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April 18, 1988

DESPITE THE BAD PRESS OVER LIQUIDATIONS, WITHDRAWALS, IRELAND’s IDA STILL HAS A PRETTY TALE TO TELL

By CBR Staff Writer

After being hailed as the miracle of the age in the 1970s, Ireland’s Industrial Development Authority has been receiving a very mixed press in the past few years as company after company – Mostek and Advanced Micro Devices were two of the biggest disappointments – arrived in Ireland with a flour ish of trumpets and copi ous grants and subventi ons, only to say a few months later that they weren’t going to set up there after all. But, reports David Martin, the picture is far less gloomy than some of the headlines would have us believe, and all the signs are that despite the disappointments, the strategy has to be regar ded as a substantial suc cess, and that the lack lustre Irish economy would have been in a much worse state without it. With Alps Electric opening a UKPIr5.6m plant in County Cork, Apple’s Claris establishing its European and international headquarters in Dublin and Microsoft expanding its Dublin operations (CI No 899), Ireland’s electronics industry continues to be one of the country’s few economic success stories of the past 10 years. The industry now employs 24,000 people producing UKPIr2,700m worth of exports, compared with 5,000 people in 1972 producing UKPIr50m worth of exports. There are over 300 electronics companies from North America, Europe and the Far East in Ireland manufacturing products that range from integrated circuits to mainframe computers. The foundation period for Ireland’s modern electronics industry was the 1970s when overseas companies were enticed by the country’s generous grant programmes and tax incentives. The Industrial Development Authority marketed Ireland as a stepping stone to the vast EEC markets. Tax at 10% Grants of up to 60% of the value of fixed assets are still available to companies that wish to set up manufacturing plants in Ireland. Corporate tax until December 31, 2000 will remain at 10% and is applicable to profits from the sale of goods manufactured in Ireland irrespective of whether the goods are exported or sold on the Irish market. Consequently Ireland is the most profitable location in Europe for US companies, and US Department of Commerce figures show that the average rate of return on US investment in Ireland between 1983 and 1985 was 21.8%, twice the EC average. However following the sudden unexpected departure of a number of companies which foundered or ran into trouble back home in recent years the IDA received a lot of bad press. Though the Authority protests that the record of foreign companies investing in Ireland is excellent, since last year it has requested a 10-year guarantee from each potential investor that it will stay in the country and reach agreed targets; if the company does not perform then it must return its grant. Back in the 1970s most overseas companies came to Ireland and set up test and assembly plants, in recent years the industry has progressed into product or process development and software design. Telecommunications equipment manufacturers such as Alcatel, L M Ericsson and Northern Telecom, whose Irish factories used to concentrate on assembly operations, have now moved on to product development and software projects for international markets. DEC, which originally used a manufacturing base in Ireland as a springboard to Europe in the 1970s, now designs new products and redesigns existing ones in Galway and Clonmel. When Norsk Data set up an Irish subsidiary in 1986 it contracted out all its assembly operations and built up its own plant around an engineering team which customises computer systems for client companies. Ericsson has recently renovated a section of its Athlone factory floor no longer required for assembly – the rebuilding operation provided more space for Ericsson’s expanding software team, which is the largest software development centre in Ireland. This team is now working on technology for future generations of telephone exchanges, producing batches of applications that it hopes will open up new customer services. One of the major factors in the success of the electronics industry was the major investment in t

hird level education that took place in the 1970s. Two new technical universities were opened, one in Limerick and one in Dublin. In the existing universities new departments of computer science and microelectronics were created. The skills and availability of technical graduates has proved an added incentive to foreign companies investing in Ireland – 42% of DEC’s 1,700 employees are graduates. Amdahl, whose only manufacturing plant in Europe is based in Ireland, employs over 100 electronics engineers, all recruited locally straight from college. As to the future many people in Ireland feel that there has to greater investment in indigenous companies, and less reliance on foreign multinationals. Esprit The Irish Government’s national development plan has called for every new job in an international firm to be matched by one in an indigenous firm. This looks to be somewhat ambitious goal at present, but Irish companies such as Ashling Microsystems, Intepro and Mentec have proved that indigenous companies can be successful in designing and marketing specialist items such as test instruments and control equipment. It is felt that the industry, training and infrastructure created in the last 15 years can be used as a base for more support operations and specialist services in areas like optoelectronics, silicon component design and the implementation of advanced manufacturing methods. The industry must also channel the electronics and software expertise in Ireland’s third level colleges and small high-tech enterprises into the rest of European industry. Ireland’s contribution to EC research programmes such as Esprit has been proportionally much higher than other community members, which is a path it must follow if it is to remain a success story in the 1990s.

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