the UK is the leading European investor in China but is not perceived as such. This is partly because its investments, in infrastructure projects and in consultancy work in the insurance, legal and finance sectors, do not attract as much interest as the dynamic consumer markets. In addition, the UK does not have many large electronic product manufacturers such as Sony, Nokia and Siemens.
But in the AP region, and of particular interest to electronics companies, intellectual property rights is a difficult issue for foreign investors. Although legislation is in place, enforcement is weak. Membership of the WTO should help to iron out some of the problems but, for now, investors can expect products to be copied.
In Japan, however, the west is concerned about the downward slide of the Nikkei stock market index while the country appears to be taking no action to halt the trend.

Global links

The link between the two sides of the world comprises a number of organisations with the aim of selling the benefits of each side to the other and using the benefits of each to its own advantage.
The Japan Electronics Business Association (JEBA) is one of the longest established links. Sir Ivor Cohen, chairman, says the organisation's initial role was to help UK companies get into Japan. Today, in a reversal of intellectual traffic, Japan wants the expertise that UK high tech companies have. It is looking for new types of applications and opportunities and is realising that the UK is good for innovations and design.
The missions that JEBA now arranges to
Japan from the UK are smaller and more high tech. Instead of heavy manufacturers, recent mission members have offered more technically-based solutions in the forms of new software and new electronic concepts.
These companies are more confident than traditional established manufacturers and want to grow faster. Because of their innovation, they are probably not in competition with other companies, making them ideal material when Japan asks what it should do next. JEBA uses a number of routes to arrange quality contacts for its missions and Japanese companies need to be aware of these opportunities.
For countries in the AP region other than Japan, PREBA was established on the lines of JEBA. Its mission, likewise, is to provide a network of UK companies that want to supply the region and to help local companies that want to invest in the UK.
Last summer, for example, ARM, the electronic industry's leading provider of 16/32-bit embedded RISC microprocessor solutions, entered into a technology licensing agreement with ZTEIC, one of China's largest semiconductor companies, after meeting staff on a PREBA trade mission.
Steve Evans, VP Segment Marketing for ARM, says China is one of the most significant emerging markets for digital electronics, making it a key market for ARM. Under the agreement, ZTEIC will incorporate ARM intellectual property into future mobile communications applications.

Office centre

A key contact point in the AP region is the British Industry Centre (BIC) sited in Yokohama City. It provides a base for British companies investing in Japan for the first time.
Mike Ingle, an adviser to the DTI and responsible from setting up BIC, says it is helping suppliers establish the geographically close relationships that are vital
when dealing with companies in the region. Users are expected to move on to their own offices as they grow
so vacancies are continually arising but there are some 20 companies currently interested in taking space over
a range of time scales.
Filtronic, a world leader in advanced communications components, is a recent occupier while an early occupant, the broad line component distributor RS Components, has expanded greatly.
BIC was created by the UK Department of Trade and Industry's (DTI) Action Japan campaign, the British Chamber of Commerce, Yokohama City Government and Nomura Real Estate Development Company.
One of the first companies to take space in the new centre was Electronics Link Asia (ELA), run by Peter Bacon. ELA consultants provide local knowledge and assistance to UK companies that would like to establish
a presence in the region.
Another link between east and west is the China Britain Business Council (CBBC) which has created a website that provides an informative source of business developments with China as well as promoting the Council's projects and activities.
It offers a Chinese Language Business Directory and
a list of electronics companies with a profile written
in Chinese. CBBC also publishes a Chinese-language magazine, Ying Zhong Weilai (Britain in China) and
a mailshot to each of its 12 000 readers in major Chinese business and governmental institutions.
CBBC says it has seen some clear indications from
the Chinese that they are considering investing in other economies and believes that China could become one
of the UK's major foreign investors. China is now mostly engaged with attracting inward investments, but the
tide is turning and future development will depend on investing in other economies.

Largest economy

China will undoubtedly look to Europe, since the single European market has now overtaken the United States as the largest economy in the world. And the UK is well-placed to take advantage of any opportunities, having established itself as the leading country in Europe for investments.
The UK has overtaken the US to become the world's leading source of Foreign Direct Investment for the first time in 11 years, according to the Japan External Trade Organisation (JETRO). Its White Paper states that while FDI outflow from the US rose 3.3 per cent to US$150.9 billion for 1999, investment from the UK rose to a total of US$202.1 billion, up 68.7 per cent. Japan, the leading investor in 1989 and 1990, was ninth with FDI outflow of US$22.3 billion.
The UK remains the second largest recipient of investment after the US, with FDI inflow rising 33.1 per cent to US$84.8 billion. Japan was ranked fourteenth despite an increase in FDI inflow of almost 280 per cent. JETRO is the country's principal organisation for implementing trade policy on a comprehensive basis.
Within the AP region, the Japan Electronics and Information Technology Industries Association (JEITA) was formed in November 2000 through the merger of the Japan Electronic Industry Development Association (JEIDA) and the Electronic Industries Association of Japan (EIAJ).
The new organisation was approved by the Ministry of International Trade and Industry (MITI) as a way to keep the industry up to speed with the digital revolution and the many developing high tech areas of electronics. It is one of the sponsors of the important CEATEC electronics exhibition to be held on Tokyo from 2nd to 6th October 2001.
The Global Business Opportunities Convention is also an annual international event. It aims to help foreign companies looking for potential business partners in Japan. G-BOC 2001 will take place at Mydome, Osaka Japan 22nd to 24th October 2001.
These two events will highlight the rapidly changing face of the electronics industry across the globe, which requires all commercially-minded electronics engineers to look outside their own country to keep up with developments.