Ireland: Manufacturing Welcome Wagon for Western Europe
Europe's market is huge: more than 540 million well-educated, prosperous citizens with above-average incomes and a high standard of living. Manufacturers and sellers of goods can't ignore the business opportunity it presents, but they can hardly afford to move here. In spite of the warm feelings economic unification has brought, the area remains a crazy quilt of differing laws, languages, and c...
Europe's market is huge: more than 540 million well-educated, prosperous citizens with above-average incomes and a high standard of living. Manufacturers and sellers of goods can't ignore the business opportunity it presents, but they can hardly afford to move here. In spite of the warm feelings economic unification has brought, the area remains a crazy quilt of differing laws, languages, and customs that form effective barriers to the outsider. Just ask the people at Wal-Mart: after years of trying, the retail giant is giving up and moving out of Germany.
Fortunately for outsiders, however, there is one European country that has a big “Welcome!” sign on its front door: Ireland. Long renowned for its beauty and poetry, Ireland is now one of the fastest growing countries in the developed world, posting a 6.0% real GDP growth in 2005 — outstripping its neighbor the U.K., as well as the U.S. and Japan.
And where has this dramatic growth come from? Not from within, but from without. Nearly a quarter of the country's GDP is from 1,000 overseas companies who now base their European operations there. This includes nine of the world's 10 largest pharmaceutical companies, and IT giants Intel, eBay, Google, and Microsoft. Over two-thirds of the economy is fuelled by the service sector.
The soft-spoken, easygoing charm of its people may attract outsiders, but what lures them more than anything is the pro-business climate, where corporate tax is set at only 12.5% — about a third of the amount levied by the U.S. and other European countries.
Three-quarters of what Ireland exports leave through its five ports: Limerick, Dublin, Cork, Waterford, and Rosslare Harbour, and the government spent€142 million during the last six years to improve infrastructure and capacity development. This puts most of Europe to within 24 to 48 hours by truck. International airports at Dublin, Shannon, and Cork handle over 10 million passengers and 125,000 tonnes of freight every year, with direct daily scheduled services to European and North American destinations.
In the past, Ireland was known especially for its emigrants. Now, that has all changed, and last year there were actually more people moving into the country (70,000) rather than out of it (16,000). Membership in the European Union has helped, as people from other countries in the EU can easily migrate from one country to another. The average rate of unemployment, 4.4%, is half that of France or Germany.
High caliber engineers
Mr. Richard Cooper, VP Europe for Horner APG, thinks his company did the right thing in expanding outside of Indianapolis and opening up its European operations in Cork, Ireland.
Horner APG manufactures small PLCs and HMIs, and has been steadily increasing its business, in spite of fierce competition from other well-established European companies.
“There's a very high calibre of engineering personnel available here, and a lot of multilingual people,” says Mr. Cooper, referring to the free flow of Europeans who have been attracted to the quality of life on the island. The commutes are short, high-speed Internet is readily available, “and there's enough electronics infrastructure to support small manufacturers like ourselves.”
Most importantly, Mr. Cooper says, is that Ireland is viewed as a high-tech “new” economy in Europe, one that is “neutral” with little political baggage. “If you are a business located in France or the U.K., and you begin to expand into other countries, you're seen as a French company or an English company trying to expand,” he says. “But if you're coming from Ireland, business people view it differently. They see Ireland as the gateway into Europe.”
An often cited reason for locating a business in Ireland is its workforce. A unique advantage Ireland has over other European countries is that its population is so young: over 36% are under the age of 25 years, as opposed to about 28% for all of Europe — and, according to projections, it will stay that way for some time.
Ireland also enjoys a worldwide reputation for IT excellence with a highly skilled workforce of IT professionals across multiple platforms, applications, and skill levels. Microsoft noticed, and located operations and development centers for the entire Europe, Middle East and Asia region in Dublin. The operation employs 1,600 people and is Microsoft's fiduciary, tax, and legal hub for the region, serving customers in 70 countries.
“Over a period of 20 years operating in Ireland in our very dynamic industry, the real sense of support and partnership we have experienced here has been a constant: allowing us to evolve and become one of Microsoft's most important business centers worldwide,” says Mr. Terry Landers, head of corporate affairs for Microsoft Ireland.
Manufacturing in Ireland
With all the talk about the “knowledge economy” and the burgeoning service sector, one could be forgiven for thinking that manufacturing in Ireland — as it has in so many other Western countries — is taking on a diminished role in the economy. While it is true that such pursuits have somewhat changed the profile of the type of inward investment the Irish Development Agency (IDA) seeks, it is wrong to interpret that as meaning Ireland is working to be a services-based economy, says Mr. Sean Dorgan, CEO of IDA Ireland.
