Business is still booming for those electronic machines

THE huge expansion announced by the US computer company Gateway 2000 earlier this week will transform the young company into one of the State's largest private sector employers.

Gateway bought its factory in Clonshaugh in August 1993, and shipped its first PC just six weeks later. By its second lull year of business, the company had European sales of $400 million.

Initially, the company planned to create 450 jobs in Dublin by the spring of this year, but quickly exceeded these projections and now has a staff of 1,100. By the time the company celebrates its fifth birthday in Europe in 1998, it should employ over 2,000 people. Gateway's performance in Europe and in its domestic market in the US is a testament to the huge growth enjoyed by the personal computer sector in recent years. But in this ever changing industry, which regularly has annual growth rates of 20 to 25 per cent, there are as many losers as winners.

The biggest loss was the closure of Digital's manufacturing plant in Ballybrit, Galway, when 780 staff lost their jobs. This was a bitter blow and continues to cast a shadow over the public's perception of US companies investing in Ireland. Yet for every Digital and Key Tronic - which shed more than 300 jobs this week - there is an Intel, a Gateway or a Dell. But even Digital - the company which many people think quit Ireland - has expanded dramatically over the past 18 months and now employs 1,100 people.

More recently, concerns about the future of the Apple plant in Cork were alleviated with the news that the implementation of its recovery plan would not result in job losses. Limerick based AST, which also had problems recently, appears to be in a much better position since Samsung took a large stake in the hardware company.

Ireland has had more winners than losers in recent years and has four of the top 10 PC hardware companies. But in such a fast moving sector, there are bound to be more disappointments and IDA Ireland has to ensure that it has a wide enough spread of PC and electronics business to cushion against the occasional failure or contraction. So far the strategy appears to be working as employment in the Irish electronics sector - software, PCs and components in the main - has expanded dramatically over the past 20 years.

In 1975, there were 10,000 people employed in the sector, within 10 years this had risen to about 22,000. About 33,000 people are currently employed by computer/ electronics companies in the Republic and with many of the big players currently undergoing major expansions this figure should continue to grow.

In the last year, foreign owned electronics companies have announced the creation of a total of 8,500 new jobs and the Republic is currently taking 23 per cent of all new greenfield electronics investment in Europe.

The sector plays a huge role in the Irish economy as domestic and foreign owned firms pump billions of pounds into the economy in taxes, wages and the purchase of Irish goods, services, and supplies. During the past 2 1/2 years Gateway alone has contributed £400 million to the economy more than repaying the £10.1 million that it received in grants from IDA Ireland.

The slowdown in the PC industry during the first quarter of this year had lead to some US stock market analysts voicing concerns about the strength of the sector and downgrading certain key companies.

But Mr Kieran McGowan, IDA Ireland chief executive, points out that a slowdown in the computer industry means expansion of 15 to 20 per cent this year compared to growth of about 25 per cent in 1995. The growth might be slowing down, but it is still at a level which is the envy of many other sectors of the economy.

Mr McGowan believes that the slightly sluggish performance, which was mainly felt in the US market, is due to companies being too bullish in the run up to last Christmas rather than to an underlying weakness in the sector. "This is a temporary blip, due to people overstocking last year," he said.

He has recently returned from a series of meetings with Korean and Japanese electronics companies, and found them up beat about prospects for the medium term.

While the US market may be slowing somewhat, Europe is still strong and Ireland is also benefiting from the good performance of the direct sales sector.

Direct sales, which currently accounts for 30 per cent of the £50 billion worldwide PC market, is growing rapidly and Ireland is home to the two giants of the sector Gateway 2000 and Dell. Dell's Irish operation is growing strongly and according to figures released this week its Limerick manufacturing operation, which exports to a number of European markets, had sales of $467 million (£299 million) in the first quarter of this year - an increase of 34 per cent on the same period last year. Dell employs 1,400 people in Limerick and at its telesales and support centre in Bray, and has taken on 800 new staff over the past two years.

Mr McGowan said that he would still be bullish" about the PC sector despite the ongoing debate over the PC versus the network computer (NC). However, some in the industry argue that PCs will be replaced by NCs - simple cheap terminals which will receive software and information over networks such as the internet.

While the global PC versus NC debate looks set to rage, Mr McGowan and his colleagues can take comfort from two factors. The proponents of the NC claim that five of the top 10 PC hardware companies are interested in producing the new machines so chances are at least one NC company will be in the Republic, and Ireland is also home to major networking companies such as Cabletron and 3Com.