The computer and electronics manufacturing industry is relying on the largest company in the sector to lift it out of the doldrums. A report says 2013 will be the start of something big

Future of industry on BlackBerry
BlackBerry has enough pressure on its shoulders already trying to recover with a new line of smartphones after slumping sales and revenues.
Now a report from the Conference Board of Canada and the Business Development Bank of Canada has added the entire computer and electronics manufacturing industry to its burdens.

As the largest Canadian technology company, the industy is counting on its revival for a rebound in their bottom lines, says the report issued Wednesday.

“In the longer term, the performance of Blackberry will shape the industry as a whole,” Michael Burt, director of industrial economic trends for the Conference Board, said in a news release accompanying the report.
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The report, one of an annual series on Canadian industrial sectors, notes that the computer and electronics manufacturing industry profits dropped to a nine-year low in 2012. In part, that has to do with weakness in the global economy, which saw sales drop sharply starting in the middle of 2011.

Weak exports and the strong Canadian dollar will continue to hinder the industry in the near term, the report says. Some Canadian firms have already shifted their production to low-cost countries and refocused their energies on research and development, it notes. The result is they are able to offer more specialized and customizable products, which give these Canadian firms a competitive edge and higher pricing power.

Still, the authors are optimistic about this year, predicting employment in the sector will jump 12 per cent to 88,000 after dropping to an estimated 79,000 last year. Output, however, will  show a small 1.8 per cent increase to just over $6.1 billion. Next year, the report predicts, output will grow 4.2 per cent on top of that. By 2017 it will hit just over $7 billion.

Industry revenues, estimated to be $14.5 billion this year, will go up by just over four per cent a year for the next four years to hit almost $17.2 billion in 2017. Profits will rise from an estimated $846 million this year to $1.4 billion in 2017, although revenues will be up a mere 1.2 per cent this year over 2012.

Last year was the lowest point the industry has faced in a while, the report suggests. Although not all figures are in, the report estimates that industry profits in 2012 were a mere $264 million, compared to $1.5 billion in 2009. This year it estimated industry profits will leap 220 per cent to $846 million, in part because production and prices are forecast to increase modestly while costs are expected to decline. Still, in an interview, Burt noted that profits will still be below the level of the 2009 recession.

Measured by their 2011 profits, the biggest companies of the 99 firms covered by the report include BlackBerry (officially still called Research In Motion, but about to legally change its name), Celestica (which makes electronics for companies around the world), IBM Canada, Hewlett-Packard Canada, Siemens Canada, Montreal’s CAE (maker of aircraft flight simulators), Cinram International, Ottawa’s Mitel Networks (unified communications) and B.C.’s Sierra Wireless.

Over 90 per cent of businesses in the industry have fewer than 100 employees, the report notes. Over 50 per cent of the industry’s firms are located in Ontario. With global production concentrated in major centres in China and elsewhere, Canadian players often focus on specialty products, it says. This is most apparent in the navigational, medical, measuring, and control instruments segment, which accounts for 39 per cent of industry businesses, but only 24 per cent of sales.

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