Manufacturers, researchers looking beyond communications equipment to grow exports
TORONTO—There was a brief moment in the mid-2000s – before Steve Jobs walked out on stage in his trademark turtleneck to announce the first iPhone, before Android was anything but a Sci-Fi buzzword–that it seemed like Blackberry would rule the smartphone world.
Needless to say, it wasn’t to be.
At the high water mark in 2011, Blackberry Ltd. was pulling in more than $5-billion in quarterly revenue. John Chen, Blackberry’s CEO since 2013, can only dream. The company’s latest numbers show a relatively paltry $660-million in revenue and razor-thin profit of $28-million for the final quarter of Blackberry’s fiscal 2015.
And Blackberry is not the only Canadian company that’s suffered. After steady annual growth of five per cent per year between 2002 and 2007, the Canadian electronics industry hit a wall. Exports fell 22 per cent between 2007 and 2014. Information and communications technology equipment was particularly hard-hit, with exports falling a remarkable 40 per cent.
“The weakness in the communication industry is quite clear,” Andrew Skinner, head of global trade and receivables finance at HSBC Bank Canada said. “It’s tough to compete with some of the sexier products coming from Apple and Samsung.”
But after facing the significant setbacks of increased competition, Canadian electronics companies are moving on, diversifying beyond communications equipment and eying growth in emerging markets, according to a recent HSBC report. Overall, the electronics industry is expected to grow to $15-billion by 2030, up from $12.3-billion in 2014.
“One of the key advantages Canada has is the links to university research,” Skinner said. “The education sector here… has a great reputation and is a key export. That knowledge transfer and proximity to key demand is obviously a key advantage.”
Skinner pointed to scientific and precision instruments, which includes medical equipment, as one area that’s been resilient to the sector’s woes. While exports were falling in other areas between 2007 and 2014 scientific instrument exports were up 15 per cent. HSBC forecasts strong growth to continue in the sector. Meanwhile, the automobile and aerospace industries are seeking ways to add higher value to their products and gain higher margins.
Overall, Canadian exports are expected to turn positive, and grow by 4 per cent per annum on average between 2015 and 2030. As emerging markets mature, their appetite for Canadian electronics may amount to a significant portion of that growth.
“There’s interest in better technology, so the health and medical sectors in particular improve,” Skinner said. “[Emerging markets] are moving up the value chain, as they can afford more, they consume more in those key sectors.
And though they aren’t targeting emerging markets yet, printable electronics is another area where Canadian businesses are gaining traction.
Unlike tradition silicon-based electronics manufacturing, which is highly capital-intensive, printable electronics companies or divisions have low start-up costs.
“Many of the companies that are coming into this business were in some sort of control panel, user interface design, or some sort of electronics system that has a variety of components,” said Peter Kallai, president and CEO of the Canadian Printable Electronics Industry Association.
“They’re looking at ways to reduce costs, they look at ways to increase volumes and look at ways to introduce innovation to differentiate their approach,” he added.
As the market to replace silicon parts in a wide variety of electronic circuitry heats up, a wide range of Canadian businesses are looking to take advantage. It’s just one growth area of electronics into which Canadian businesses are shifting.
Despite the success stories, however, the news is not all positive. HSBC anticipates the growth in electronics imports to continue to outpace exports. Driven largely by automotive and aerospace industry demand, electronics imports to Canada are expected to grow by 6 per cent annually between 2015 and 2030 compared to 4 per cent annual export growth.