The DTT (digital terrestrial television) migration process continues to trundle towards its 2011 deadline but it seems that local manufacture of set-top boxes (STB) has been delayed in its tracks.
Dataweek spoke to Secretary General of NAMEC (National Association of Manufacturers of Electronics Components) Adil Nchabeleng, about the role NAMEC is playing in the manufacture of STBs and what factors are causing the current legislative delay.
NAMEC views itself as a full turnkey operation in terms of assisting in the identification of opportunities, putting together sustainable business models, providing technical training and marrying the technical expertise of South Africa to other countries such as Korea, Japan, China and Brazil. “Capacity building is sorely lacking in terms of the black manufacturers and we will assist by providing manufacturers with technology and technical know-how and business support needed in terms of starting, sourcing and running an STB manufacturing and assembly plant,” Nchabeleng said.
NAMEC was constituted to “. . . be the anchor in the electronics components, manufacturing and assembly industry with a development emphasis to include black manufacturers and HDI in South Africa. The Association’s intent is not aimed at excluding other established manufacturers and industry players. Although the formation of NAMEC as an industry body goes far beyond the STB technology and manufacturing, we felt that emerging and established manufacturers needed an umbrella organisation to represent and lobby for their interests,” Nchabeleng said.
The question is: “How far down the line has the Association come in terms of achieving its stated objectives since its inception late last year?” Nchabeleng said that due to intervention by NAMEC just prior to the adoption of the draft policy on set-top box manufacturing sector development strategy and policy for South Africa, it became quite apparent that the draft manufacturing policy, whilst alluding to the need to transform the sector, did not do much to ensure a balanced reflection of the demographics and the economic value chain participation of BEE SMMEs in this opportunity and process. “The prior processed draft policy was in fact structured in a favourable position towards established manufacturers.”
NAMEC as an industry lobby body intervened and requested a policy review which would include the participation and factor the interest of all stakeholders, as well as both emerging and developed manufacturers. “In essence, we want Government to allocate 50% of the STB manufacturing to emerging and historically disadvantaged and black electronics component manufacturers. The policy proposes to subsidise manufacturing and distribution costs of the STB decoder; this is geared to assist about five million poor households in South Africa to acquire the manufactured STB decoder,” Nchabeleng said.
“The previous proposed legislation was aimed at giving the lion’s share to the ‘Big Five’ manufacturers to the exclusion of the emerging manufacturers,” he continued. “NAMEC believes that the current digital broadcast migration process is a significant opportunity as an economic development, economic stimulus and driver, to promote local technology development, components and STB manufacturing and mass roll-out of digital transmission technology.”
Nchabeleng pointed out that Department of Communications is in the process of finalising the current draft policy. This process entails finalising evaluation of and broadcasting transmission standards it wishes the manufacturers to follow and it also needs to determine what the subsidy scheme and value will entail before the process can continue to its finality.
The Government’s long-term strategic objective is one of strengthening and expanding domestic technical, design and software engineering skills base, as well as leveraging and maximising opportunities and introducing new players within the STB manufacturing value chain and building a world class electronics industry. There are numerous challenges in this process, but the opportunity is great for South Africa.
“It goes without saying that the cost of setting up an STB manufacturing facility and plant is huge, with figures of around R30 million not being unreasonable. It then becomes important that industry, with Government and other stakeholders such as banks and research and development agencies, work together to achieve these objectives to ensure a successful DTT migration. We also encourage the fostering of new collaborative agreements between existing manufacturers and emerging manufacturers, with the hope of achieving reasonable and sustainable transformation of the electronics sector and industry in South Africa. We also hope to in the future achieve 100% black owned and operated concessions by buying existing components assembly factories, then ensuring that they comply in terms of quality assurance,” Nchabeleng said.
“We have already seen an instance of a successful consortium between an existing JSE-listed electronics manufacturer and a black women’s investment group, which has enabled the formation of a new, almost fully black owned STB manufacturing company,” he added.
Where will manufacturing take place?
NAMEC’s strategy is to address the nine provincial markets in terms of distribution, installation, the procurement process and the empowerment of communities in the context of training and software development. “It is anticipated that because of the capital outlay required, there will not necessarily be manufacturing facilities in all nine provinces. We have therefore focused on the recognised trade hubs such as Johannesburg, Cape Town, Port Elizabeth and Durban. The latter three are natural choices since they are sited at operational ports. This means that from a logistics perspective there will be no need for warehousing and storage facilities and unnecessary transportation costs. It also means that manufacturers will have ready access to shipping routes for exporting products once they have reached capacity,” Nchabeleng explained.
