Swiss manufacturers shift production abroad

More and more firms are moving production lines to foreign subsidiaries Keystone Archive

An increasing number of Swiss manufacturers are outsourcing part or all of their production to foreign subsidiaries, according to a study.

Only 37 per cent of the more than 100 companies surveyed continued to base all production in Switzerland.

The report, conducted by the Institute for Technology Management at St Gallen University, found that a majority of firms had already moved some manufacturing to subsidiaries in eastern Europe, Asia and the United States.

“Cost is an important factor, but we are also finding that companies wanting to establish a greater presence for themselves in new markets are moving their production lines there,” said the co-author of the report, Elgar Fleisch.

“And as well as outsourcing manufacturing, firms are also moving jobs in the research and development sides of their businesses out of Switzerland,” he told swissinfo.

Most of the companies surveyed are active in the machine, automobile, electronic, chemical and pharmaceutical industries, and posted annual turnovers ranging from SFr150 million ($121 million) to SFr1 billion.

Jobs lost

Figures indicate that the number of jobs tied to the manufacturing industry in Switzerland has fallen by 25 per cent since the beginning of the 1990s.

“One of the messages of this report is that if companies move their production lines or any other function to another country, they will stay there. In other words, once outsourced, forever outsourced,” commented Fleisch.

Swiss Engineering, an association which represents around 15,000 engineers and manufacturers, has expressed concern that the move away from Switzerland is irreversible.

“This report has confirmed the fears we already had that more and more companies are looking to move their production offshore,” said the association’s general-secretary, Andreas Hugi.

He also warns that universities are struggling to recruit would-be engineers as students shy away from training for a profession which offers no guarantee of a job upon graduation.

“Universities are finding it difficult to attract enough engineering students because there is no chance of them finding work in Switzerland.”

Small and large

The report found that an increasing number of small- and medium-sized enterprises (SMEs) were considering moving production out of Switzerland.

“Around 25 per cent of companies which do not yet outsource production told us they were likely to do so within the next five years. And the majority of these are SMEs,” said Fleisch.

“So what we are seeing is the small companies following the larger ones.”

Hugi says his association recognises the economic benefits to both small and large companies of shifting production to parts of the world where overheads and salaries are often a fraction of what they are at home.

But he adds that the country will lose out if it does not do more to regain its competitive and creative edge.

“Switzerland is no longer the centre of innovation it once was,” said Hugi, “so it’s not surprising that companies are attracted to places like China and India, which are very innovating and have a lot of good and well-educated engineers.

“The end result is that Switzerland could become a second Monaco, a place which is home only to financial institutions. This is not a good solution, because the country needs engineering companies as much as it needs the banks.”

swissinfo, Ramsey Zarifeh

Key facts

The report was based on surveys conducted with 112 Swiss firms.
It found that an increasing number of small- and medium-sized enterprises were considering outsourcing part or all of their manufacturing to overseas subsidiaries.
Only 37 per cent of firms surveyed said all their production was still based in Switzerland.