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Electronics Business i hProf. Ian Phillips

Principal Staff Eng’r, ARM Ltd

ian phillips@arm com

in the UK Economy

Prof. Ian PhillipsPrincipal Staff Eng’r,

ARM Ltdian phillips@arm comian.phillips@arm.com

Visiting Prof.Uo Liverpool UK

UK Economyian.phillips@arm.com

Visiting Prof.Uo Liverpool UKUo Liverpool, UK

Contribution to Industry Award 2008

UKEA

Uo Liverpool, UK

Contribution to Industry Award 2008Award 2008

London 7sep11Award 2008

•This is not Electronic Systems work, •This is not Electronic Systems work, y ,but should be extended to be so.

•Based on my work from 2004-8

y ,but should be extended to be so.

•Based on my work from 2004-8

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•I am not an Economist•I am not an Economist

Engineering in 2011 ... Details of Electronics, SW, etc ... Are Well Beyond Public Understanding

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EIGT Report (2004)

UK Electronics ... Unknown Invisible Unknown, Invisible Uncoordinated, Unfocused Unquantified

... But Internationally Respected... But Internationally Respected

3Source: “Electronics 2015”. Published: DTI (HMG)

EIGT Report

Low?Low?

UK ElectronicsUK Electronics ... 9,400 enterprises Employing 250-500k people Contributing 2% of GDP

4Source: “Electronics 2015”. Published: DTI (HMG)

Contributing 2% of GDP... Believed Conservative Estimates!

Engineering in the UK (2009)Better!

60%!

5Source: Engineering UK 2009/10. Published: EngineeringUK (pka: ETB)

...The Same Story across All Engineering

101: Macro Economics ... Economics is an Art not a Science Gross Domestic Product (GDP) The sum of all known financial transactions in the UK The source of the (greater-part of) the UK Budget

From which All Government Activities are paid for.p There is no Buffer ... All is spent as it is Received.

GDP figures obtained from ... Actual GDP from Tax Revenue Actual GDP from Tax Revenue

GDP = Tax Income / 38%

... Up to 1yr after the tax-year Running GDP from several Economic Indicators ...

Gross Value Add (∑GVA => GDP) (GVA) = Value of Output - Cost of Input

Corporate Revenue (∑Revenue => GDP)Corporate Revenue (∑Revenue GDP) Other business indicators

...These are Relationships, not Mathematic Equations!

6Source: Engineering UK 2009/10. Published: EngineeringUK (pka: ETB)

Undervalued Communities Research Groups Service Providers ... Inc Installation and Maintenance Inc IP and Know-How Providers

National Operations of International Businesses National Operations of International Businesses Educators SMEs & Start-upsp

If the stats are correct, these represent more than 90% of the Operations % fand 50% of the employment.

Probably represent more than 50% of the total GDP contribution from ‘this sector’sector Probably represent the division with greatest growth potential.

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101: Tax Receipts ... In 2006, GDP for 2005-6 was projected as £1.2T

C3: Government Receipts By FunctionC3: Government Receipts By Function 2005-2006 (Projections)

Total Revenue ~£450B 73% is Direct Tax on the Person 13% is Tax on Business 14% ‘Other’

(~38% of GDP)

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... I maintain: 100% is attributable to UK-Workers (It would be Zero without!) Source: HM Treasury. Published: http://www.hm-treasury.gov.uk/media/415/DC/psfmarch2006.xls

101: Government Spending...

Total Spend ~£490B (~£40B Loans)

B4: Government Spending By Function 2005-06 (Projections)

( )

No Current Account

9Source: HM Treasury. Published: http://www.hm-treasury.gov.uk/media/415/DC/psfmarch2006.xls

Spend above Tax Revenue is Deferred Tax ... justified by a 8%pa Economy Growth

GDP/Working Population From this I argue : UK-GDP is the Working Population ... Doing its work (Including Sustaining Business) 27% Being Paid ... ... And Spending that Money

GDP/Working-Head (2006)

73%

GDP/Working Head (2006) ... GDP = £1.2T Working Heads = 29.1M1

Average Salary = £23,0802

... = 1.79 x Average Salary Sanity Check, shows this to be 'about right'...Sanity Check, shows this to be about right ...