He also pointed out that each of these hubs currently has the required infrastructure and skills availability in terms of necessary electronics assembly skills such as soldering and other electronic component manufacturing processes. “Skills will be essential since each of these plants will need a minimum of 500 people on board. We know that the smaller companies are employing between 150 and 200 people but this is not critical mass. Their current manufacturing capacity of 25 000 to 50 000 units a month will unfortunately not address the production requirements, so we will be placing emphasis on the development of technical skills and competency as well as further training and development.”
Is STB manufacturing a sustainable industry?
According to Nchabeleng, the current requirement is for nine million set-top box decoders in households, of which five million households will be subsidised by Government. “We are cognisant of the fact that once the critical mass has been reached there will obviously be a limited lifespan for STB manufacture. However, NAMEC was not formed solely to address STB manufacturers’ needs. We are an Association for all manufacturers of all electronics components.”
The Association’s main objectives are to collectively protect, bargain, lobby and promote the interests and rights of the historically disadvantaged, emerging, small medium micro enterprises (SMMEs) in the manufacturing and assembly of any and all electronics, communication and related components, products and solutions. Nchabeleng said that the aim is to create a sustainability model whereby, once the STB ‘rush’ is over, the STB manufacturers can then move into manufacturing other electronics components, using their current infrastructure and skills bank. “South Africa is lagging behind in terms of technology and we hope we can minimise dependency on importation of electronics components in the future by becoming self reliant as a country. We want to see a redevelopment of the diminished electronics sector and segment.”
“Up to 1994 South Africa had one of the most leading edge electronics technology industries in the world, residing in organisations like Armscor and DENEL African Defense Systems. However, much of the skills initiative has been lost and there has been a definite knowledge gap between 1994 and 2010. We need to make SA competitive in the global digital market again. We have a technology base and people who understand the market, but we need a consolidation of this knowledge for the industry to once again become a successful world player,” Nchabeleng emphasised.
What opportunities are there?
Nchabeleng explained that as far as the STB industry is concerned, a number of potential programmes are in place and are ready to roll out on the go-ahead from Government regarding the DTT policy. “This will be a vertical upstream value chain model with suppliers, manufacturers (OEMS), distributors, retailers, installers and consumers and it will create a multitude of job opportunities, industrial development and growth within the South African economy.
“As far as the OEMs are concerned, there will be a need for components, metalware boxes and software as well as PCB and component assembly. We envisage that distribution will follow a warehousing model with systems undertaking tracking of products,” Nchabeleng said. “The retailers will be given sales and marketing support to ensure that the market is familiarised with the product and that it is adequately promoted and introduced to the marketplace.”
Nchabeleng sees a huge entrepreneurial opportunity for installers from communities in terms of the national rollout of set-top box decoders. “Once an installer has undergone the requisite training and received accreditation, he can create a sustainable business whereby he would then fulfil the role of educator to the consumer and households, and intermediary between the consumer and the retailer for any future service requirements. His duties would include the installation of wiring and cabling, the installation of the decoder, and checking the quality of signal reception.
“In all steps of the value chain process there will be an emphasis on planning and ensuring that orders are available on schedule,” Nchabeleng said. “If you are in a position to integrate all elements of the value chain you will have a much stronger industry. We are therefore aligning ourselves with the National Research & Development Strategy whose goals are job creation and equity.”
Skills and training
Nchabeleng pointed out that at all levels of the upstream and downstream value chain, education, training and support are needed to ensure the requisite skills are acquired. “This training will be based on the standards set by SETAs and by the institutes for further education and training (FET); the latter predominantly for the installers.”
In terms of tertiary education, there will be an emphasis on electronics knowledge, as well as technology, software and engineering capabilities. “Specialised encryption technology requirements need to be addressed and in spite of the high level of automation in manufacture and assembly, there is still a large amount of human intervention needed and this will therefore require a specific skills and development base. Competency and skills transfer is very important to ensure we comply with international standards, so we may well need to partner with overseas technology experts,” Nchabeleng said.
