An
important issue to consider in understanding the evolution of the sector is that
before 1990, the electronics sector of Soviet Latvia employed some 30,000 highly
qualified specialists. Latvia’s
electronic industry was very important in the former Soviet Union, providing at
the time
telecommunications
equipment and electronics production for military needs. The industry had
five
big state companies: VEF, Radiotehnika, Alfa, Komutators and Elar (that was
producing
equipment
for the first four companies).
Despite
its importance in the Soviet times, the Latvian electronics industry could not
compete
with
Western companies when the markets were open in the beginning of the 1990s. Low
pricing
strategy
could not compensate for the poor service and quality of the products. The
restructuring
process
of the national enterprises was not very successful, and the companies
production
fell in
more
than 90% between 1993 and 1997.
The
former electronics enterprises are still present but restructured in smaller
units. Today the number
has dropped to 2,000 highly qualified specialists (e.g. VEF decreased its number of employees close to 95%
from around 20,000, and was organized into smaller units profit centers).
The companies that have survived are those that have endured substantial
restructuring—gathering the best of technology and people present before 1990,
and developed specialized competencies related to some other field, e.g.
electronics & medicine, electronics & chemistry. The most viable way for
companies is to integrate electronics and IT into traditional industries (e.g.
Latvia’s strong chemicals and oil industry
supported by its chemical management process through IT processes).
There is still a great need for restructuring, focusing on gathering strategic
investment and developing a corporate market2. Most companies are still in need of
strategic
investors.
The
contact between telecommunications service sector and local equipment producers
is very
weak.
Despite the fact that the modernization plan of the telecommunications
infrastructure
suggested
the participation of the local electronics industry, the equipment was provided
by
Western
companies - local quality standards were insufficient to meet the demand for new
technologies.
The government, through agreements signed when granting the licenses to
operators,
intended to provide the right incentives for the use of local suppliers and help
the
electronics
industry development. The only real example of co-operation was Dambis’
assembling
of telephone boxes from supplied details.
The
electronics industry in Latvia is still in poor condition, even though some
individual
companies
have been successful in certain niches (e.g. Sidabre has developed a technology
to
make
the lithium batteries of the mobile phones thinner). Urgent coordinated
measures have to
be
taken from the government and industry to design a future development plan.
The process of
privatization
needs to be completed and strategic partners found to restructure.
From a governmental
perspective, a clear focus and a coordinated plan of development is required to
support the recovery phase and to give a stronger incentive for the growth of
the industry. Some successful restructuring examples include: Dambis-
producing mobile phone testing equipment (former semiconductor producer) to JOT.
It became a subcontractor in 1998 and has an annual turnover over 10 million USD
per year. Sidrabe-
working with vacuum disposition process that allows to make the lithium
batteries very thin. It is supplying to 3M, for example, and has had some
discussions with Ericsson. It has around 200 employees of which about 40 have a
PhD. DATI
is internationally recognized and has been looking for strategic partners and in
St.Petersburg, Russia, Kiev and Belarussia.
The
market’s capacity for computers (locally assembled and imported), software and
peripherals is estimated around Ls 80-100 million per year. According to the
Latvian Association of Computer Technologies (LTDA), the largest companies
currently are:
Computer 2000, CHS-Riga, Dati grupa, LIS, Microlink datori and Var. In 1999, the
turnover of these companies ranged between LVL 2.5 – 11.5 million computers
sold between 2,500 – 5,000 units; and software sold between Ls 0,1 – 1,5
million LVL. The electronics sector of Latvia comprised in 1999 of some 50
companies with 5,300 employees and LVL 35 million in turnover (not counting
computers) 2. The companies produce electronics for equipment,
machinery, systems and technological management control; some communications and
telecommunications equipment; medical electronics; food product quality control
equipment; electronic security equipment and others. The largest electronics
companies measured by the number of employees are the following2: