14 Jan 2017
AFR Weekend, Australia
Author: Ben Fitter • Section: General News • Article type : News Item
Audience : 49,915 • Page: 5 • Printed Size: 245.00cm² • Market: National
Country: Australia • ASR: AUD 2,170 • Words: 543 • Item ID: 713123030
Licensed by Copyright Agency. You may only copy or communicate this work with a licence.
Page 1 of 1
Australian firms must move up
value chain to stay competitive
Manufacturing
Ben fitter
When Chinese counterfeiters copied
Codan's metal detector five years ago
and sales to Africa plunged, the
Adelaide company tried to enforce its
legal rights.
"We tried to stop them in the market by going out there and doing
raids and so on, and it was just like
playing whack-a-mole," chief executive Donald McGurk said.
So Codan reinvented its metal
detector and brought in engineers
from its radio communications unit
to encrypt the intellectual property.
Sales and profits bounced back.
"The only way to stop them is to
out-innovate and outsmart and outcompete them in the market," Mr
McGurk said.
Codan is the kind of high-tech firm
the nation needs to cultivate if it is to
have a future in manufacturing, but
there are too few such firms.
A report from the Turnbull government's Advanced Manufacturing
Growth Centre finds that most Australian manufacturing do not have
the chops to compete at this level.
The findings are a blow to the government's $1.1 billion innovation
agenda, which aims to create engines
of economic growth beyond mining
and finance.
"The majority of Australian companies do not report characteristics
such as R&D collaboration; the use
of science, technology, engineering
and maths - or STEM - skills; supply
Donald McGurk. PHOTO: DANIEL KALISZ
of overseas markets; or increasing IT
expenditure," the AMGC's Sector
Competitiveness Plan says.
There are huge knowledge gaps in
fields vital to 21st-century manufacturing: robotics and automated production
processes;
advanced
materials and composites; digital
design and rapid prototyping; 3D
manufacturing;
micromanufacturing and precision manufacturing; and virtual reality systems.
Australian firms do much less
R&D than their counterparts in top
manufacturing nations such as
America, Japan and Germany, management is weak and manufacturing
labour productivity is only 60-65 per
cent of international benchmarks.
Still, the report says there is a prize
for Australian manufacturers willing
to put in the hard yards and move up
the value chain - a potential
25-35 per cent increase in value for
the $100 billion sector during the
next decade.
Australian firms have one big
advantage over their American and
other foreign counterparts - skilled
workers in medical devices and aerospace are 38-40 per cent cheaper to
employ than their US counterparts.
Employing more skilled workers is
one of the ways in which the AMGC
says Australian manufacturers can
move up the value chain and overcome the overall 7-15 per cent "Australia tax" - the cost of doing business
here.
The others include doing more
innovation, R&D and collaboration
with research agencies and other
firms to increase their technical leadership, and boosting scale and management quality.
Firms exhibiting these attributes
include Resmed, which spends more
than $100 million a year on R&D and
has 40 per cent of the global sleep
aids market, Quickstep, which has
developed new ways of curing carbon fibre resins for automotive, aerospace and defence by working with
Deakin University near Geelong,
Textron Systems Australia and
Cablex - which make drones and
short-run aircraft cables for global
markets. Codan is using its radio and
defence know-how to move into
defence electronics, with an eye on
top defence contractors like BAE Systems and Lockheed Martin.
"You have got to be internationally
relevant in Australia to be able to
gain some critical mass ..." Mr
McGurk said.