Executive summary Concentration of manufacturing companies in the Wellington region
Kapiti
Wairarapa
Upper Hutt
Porirua
Wellington
Lower Hutt
25+ 15-24 10-14 5-9 1-4
Wellington’s manufacturing sector is diverse and capable, although relatively small. It exists in a market that is globalised, connected and very competitive.
1. Boost awareness of and activity in research and development, design thinking and new product development;
However, New Zealand, and the Wellington region has advantages that manufacturing companies can exploit.
2. Assist companies to identify and exploit the right export markets;
These include strong information and communication technology (ICT) and design sectors as well as good trade connections to a number of key markets. To encourage longevity and robustness in the manufacturing sector, Grow Wellington will focus on three strategic priorities:
3. Facilitate connections between the digital and manufacturing sectors. Through implementing this strategy we aim to facilitate growth in the number of ďŹ rms, the number of skilled employees and the value of research and development (R & D) spend by businesses.
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Manufacturing in the Wellington region The manufacturing sector makes a significant contribution to the region’s economy. It supports a wider network of upstream, downstream and support services. Economists agree that creating one job in a manufacturing business leads to the creation of two to three additional jobs in supporting industries. Manufacturing businesses are located throughout the region, with traditionally strong concentrations in the Hutt Valley and Porirua. Employees of Wellington region manufacturing firms are 70% more productive than the average New Zealand employee*. Wellington manufacturers produce a diverse range of products, from beer and chocolate through to animal vaccines and scientific instruments. Some of the larger sub-sectors include plastics, print and machinery.
Wellington regional economy 2013
GDP total
$28 billion Manufacturing 8%
*Source: Infometrics
Manufacturing creates employment in a number of supporting industries.
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Manufacturing in a global context Manufacturing as a share of gross domestic product (GDP) is declining in OECD countries. At the same time, digital connectivity is becoming increasingly important for products and processes.
Manufacturing as a proportion of GDP Japan
There has been a shift from trade in goods to trade in value adding processes and features.
30%
There is a trend in dispersed production manufacturing products in different places to save transportation costs.
20%
Germany United Kingdom Sweden
United States Canada Australia
New Zealand
10%
Food, water, energy and technology products are in high demand. Disruptive open source and other low-cost development models are gaining ground.
1980
1990
2000
2010
Manufacturing in all developed countries is in decline, shown here in this high level GDP chart 1970-2011.
New Zealand’s free trade agreements are providing businesses with a significant advantage.
Source: Reserve Bank of New Zealand
New Zealand Free Trade Agreements China 2008
Taiwan Hong Kong 2013 2010
Thailand 2005
Malaysia 2009
ASEAN 2012 Brunei 2005 Singapore 2001
Countries with existing free trade agreements with New Zealand
Chile 2005
Australia 1983
Countries with proposed free trade agreements with New Zealand
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Regional strengths and weaknesses Wellington has a strong ICT sector – particularly in software development. There are also active design and creative sectors including digital design. We have a highly educated workforce. The region has a strong entrepreneurial culture, particularly in ICT. We have a very diverse range of manufacturing capabilities, albeit on a small scale.
Wellington has the most highly educated workforce in the country. Statistics NZ
NZ’s clean, renewable electricity is easily accessible in the region. BUT A smaller number of manufacturing companies start up in the region compared to other sectors. The small scale of industry base leads to gaps appearing as specialists retire, for example in tool-making.
“Our top 10 technology companies produce $3.9 billion a year, making strange things that dominate niche markets. We need 100 companies doing the same thing. To achieve that we need 100 talented people to create and foster those companies in New Zealand.”
Renewable sources account for 79% of Wellington’s electricity supply. Ministry of Economic Development 2011
100 years
10 years
Sir Paul Callaghan, 2011 1 year $1m
$10m
$100m
It typically takes a Wellington manufacturer more than 10 years to get to $10m turnover, and more than 20 years to get to $100m.
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Manufacturing Wellington Where are we? cost of labour. They invest heavily in research and development to achieve this.
The McKinsey Global Institute groups manufacturers into five categories. Of these, ‘Global Innovators’ and ‘Global Technology’ companies have the advantage as their goods are high value, highly tradeable in international markets, and less affected by the
COMMODITY
GLOBAL TECHNOLOGY
Wellington companies are clustered in the ‘Regional Processors‘ category.
