NEC closure reflects harsh realities of global marketplace, writes Arthur Beesley, Senior Business Correspondent
Last Friday the directors of a Japanese firm called NEC Electronics gathered in Tokyo to discuss a mounting financial crisis in the company. Few of the 350 people who work for NEC's Irish unit in Ballivor, Co Meath, would have known about this meeting, but the decisions taken by the directors will disrupt their lives hugely. Each of the staff will lose their job when NEC shuts the microchip plant in September.
The development came as an unwelcome surprise to workers coming off the night shift early yesterday and who were called to an emergency meeting in the afternoon. The expectation of bad news intensified when NEC phoned staff not on duty and told them to come in for the meeting.
Managing director Kenji Yamashiro told workers that production will move to Singapore, Malaysia and China because operating costs in Ireland were too high. He said the decision had nothing to do with the quality of work carried out at the plant and went on to say NEC Semiconductor Ireland was "very proud" of its legacy. Such pride will be of little comfort to staff, who must now embark on a search for alternative work.
Long before the boom began, NEC was among the first international high-tech companies to establish a base in Ireland. Regarded for years as one of the IDA's shining stars, its directors decided last week that NEC should go the way of others who say that doing business in Ireland is too expensive. "The consolidation of production from Ballivor into other international plants, which have lower operating costs, will allow NEC Electronics to reduce its global manufacturing costs while maintaining global capacity competiveness," the company said.
NEC is forecasting a net loss of 20 billion yen (€141.26 million) in the current financial year. Some 70 per cent of the Irish production will go to Singapore, where costs are half the Irish rate. Costs are even lower in Malaysia and China. In that context, it matters not a whit that the Irish unit is profitable, with net profits of €4.61 million in the year to last March.
If the movement of production to low-cost economies is part of the logic of international capitalism, the directors of NEC Electronics cannot blame conditions in Ireland for the company's poor performance. In less than 20 years, it has fallen from its perch as the world's biggest maker of computer chips in 1988 to 10th largest today. Ballivor is not to blame for that.
Still, NEC's departure is in line with the relentless demise of Irish manufacturing generally, whose slow death comes as traditional industries put thousands of their staff out of work in the drive to cut costs. As if on cue, the NEC closure came only five days after Fruit of the Loom said its T-shirt factory in Buncrana, Co Donegal, will finally shut next May. After years of cutbacks, less than 200 people are currently employed at a plant that once had 3,000 staff.
In addition, not a week has passed since Magee of Donegal said it was moving production of its suits out of Ireland. After years of losses and job cuts, Magee said only last October that it was projecting a return of profits for 2005. Neither that nor the undoubtedly high quality of Magee's manufacturing operation was enough to save 60 jobs.
At the same time as the Donegal closures came into the frame, Korean firm Saehan Media said it was closing a videotape and cassette factory in Hazelwood, Co Sligo. This will leave 91 people looking for new jobs at the same time as 57 former staff at Platter Foods in Sligo seek alternative work.
"The number of manufacturing jobs in our economy is going to continue to shrink," says Austin Hughes, chief economist at IIB Bank. "It reflects two distinct facts. The number of manufacturing jobs worldwide is also shrinking and in that smaller pool, countries with lower costs are probably seeing a smaller rate of job loss."
This phenomenon is all the worse in a region such as the northwest, which does not have the ease of access to European markets that helps to attract high-tech industry to Cork and Dublin.
Through social partnership, the Government also has a leading role in the determination of the wage rates that feed into the rising cost of doing business. Workers cannot be blamed, however, for seeking a wage that will enable them to buy a house in a time of rising prices. Other business costs have risen too, among them energy, local authority rates and insurance.
IDA Ireland had a bumper year in 2005, capped in January by an €820 million project in Co Cork by biopharmaceutical giant Amgen and other projects. If the Irish economy is still proving to be remarkably adept at job creation in highly specialised areas, the NEC closure proves that even the brightest stars sometimes fade. For the community in Ballivor, the news yesterday was only the start of the pain.