Employment in manufacturing fell for the fifth year in succession in 2005 and it is a racing certainty that it will fall further this year. Yesterday's announcement from NEC Semiconductors Ireland Ltd that it will cease operations at its Ballivor plant in Co Meath is further proof that manufacturing in this State is more vulnerable than ever before. Unless action is taken, rising costs, technology mobility and global trends could diminish the manufacturing base to the point where its relevance will be at an end.
The NEC decision is devastating news for Ballivor and for Meath as the plant is one of the largest employers in the county. It will not, however, have come as a complete surprise. When NEC set up in Ballivor in 1976 it was a great coup for the Industrial Development Authority because the company then was the largest chip manufacturer in the world. The IDA successfully used the NEC investment to persuade many other technology companies to set up Irish operations.
But NEC today is only the tenth-largest chip manufacturer. Declining demand for its chip products saw the group fall into losses last year running to some €141 million. While the Ballivor plant has been profitable until recently, the profit margins were running at less than 3 per cent. Although Ballivor was once at the forefront of technological innovation, insufficient development and investment have rendered it expendable. NEC invested £50 million in Ballivor in 1995. Intel has invested €5 billion in Leixlip. Ballivor, unfortunately, was far from being the jewel in the crown of NEC.
The semiconductor industry in this State is relatively small but it includes a number of world leaders on wafer fabrication and the design of integrated circuits. The Analog Devices plant in Limerick is the company's most advanced production facility and the Dublin operation of Xilinx has global responsibility for product lines. When the operations amount to more than production line assembly and especially if there is a significant R&D capacity, they can rely heavily on employee skill-sets which are not easily found elsewhere.
But the escalating operating costs which led to the NEC decision to shift production to Asia is an issue which must concern industry and Government. According to Forfás, foreign direct investment into this State in 2004 was half the level seen in the previous year while Irish investment abroad (excluding property) more than doubled. This suggests that the economy is at risk of becoming over-reliant on service industries and on the notoriously cyclical construction sector.