“1” as Paid: “+1” as Spent (30% Income Tax, 70% Fund the Family) = 2 +ve Var: Exports, Loans (esp for Houses and Cars) (Deferred Earnings) -ve Var: Imports, Spending outside of the UK, Savings (Deferred Tax)

Summary: Summary: Workers are the Engine of a Nation's Economy! (Needs Businesses to Employ them)

UK-Worker contributes 2x Salary to UK-Economy! (Simple Message)

101,2: Source: HM Treasury. Published: http://www.hm-treasury.gov.uk/media/415/DC/psfmarch2006.xls

Analysis: UK Electronic Business What is one? (eg: Incl. of Electronics within Retail?) How Many are there? How much do they Contribute to the UK-Economy? Are the figures realistic/justifiable?

Wh t d th d ? (Wh t V l P t) What do they do? (What Value Prospect)

Note:Note: This work was done in 2008, and focuses on UK businesses actively in

Electronics ... Ignoring those involved in the wider Systems aspects.S th tifi ti f S b S t f th UK O ti ti i So these quantifications are for a Sub-Set of the UK Operations active in the life-cycle of Electronic Systems! ...

...These figures are Conservative

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What is an Electronic-Enterprise? No clean definition ... Electronics is a Service, not a Sector. I negotiated access to the 2008 EKTN Database Findlay's Data-Base (Advertising, UK, Electronic bias) EKTN Membership (Electronics bias) No input from other KTNs (Mathematics ICT Digital Coms etc)No input from other KTNs (Mathematics, ICT, Digital Coms, etc)

I created an SQL query and applied it to the Database SICCode search ...

30010', '30020', '31200', '31620', '32100', '32200', '32201', '32202', '32300', ‘33201', '51701', '52702', '52704', '52707', '52720', '64200', '72100', '72200', '72300', '74202', '72600'

Key Words search in CompanyName or CompanyDescription ... 'electro, 'semiconductor', 'semi-conductor', 'telecom', 'embedded', 'radio', 'audio', 'telephone',

'membrane', 'pcb', 'LED ', 'communication', 'loud speaker', 'avionic', 'receiver', 'recording', 'network', 'terminal', 'alarm', 'emergency', 'circuit', 'digital', 'automation', 'instrumentation', 'X-Ray', 'lcd', 'micro', 'silicon', 'wafer', 'transducer', 'emc', 'asic', 'chip', 'data', 'compute', 'software'

Note: Although software key words are included, only those enterprises with an ‘electronic angle' are likely to be in the DB at all!

...

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How Many E-Enterprises? Of the 13,184 EKTN (2008) unique records

I identified 5,219 as Electronic-Enterprises (With addresses etc) I visually checked the result and found 1% false counts I visually checked the result and found ~1% false counts ...

I put this into a spreadsheet and played with the numbers ... Reasoning: Whilst most of Large companies had been 'caught' many of the g g p g y

Smaller and Micro-enterprises will have been missed.

...25k Enterprises; 500k UK-Employees (Half in biz. <100)

13Source: EKTN 2008 DataBasePublished: Provided in confidence

The Contribution to UK GDP Playing with the same spreadsheet. The Direct Economic Contribution is ...

GDP 2.55% (In line with EIGT expectation >2%) No of Enterprises 25,000 (in line with EIGT expectation >>10k) 50% of Employees, and GDP Contribution in Operations <100 heads.p y p Contribution is independent of Nationality of a Parent Company !

... The Indirect Contribution is more difficult to quantify, but it is 'easy to

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believe' that UK Electronics Enables 10-20x this!Source: EKTN 2008 DataBasePublished: Provided in confidence

Importance of Worker Accounting HMG/ONS tends to ‘invert’ the GVA equation (Thus GVA => GDP) GVA is not the source of the Tax Revenue, so is not GDP. Leads to initiatives to stimulate GVA Difficult to identify the part of the GVA which is ‘in the UK’... This favours traditional factory-based businesses and disadvantages s a ou s t ad t o a acto y based bus esses a d d sad a tages

knowledge-based enterprises.

