Thursday, February 23, 2006

NEC Shutting Irish Plant

Forbes and others are reporting that NEC Electronics has announced it will close its plant in Ireland in September, laying off 350 workers. The plant makes micro-controllers for automotive electronics. The work will be transfered to China, Malaysia, and Singapore, according to Kyodo. Some 150nm lithography equipment will also be moved from Sagamihara (Japan) to some plant in the US.

For the last decade or more, Ireland has been considered one of the EU's most attractive places to do high-tech manufacturing, due to a combination of wages, education, local infrastructure, and more. Now jobs are starting to leave because of high salaries? Tom Friedman would say it's globalization in action, and the "long-horn cattle" such as NEC move capital around more slowly than the "short-horn cattle" (day traders and other investors), but they do move it around in response to market forces. Did the strong euro hurt Ireland?

2 Comments:

At 8:58 PM, Blogger Joe said...

There are other reasons that made Ireland attractive, not least of which is the extremely low rate of corporation tax. I'm not sure it was the euro, so much as the rising cost of living, which has been going on for a while. Dublin is now one of the most expensive cities to live in in the world (It's tied with New York in this report).

http://money.cnn.com/2005/06/21/pf/costliest_cities/

You would be hard pushed to find a house in Co. Dublin for less than 300k euro, with a _lot_ of houses being well over a million.

Eating out is very expensive too, as is alcohol, cars, insurance, etc.

I know that it can be argued that these are a result of higher wages, but I think that things are the other way around. Many businesses take any chance to raise prices, and wages follow this (although they aren't following it quick enough for me).

I can honestly say that I find Oxford substantially cheaper than Dublin.

On a side note, it seems to be widely recognised that Ireland can't compete with lower costs indefinitely, so the government is putting a lot of focus on switching to a 'knowledge' based economy. i.e. Not only should everyone go to university, but it'd be good if we all had PhDs in science, engineering or computer science (preferably Biotech for some reason).

 
At 10:00 PM, Blogger rdv said...

Wow, Dublin as expensive as New York, that's amazing.

I didn't mean to suggest that Ireland has or should try to have low wages on a global scale. It should try to have an attractive total cost of doing business relative to the value a company gets from being there. And that means, in general, that the more educated your work force, the more a company will be willing to pay in your location -- but only if it can't get equivalent or better somewhere else for less money. Stable, predictable financial and legal environments also figure into the picture.

I used to work for Nokia in Silicon Valley, and these pressures quite directly affected Nokia's management decisions. Silicon Valley and Tokyo are the two most expensive places Nokia has people, so it only does the things there that it can't do anywhere else. Helsinki is in the middle, and Beijing near the bottom, cost-wise. As Beijing's competence level continues to rise, more work will get shifted there, modulo political, legal, and financial risks. Salaries will continue to rise in China, but not quickly enough to avoid putting pressure on engineering salaries elsewhere.

I'm half way through Thomas Friedman's _The Lexus and the Olive Tree_. Something from this general genre should be required reading for all engineers, I think.

 

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