The IDA has said it expects a reduction in the annual rate of jobs growth here, as the world economy heads towards a downturn. While there will be a fall in growth in the Irish electronics sector, the worst affected area will be the consumer products industry.
New jobs generated by inward investment from electronics companies are expected to fall 22 per cent from about 4,500 this year to around 3,500 in 1999. No major closures in the IT area are expected, but small numbers of jobs will be lost across all industry sectors. The IDA predicted temporary jobs numbers will decrease by 50 per cent annually from next year.
Recent market crises in south east Asia and Japan have triggered the IDA's economic slowdown prediction, while developments in Russia are expected to contribute significantly to the global slowdown.
The electronics sector currently employs 35,000 people here - excluding indigenous Irish companies. Mr Frank Ryan, head of electronics at the IDA, told The Irish Times: "What we have to remember is the calibre of investment here is much better now than the last recession in 1986 when the economy was nothing as strong. With the current portfolio we have a better chance of riding it out than our less flexible European counterparts."
The IDA is confident the IT industry will weather any recession, as it feeds into all industries and is projected to be a fundamental wealth generator well into the 21st century. According to Ms Patricia McLister, divisional manager of electronic engineering at Enterprise Ireland, a global slowdown could have a beneficial impact on Irish electronics companies.
"It could help to relieve the skills-shortage problem if large multinationals aren't doing as well. When their shares are not as enticing they may look to smaller Irish companies for opportunities. The indigenous high-tech sector is also experiencing very rapid growth. A cooling-off period might help these companies better manage growth."
Irish sub-suppliers to multinational electronics companies here and abroad are the most likely to be affected. Ms McLister says there is already evidence in the mobile phone industry of a slowdown, resulting in a continuing question mark over Motorola's Swords operation.
Closures announced by Siemens and Fujitsu in England last week have raised questions about Ireland's dependence on large foreign investors. Job cuts and investment delays have been announced at companies across Britain in the wake of the Asian crisis. The IDA has said it has no reason to believe any major job losses are expected in similar sectors here.
The closures in England related specifically to problems in the global semiconductor market. The Asian financial crisis has aggravated problems for microchip makers, who blame Korean companies for undermining prices by dumping chips on the market. Worst hit by overcapacity have been producers of D-Ram memory chips, mainly for the computer industry.
Intel, Ireland's largest chip manufacturer is not expected to be directly affected by these developments as it has not made DRam memory chips since 1986. However it does produce microprocessors, which have experienced market challenges lately, and the IDA accepts a number of high-tech companies are currently "pausing for breath to watch the market".
A shift in emphasis from manufacturing to more critical activities is helping to secure the future of many multinational companies in Ireland. At present 45 per cent of all overseas electronics companies undertake activities here outside of manufacturing. This compares with only 10 per cent in 1986. According to Mr Colm Donlon, spokesman for the IDA, the authority's resources are split 30:70 between chasing new investment and consolidating what is already here.
"We have all the Fortune names here and there's a limit to our capacity. Now we're in the business of getting deeper integration out of the existing client base and burying the roots here right down," he says. "The question should nearly be now why aren't there more expansions, not new jobs."
Recent job announcements from Dell, IBM, EMC and Xerox are all examples of this.
Now the IDA is moving its focus away from manufacturing functions and pitching for software, telecommunications, datacommunications and multimedia companies.
Prof Michael Ryan, head of the school of computer applications at Dublin City University, says the market for software development here is unlimited. The biggest problem is a scarcity of people to carry out projects.
"We have to be careful how we pursue these software opportunities, when other markets have huge pools of talent offering the same services for less. We have to position ourselves high up on the value chain so our skills base is better developed than elsewhere."
A strong national commitment to research activities and advanced software development are necessary to achieve this. Prof Ryan cites the example of Iona Technologies, which started out as a Trinity College campus company. "Iona never received any support from the Irish Government, but got it from the EU. We tend to think in terms of surviving, and don't think enough about being in front."