Worker AccountingV l E l t i th UK i ti f l (R h d i Values Employment in the UK, irrespective of role (Research, design, manufacturing, instrumentation, distribution, support, etc.) or ownership.

Recognises the value of Higher Paid (Higher Skilled) jobs Recognises the value of Total Employment (not just in large businesses) Supports Globalisation and the UK operations that make business throughout

their life-cycles.their life cycles. Is easy to count for all businesses (~2x Salary or ~1x Payroll Costs)... Will lead to stimuli to grow these 20C business models.

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... I expect opposition from some ‘traditional’ businesses!

Reliability of these Figures The limited Scope of the EKTN Database No Research, SW, Mec’tronic, Inst’n, Tools, Methods, Support, IT, etc Can be improved by getting access to other databases Other KTNs, Industry Associations, Government databases

... I believe the results are pessimistic ... Maybe 100% sobe e e t e esu ts a e pess st c aybe 00% so

The estimates of the % of businesses that are in the EKTN Database Can be improved by ‘fish counting’ methods (Statistics) Can be improved by bigger/better databases.

... I believe they are about right (and they are not very sensitive)

The Economic Validity of linking GDP to Workers Salary The Economic Validity of linking GDP to Workers Salary Was a lot less happy about this than I am now ...

Economics is an art not a science (Economists say-so)E i E ti I di t d t l b i ll i l bl Economic Equations are Indicators and not algebraically manipulable.

I have presented this to credible institutions/profs and nobody has turned a hair!

... I think that this may be difficult politically, but is justifiable

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... Far more rigorous that anything I have been able to find for other sectors!

What do Electronic Enterprises do? Lots more analysis of available data to do on this ...

If.. 80% of E-Enterprises are 4 people or less ..&.. they are stable..Then.. they must be doing Something Right !y g g g

I speculate.. All are Delivering a Valued Service to a remote customer (or Larger

Enterprise); which may or may-not share a Corporate Identity This may be based on Advanced Knowledge Or may be based on Excellence of Delivery

To be stable, they are supplying that Service Competitively..vs.. the global alternatives available to their 'Customer'...vs.. the global alternatives available to their Customer .

And they are adapting their role and delivery mechanisms continually in line with evolutions in the Technical, Delivery, Legal and Business environments in which they work

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in which they work.

How do they work? Deliver Valued Functionality/Service to a (remote) Customer, against

global competition ...I believe the UK roles are Frequently as Technical Leaders... I believe the UK roles are Frequently as Technical-Leaders

The Value of the Function/Service (Fd) as delivered Includes the Costs ( )incurred in the Delivery Channel.

Fd = Fa+Cd E t bli h W ld C titi F ti lit (F ) Establish a World-Competitive Functionality (Fa) Reduce the Cost of Delivery toward Zero (Cd)

For stability the Delivered Functionality/Service (Fd) must be... Appropriately valued (Not under-valued) Demonstrably better than an alternative ... sourced globally

All Businesses work by maintaining their Delivered Value!

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... All Businesses work by maintaining their Delivered Value!

Conclusions (UK Electronic Enterprises) Employed People are the Engine of the Economy Contributing ~2x their salary

~25k E-Enterprises employ ~500k people. They Contribute ~2.5% to the Economy, with Indirect value ~10-20x this. 50% of Employment and Contribution; from the 95% Ent's <100 head. 50% o p oy e t a d Co t but o ; o t e 95% t s 00 ead 80% of Enterprises are <5 heads. This is NOT the traditional model of Business.

Most UK E-Enterprises are Delivering Knowledge Services Developing Knowledge is important (Relationships and Partnerships) Delivering Knowledge is important (Pre-Competitive Infrastructure)Delivering Knowledge is important (Pre Competitive Infrastructure)

Everybody is in Competition Globally 'UK Divisions' are no less vulnerable to this

Electronic Systems would be a better domain for this study More Inclusive and more easily Defined More easily Comprehended by ordinary folk (and Politicians)

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More easily Comprehended by ordinary folk (and Politicians)