REGIONAL PROCESSORS
GLOBAL INNOVATORS
LABOUR INTENSIVE
PLASTICS
FABRICATED METAL
CHEMICALS & APPLIANCES
FOOD & BEVERAGE
ELECTRONIC, PHARMACEUTICAL & PRECISION
MACHINERY & TRANSPORT PRINT
WOOD, METAL, OIL, PULP
RESEARCH AND DEVELOPMENT
LABOUR
CAPITAL
TEXTILES & FURNITURE
ENERGY
TRADEABILITY
VALUE
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Manufacturing Wellington Where could we go? • a machining company has developed its own range of waste-processing machines.
If more of our regional processors develop higher value products in the ‘Global Technology’ or ‘Global Innovator’ categories, their competitiveness and long-term robustness is likely to improve.
By encouraging and enabling companies to develop new products, a more robust sector can be created.
Some companies are already doing this, for example: • a plastics manufacturer is developing unique agritech equipment.
COMMODITY
GLOBAL TECHNOLOGY
REGIONAL PROCESSORS
GLOBAL INNOVATORS
PLASTICS MACHINES & APPLIANCES
Fabricators move into precision components and food companies develop nutritional additives.
LABOUR INTENSIVE
Plastics and fabrications add technology to become machines and appliances.
FABRICATED METAL
ADDITIVES & PRECISION CHEMICALS & APPLIANCES
FOOD & BEVERAGE
ELECTRONIC, PHARMACEUTICAL & PRECISION
MACHINERY & TRANSPORT PRINT
WOOD, METAL, OIL, PULP
RESEARCH AND DEVELOPMENT
LABOUR
CAPITAL
TEXTILES & FURNITURE
ENERGY
TRADEABILITY
VALUE
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How Grow Wellington can help Grow Wellington is well-placed to strengthen the manufacturing sector through our connections with local and central government, local business organisations, education facilities, technology businesses and our start-up incubator (Creative HQ). We will work with New Zealand Trade and Enterprise (NZTE), the Ministry of Foreign Affairs and Trade, the Ministry of Business, Innovation and Employment and Callaghan Innovation to connect regional businesses with export initiatives.
We will educate businesses about funding available for Research and Development (R & D) and give them advice on applications. We will boost awareness of product development, design, R & D activities. We facilitate connection and collaborations between the Wellington ICT and manufacturing sectors. Our planned programme of work focuses on three key areas, outlined below.
We will equip companies with the tools they need to find and develop new markets.
MARKET FUTURES
DIGITAL FUTURES
DESIGN FUTURES
Manufacturers find the right export markets
Collaborate with the digital sector to find new opportunities
Manufacturers upgrade product offerings - add value through design
Help companies identify markets
Build on internship programmes in tech and manufacturing
Champion innovation and ‘design thinking’
Partner with NZTE to deliver programmes
Drive manufacturers and the ICT sector to interact
Build capability and connections for new product development
Assist business to develop market skills
Grow startup ecosystem for physical products
Encourage R & D spend
Through implementing this strategy we hope to achieve the following outcomes for the sector: • Increase the proportion of high skilled jobs. • Increase the number of firms in the ‘high value’ part of the manufacturing sector. • Increase the value and percentage of R & D spend by businesses.
• Increase the number of Wellington firms in industry indexes such as the TIN100. Our vision is to see a strong manufacturing sector in the Wellington region, made up of innovative, growing and exporting businesses that are well connected to expertise and funding.
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Get in touch
• Are you interested in the Wellington manufacturing sector? • Would you like to get involved with building the sector’s capability and longevity? • Do you have a great story to tell about manufacturing in Wellington?
Then please contact Grow Wellington: Contact Phone Email Web
Grant Lumsden +64 4 382 0099 info@growwellington.co.nz www.growwellington.co.nz
Level 5, 50 Manners Street, Wellington 6011 PO Box 10-347, Wellington 6143, New Zealand
Disclaimer: The information in this document and any attachments does not constitute professional advice and we are not liable if you act on it. Please seek independent advice before acting on any such information. The information is correct to our knowledge at the time of publishing, September 2014.