NAMEC has aligned itself with the Information Systems, Electronics and Telecommunications Technologies (ISETT) SETA which has a number of learnerships in place to satisfy industry requirements for the migration process. “One of our roles is to ensure that companies can absorb the fresh skills coming out of training facilities and FETs and use them to benefit the electronics component manufacturing industry,” stated Nchabeleng.
On the local front, Nchabeleng said that the provincial chapters of the association are now in place and road shows will take place to educate communities throughout the country about the digital migration process and the role that previously disadvantaged South Africans have to play in it. “We will look at the various aspects such as the technical requirements, changeover implementation and the impact of the process.
“We would like to facilitate the flow of technological resources to the industry through knowledge networks. We are therefore working closely with various universities, and research and development institutions with regard to the development of innovation labs. It is important that manufacturing becomes a core competency and knowledge area and we need to build an environment that is conducive to innovation through the supply of skilled manpower, technology infrastructure and funding. Government, and the public and private sector likewise, must become involved in this with regards to enterprise development and incentivising,” Nchabeleng said.
What is next?
Nchabeleng believes that there are huge global opportunities in terms of the DTT migration process. “However, we need to move quickly so we do not lose the competitive edge. We are in a position to become a catalyst in terms of showcasing capabilities on the migration from analog signal to a digital broadcasting platform. There were global doubts that we could pull off the 2010 World Cup, but South Africa exceeded everyone’s expectations in terms of our collaborative efforts.
“With the STB and DTT migration process we can now showcase our own skills in a well run manner from start to finish. This would, in our opinion, entail using only local technology, supported by local manufacturers, by stimulating technology and enterprise development. This will all lead to further economic stimulus in the market in the future,” he added. “South Africa has a one-time chance to become entrenched as a continental leader and resource hub in the migration to DTT platform as well as to develop, supply and support the needs of other African countries, but we need to do so before the international market captures this transitory opportunity,” Nchabeleng said.
A manufacturer’s perspective
Muzi Makhaye, CEO of Arion Bomema Technologies, said that his company, a fully black managed and owned set-top box manufacturing business, started off importing and selling decoders in 2002.
According to Makhaye, the company took a decision early on to align itself with reputable and quality-focused technology partners. “We visited both China and South Korea and found what we believe to be the best STB technology in South Korea. We entered into a partnership agreement with Arion Technology and started the STB design and manufacturing business, while at the same time registering our IPs locally.
“Our earlier customers were the churches and hotel and leisure groups with a few other smaller customers, but in 2006, when the ITU announced the RRC06 (its decision to implement the digital migration process), we saw this as an opportunity to remodel our business and prepare it for local manufacture. Instantly, countries of the world became our potential customers.”
Makhaye is quick to point out that the process has been fraught with delays and indecisions. “The latest was when DOC informed the industry that a new and different broadcast technology standard, the ISDBT, was being considered to replace the established DVB family of standards. This was a major setback for us all as we had built business plans secured funding based on DVB-T; the review of which threw our plans off and caused our backers to withdraw their funding.”
Makhaye said that there are a couple of issues still to be sorted out: “Government needs to finalise exactly how they are going to subsidise the poor households to acquire the decoders. As things stand now, the issue of subsidy is of less urgency to us; the most pressing issue now is the confirmation of DVB-T as the country’s broadcast standard.”
Makhaye said that the company imported its last set of decoders in March 2009. “We then spent a year developing our own STB that meets SABS specification. In anticipation of digital terrestrial television (DTT) migration and hoping for an order from Government, we upgraded our factory in late 2009 to increase our capacity to 150 000 units a month. Although we are still waiting for the DTT process to ultimately move on, we did supply 600 of our AF8700VHD model STBs for the broadcast of the FIFA World Cup games at the various fan parks and public viewing areas.”
Makhaye explained that the broadcasters will appoint a conditional access company to work with the STB manufacturers. “Once we receive the go-ahead from the broadcasters we will be issued with security chips to insert into the STBs. To date we have had very positive feedback on tests done on our STBs from both e-TV and the SABC, so we anticipate the turnaround time to be relatively quick once the protocol is in place.
The end user market is divided into two separate categories – the retailer market and the Government (subsidised) market. “The entry level STB, which comes without all the bells and whistles and serves the basic objective of converting the signal, will be subsidised. We are also developing top-of-the-range brands that will incorporate a return path. In essence, this will enable interactivity and two-way communication between the broadcaster and the television viewers,” Makhaye concluded.
For more information visit www.namec.co.za
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