“Despite much comment to the effect that manufacturing is in decline, the fact is that it continues its substantial output growth and, like many other developed economies in Europe, Ireland remains a competitive and attractive location for new manufacturing investment,” says Mr. Dorgan.
Casting a glance around Cork, at the southern tip of Ireland and the home of many of the transplanted pharmaceutical companies, one quickly realizes that what's booming here is not the old, smokestack-style manufacturing of the 20th century. This is new-era manufacturing where productivity improvements arise from innovation and process automation and the relative cost of labor diminishes. These features create a demand for knowledge, innovation, and flexibility, which makes the skill and expertise of the workforce a fundamental of the business.
Probably no company better exemplifies the new era of manufacturing more than Intel. At Shannon, about 80 miles north of Cork, and in Leixlip, about 10 miles north of Dublin, Intel has its greatest concentration of employees in Europe: 5,000 people directly and indirectly in engineering, technical, and operational activities. It has four chip fab operations, including one that was Europe's first high-volume 300-mm facility operating on 65 nanometer technology.
“One of the main reasons that Intel Ireland has been so successful is that we have an excellent employee base,” says Mr. Jim O'Hara, VP and general manager for Intel Ireland. “Our employees have consistently proven their ability to master the engineering, scientific, and manufacturing disciplines involved in the world's most advanced technologies.”
Ireland also boasts of one of the most advanced and competitive telecommunications infrastructures in Europe, thanks to an investment of over€5 billion in the last decade that has laced the country with fiberoptic networks. The telecommunications market is fully de-regulated with two dozen companies competing on the basis of value-added services.
The availability of advanced telecommunications has made Ireland a popular location for global companies like Ingersoll-Rand, who want to centralize support activities in shared services centers to increase management efficiency. The company established its support office in Swords, just north of Dublin. Today, it manages nearly€3 billion of revenue for the company in a variety of commercial and service activities.
“IRI is an integral part of Ingersoll-Rand's longer-term strategy to ensure continued competitiveness in our many markets by providing our internal and external customers around the world with improved processes and technological capability,” says Mr. Herb Henkel, Chairman, President and CEO of Ingersoll-Rand.
As North American businesses continue their heavy investment in Ireland, relations between companies in the two countries continue to benefit from a common language business culture. That makes Ireland a good place to locate high-tech enterprises, now and in the future.
Michael Babb is editor of Control Engineering Europe, an English-language publication issued 6x per year providing case studies, technical articles, and local news and product information to print and e-newsletter subscribers throughout Western Europe.
U.S. manufacturing faces challenges
According to the U.S. National Association of Manufacturers (NAM), the United States is the world's number one manufacturer, accounting for about a quarter of global manufacturing output in 2004 (the most recent data available).
Its global share has barely dipped in the past two decades, while other industrialized countries' share has fallen slightly. Rising costs of energy and health care, and other non production factors will affect the ability of U.S. manufacturing to remain in this position, says NAM, as will a lack of skilled labor. In a 2005 survey, 82% of manufacturers said they could not find qualified workers to fill open positions.
The three largest manufacturing industries in the U.S. are food, beverage, and tobacco products; computer and electronics products; and motor vehicles and related parts. Although it was previously the top global exporter, as of 2005 the U.S. ranked number two behind Germany, and just ahead of China, which overtook Japan for the first time in 2005. U.S.-manufactured exports totaled US$806 billion in 2005, while its imports of manufactured goods totaled US$1,347 billion.
For more on the control, instrumentation, and automation industry news, new products, and techniques that support manufacturing in the U.S. and around the world, visit www.controleng.com.
R&D thrives in Ireland's 'knowledge economy'
Recently, Ireland began promoting itself as a “knowledge economy,” citing strategic investments from major companies:
GlaxoSmithKline, the world's second largest life science company, has earmarked€35 million in R&D to turn its Cork facility into a nanomilling technology center;
IBM will invest€22 million in its R&D software laboratory as part of the global strategic development of its software business in the middleware software market;
Hewlett-Packard, the king of inkjet printers, says it will invest€21.4 million at its inkjet manufacturing operation to establish a world-class Technology Development Centre.
No small factor in this sudden R&D increase is the Finance Act of 2004, which introduced a 20% tax credit on incremental R&D expenditures. This additional tax benefit makes Ireland one of the more attractive locations for R&D activity in Europe.
The dramatic expansion of R&D in Ireland in recent years is at least in part a reflection of the government's massive injection of funding into the sector. At a press conference in June 2006, the government announced a new strategy for science, technology, and innovation that involves an investment of€3.8 billion over the next seven years.