When the IDA speaks, everyone listens. The government agency deservedly takes much credit for the astonishing growth of Ireland’s tech sector.
There are upwards of 300 IDA-supported technology companies in Ireland, exporting product worth US$30bn and employing over 50,000 people.
Surveying the current technology environment, David Hanna (pictured), head of the IDA’s information and communications technology (ICT) division, notes that the recession is “much deeper and has gone on much longer than anyone expected. It has lasted three years. No one expected this.”
While he shares the consensus view that a slow and fragile recovery is under way globally, the good news, he says, is that Ireland has weathered the storm better than most and should be ready to take advantage of any upturn.
Casting his eye over the market segments that constitute the ICT sector in Ireland, Hanna sees encouraging signs. He feels that the outlook for computer hardware is particularly positive. After three years of stagnation, PC sales are set to climb again as organisations carry out equipment upgrades. Server sales are also expected to rise, driven by increased business-to-business e-commerce activity, as are sales of mobile devices, such as wireless-enabled laptops.
The semiconductor sector has been hammered by the downturn but this, too, is starting to look healthier with both Intel and AMD reporting higher than expected numbers recently, Hanna notes. Apart from PC and server applications, mobile handsets are a key consumer of semiconductor technology and he expects the coming on-stream of sophisticated 3G (third generation) mobile handsets to further aid the recovery of this sector.
For Hanna, the highlight of the year occurred in the semiconductor area. Persuading Intel to reactivate its project to build Fab 24, its third and most advanced wafer fabrication plant in Leixlip, Co Kildare, was a “major, major coup” and one that has not received the attention it deserves, he says. “It’s one of the biggest technology projects happening anywhere in the world,” he enthuses.
Winning the US$2bn project, for which the IDA and Intel’s Irish management must take joint credit, endorses Ireland’s technology credentials at the very top end, Hanna believes, and should pave the way for other investors to place advanced manufacturing operations in Ireland.
The continued success of semiconductor manufacturing is matched by the growth of the related integrated circuit (IC) design sector, which now employs upwards to 2,000 people. Hanna feels that a combination of best-in-breed manufacturers such as Intel and Analog Devices and a thriving design sector augurs well for Ireland’s semiconductor industry, despite the “current turbulence” of the sector.
Ireland’s 10pc rate of corporation tax on manufacturing activities has been an extraordinarily successful incentive over the years. Hanna believes that the reduction from 16pc to 12.5pc of the corporation tax on trading activities, due to come into effect on 1 January, 2003, will make Ireland an equally attractive location for activities such as selling and purchasing as it has been for manufacturing.
In a nutshell, the IDA’s job is to match the capabilities of the Irish ICT sector to the future requirements of the global industry and to address any deficits it identifies. A current focus of the agency’s work is cultivating a strong research and development (R&D) capability in the country, something that’s been lacking in the past. This is important, says Hanna, because it helps companies get through market downturns better. Having a strong R&D base also means they are less likely to pull out of Ireland. The new policy has already achieved notable successes. Several companies have invested in R&D centres in the past 12 months, the latest being American Power Conversion, which announced last week that it would invest more than €1m in a new European R&D centre in Galway.
Outlook for the Irish tech sector: good