Canadian manufacturers were slow to adapt to the globalized supply chain and growing competitors.
New York, NY (PRWEB) May 08, 2014
Demand for equipment sold by the Telecommunication Networking Equipment Manufacturing industry could have been bolstered by the increasing rate of aggregate private investment, swelling corporate profit and the growing number of fixed broadband connections, however these factors were not enough to prevent the industry's decline. Over the past five years, revenue for wired telecommunications equipment, including network switches, routers, modems and gateways, fell during the five years to 2014. This decline was primarily a result of external competition with companies that have more efficient cost structures.
With the majority of industry exports targeting the United States market, the industry contracted at an alarming rate in 2008, as US corporate profit plummeted. According to IBISWorld Industry Analyst Sarah Kahn, “operators did not have a chance to recover because an appreciating Canadian dollar and falling corporate profit caused the industry to contract further in 2009.” Revenue continued to plummet in 2010 and has been falling since, albeit at a slower rate. “In 2014 alone, revenue is expected to dip,” says Kahn.
The Telecommunication Networking Equipment Manufacturing industry is characterized by a low-level of market share concentration. The global financial crisis coincided with a shift in the nature of the manufacturing industry, and Canadian manufacturers were slow to adapt to the newly globalized supply chain and growing competitors. Emerging economies with low labour costs assumed production activities of low value added goods while high labour cost economies outsourced production facilities and used operating profit to invest in innovative products, technology, research, engineering and a talented and skilled workforce. Canadian manufacturers did not have the necessary profit margins to make the same investments and were unable to take advantage of opportunities offered by geographic specialization.
Canadian manufacturers' sluggish response to the changing nature of the manufacturing sector gave industry counterparts in emerging economies time to grow into robust competitors. They also developed capabilities to compete on high value added goods. While Canadian manufacturers are expected to diversify trade partners, take advantage of global resources, and invest in innovation, technology and a skilled workforce, revenue is still expected to decline during the five years to 2019.
For more information, visit IBISWorld’s Telecommunication Networking Equipment Manufacturing in Canada industry report page.
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IBISWorld industry Report Key Topics
Operators in the Telecommunication Networking Equipment Manufacturing industry manufacture wired (voice and data) telecommunications equipment, including telephone switching systems, telephones and answering machines, data bridges, routers, modems and gateways. Over the past ten years, this industry has increasingly focused on manufacturing internet protocol-based telecommunications and networking equipment.
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