3.6 Sector Overview
3.6.1 Manufacturing Engineering Sector
The complexity that characterises business globally is reflected in the
manufacturing engineering3 sector spanning intensified competition, technology adoption, product diversification, productivity improvement and related skills. The
LMT sector, measured by capital investment and employment, dominates the
economies of developed nations providing more than 90 per cent of output in the
EU (Robertson et al., 2009). In the early twentieth century, mechanical engineering
SMEs were at the forefront of small scale industrialisation.
Relevant NACE codes for the engineering sector comprise: [25] Fabricated metal
products, except machinery and equipment, [28] Machinery and equipment, [29]
3 The terms engineering industries and metalworking industries are used interchangeably (Carlsson, 1989)
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Motor vehicles, trailers and semi-trailers, [30] other transport equipment, [33]
Repair and installation of machinery and equipment).
Only 3 per cent of Irish SMEs are active in manufacturing compared to an EU
average of 10% (European Commission, 2012) however Carlsson (1989) advises
caution in interpreting the decline of manufacturing and the related growth in services suggesting that outsourced manufacturers often show up as services establishments rather than manufacturing entities. While average firm size has
been in decline since the 1970s, firm numbers have grown due to ‘flexible
specialisation’ as manufacturing is divested or outsourced to smaller suppliers
(Carlsson, 1989, p.27).
It is estimated that SMEs contribute between 25 and 35 per cent of world
manufactured direct exports concentrated around relatively few larger SMEs,
however the bulk of export growth is generated by smaller firms (OECD, 1997).
Innovativeness
The manufacturing engineering sector spanning mechanical technologies with R&D
expenditure at less than five per cent of revenue are generally classed as being
engaged in evolutionary rather than revolutionary technology (Eisenhardt &
Schoonhoven, 1990). Research-driven innovation in the mechanical engineering
sector is secondary to customer-supplier relationships in generating innovation –
which is predominantly incremental (Wengel and Shapira, 2004). However many
firms that are traditionally considered ‘low tech’ are in fact highly innovative
(Leiponen & Drejer, 2007). This is echoed by an Irish Government report citing a
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and cutting-edge (Forfás, 2013a). In their seminal work on technical innovation and
national systems, Nelson and Rosenberg (1993) note that the effectiveness of a
nation’s schooling and training systems not only determine the supply of skills but
also influence attitudes towards technical advance. The increasing use of science
and informatics and the formalisation of R&D pose a challenge to traditional
learning processes in the sector which are predominantly in-house and tacit in
nature (Wengel and Shapira, 2004). Furthermore, manufacturing engineering firms
make a significant contribution to their own process technology in contrast with
low tech firms who rely largely on upstream suppliers (Pavitt, 1984; Terziovski,
2010).
Firm Age-Ownership
The indigenous engineering sector is characterised by family firms where links
between ownership and management are strong and intergenerational
involvement appear significant. Family ownership facilitates lengthy tenure (field
data indicates periods of up to fifty years) creating ‘parsimonious stewards’
(Breton‐Miller & Miller, 2011, p.1173) who seek to avoid short term actions that
jeopardise viability. Among the research population, succession, progression and
strategic challenges are met by an array of responses, some driven internally,
others supported by state agencies.
Output, export and employment profile
The Irish engineering sector has an aggregate turnover of over €14.2 billion,
equating to 9.5 per cent of manufacturing output, it employs approximately 53,000
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The sector has suffered shortfalls in qualified labour leading to concerns of
inhibited growth (Wengel & Shapira, 2004), this is proving problematic in a number
of markets including Germany and the United Kingdom.
The indigenous sector comprises approximately 600 companies employing 16,000
people operating across domestic and export markets. Indigenous firms generate
sales of €2.7 billion with exports of €802 million (Enterprise Ireland, 2010). Export
levels, potentially masked by domestic sub-supply, have been slated for policy
support. As noted earlier, the engineering sector is significantly embedded in the
Irish economy as foreign owned and indigenous firms source a large proportion of
their inputs and services domestically (IEEF, 2014).
The manufacturing engineering cohort accounts for 17 per cent of total sector
exports and approximately one quarter of the payroll and value-added generated
by indigenous manufacturing (IEEF, 2011). Although increasingly populated by
graduate engineers, the sector is characterised by apprentice-based recruitment
with local employees who are not mobile (Wengel and Shapira, 2004).
Trading Profile
Trade is concentrated within the EU, primarily in the UK, Germany and France (IEEF,
2011) with growing reach into Eastern Europe and Asia among the research
population. The sector is diverse with identifiable sub-sectors spanning original
equipment manufacturers, Tier 1 and 2 sub component or assembly suppliers also
called ‘producer’s goods’ (Pavitt, 1990, p.43). Product design and development is
gaining traction among original-equipment companies and also among sub-
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or those seeking to diversify their portfolios in order to reduce reliance on sub-
supply contracts.
While the sector is diverse, dominant sub-sectors include: agricultural machinery,
materials handling, precision and process engineering, automotive and aerospace,
metal fabrication and processing. Table 3-3 presents an overview included selected
company listings in each of the sub-sectors.
Agricultural Machinery
A strong sub-sector generating exports of over €100 million. Irish agricultural machinery tends to be more rugged and built to a higher specification than machinery from some other countries due to the mixed quality of Irish land. E.g. Dairymaster, Dromone, Keenan Systems and Mc Hale Engineering.
Materials Handling
Sub-sector dominated by a small number of companies delivering exports of over €150 million. Companies service a wide range of sectors including manufacturing, transportation, retail, construction and quarries. E.g. Combilift, Dennison Trailers and Instant Upright.
Precision Engineering
Sub-sector largely comprised of companies manufacturing a range of precision sub-components for large multinational manufacturers. A number of niche manufacturers have been highly successful. A significant number of these companies have developed their own product ranges.
E.g. Bellurgan Precision Engineering, Mincon International and Pressco Ltd.
Process Engineering
Sub-sector comprises companies manufacturing process equipment including high value-added modular skid units used by the world’s leading pharmaceutical, chemical and bio-pharmaceutical companies, and large bulk storage tanks for a range of applications including mining and food.
E.g. BCD Group, Grant Engineering and Suretank Ltd.
Automotive and
Aerospace
Sub-sector has a small number of successful niche sub-component
manufacturers supplying the automotive and aviation industries. Companies in precision engineering, tool making, plastics and metal fabrication are active in these sectors.
E.g. C & F Automotive Ltd (Iralco), M J Quinn Ltd and Romaquip Ltd.
Fabrication and
processing
There are a large number of companies fabricating a range of metal products for the construction, agriculture, industrial, marine and transit industries. Also a source of highly innovative own-products.
E.g. Crowley Engineering, LMH Engineering Ltd and McAree Engineering Works Ltd.
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The foregoing section provides a brief analysis of key dimensions of the
manufacturing engineering sector in a global and Irish context. The next section
addresses these dimensions in the Software sector.