Copper prices have jumped 25% in the past month, much of the gains coming in the past week. Can it last?
Analysts are mixed. While most agree that pricing is well above the level its fundamentals suggest it should trade at, some feel better news from China and an expected boon for infrastructure spending in the US will increase demand over time.
Others think the speculation is overblown.
And in today’s headlines from India:
As we were saying …
The situation in the Philippines is starting to feel a lot like that of Turkey from July of this year: A paranoid leader turned strongman seeks to exert his supreme dominance over a democratic nation.
Will the country stand back while Philippines President Rodrigo Duterte effectively declares martial law? Or will the army — no fan of China — assert itself and ironically return law and order to the nation by overthrowing a budding dictator?
There are more than 30 EMS companies in the Philippines, the largest of which include IMI, ranked 28th worldwide in EMS revenue at $800 million last year, EMS Components Assembly ($110 million), and Ionics ($63 million), which has seven plants there.
Other major players with smaller operations include Siix, Celestica, Cal-Comp and Wistron.
Although US-centric for decades, the Philippines under Duterte are pivoting toward China. US companies have invested nearly $5 billion in the country; even if they no longer feel welcome, extracting that won’t be easy.
Either way, politically the Philippines are a complete mess. Duterte has taken a stable nation and completely disrupted it, without any clear end-game. If his goal was to expand his nation’s markets and hedge its bets — understandable, given their neighborhood — he could have done so in a much simpler fashion. As it stands, he has alienated many of the Philippines primary trading partners, and for what? Business partnerships don’t have to be a zero-sum game. He could have ramped his dealings with Beijing without destroying his relationship with Washington.
Duterte likes to rail against the West for being what he considers corrupt and hypocritical would-be overlords. His own military very well appreciate the security the West historically has provided, however. His words might play well with the public, but he could very well pay the price with his life.
With Mentor stock being bought up by hedge funds (again) and the CAD company having gone so far as to enlist an outside banker to provide M&A advice, expect a lot more of this in coming months.
One thing to keep in mind: If Dassault or Siemens were to buy Mentor, what would that do for Altium and its owners’ exit strategy?
Reuters is reporting that Samsung has temporarily suspended production of the Galaxy Note 7 smartphone after replacements for the first batch of devices also proved to be almost as good at spontaneously combusting as they are at surfing the Web.
One brand manager went so far as to compare the self-igniting smartphones to the Ford Pinto, whose rear-end fuel tanks had the unfortunate tendency to explode upon contact.
Samsung’s situation isn’t unique: Apple experienced similar problems with previous iterations of the iPhone. But given the speed with which new phone models are brought to market, one begins to wonder whether these defects are part of a larger failure of the process itself.
Is is possible we’ve reached an inflection point whereby, in the rush to get product to market, the validation phase is — pardon the pun — being short-circuited? Are suppliers properly vetted, product thoroughly tested, risks appropriately balanced?
Or has consumer electronics reached a point where it’s a race not to market but to failure?
Oct. 11 addendum: The Korea Herald and others are now reporting Samsung has decided to pull the plug completely on the Note 7. The estimated cost: Billions.
It’s been a year (more actually) since India announced — to great fanfare — a memorandum of understanding with Foxconn to invest $5 billion over the next five years in the nation. For India, it seemed like a marriage made in heaven: the world’s largest electronics manufacturer would be an ideal partner for its goal to develop a local end-to-end supply chain that could not only serve its burgeoning domestic population but also provide a steady stream of exports to the rest of the world.
Yet as the Times of India points out today, the bride is still waiting at the altar.
As we said at the time, Indian officials shouldn’t hold their breath waiting for the relationship to be consummated. Foxconn is really good at promising huge investments, only to fall short in the end.
Actually, we’ve been saying this for years. Foxconn is Chinese to the core. It may on occasion have dalliances with other countries, but it always returns to its mate. Suitors, take note.
Gayla Delly left Benchmark with no notice last week. Why?
Changes at the top of Tier 1 and 2 EMS firms don’t happen often. Before Friday, in fact, Benchmark had had just two chief executives in its 30-year history.
Cary Wu founded the company as part of a buyout from medical device manufacturer Intermedics in 1986. He remained in charge until December 2011, when he promoted Delly, the company’s longtime head of finance, to the top spot.
Highly dependent for years on the high-end computing sector, especially IBM, Benchmark had been trying to balance its portfolio via acquisitions. With its acquisitions of Suntron and the EMS operations of CTS, both in 2013, the company attempted to broaden its reach into the high-reliability industrial, medical and aerospace/defense markets. It then snapped up industrial communications OEM Secure Technology in 2015.
Many bigger EMS acquisitions are slow to be accretive. The large amount of fixed assets and (typically) lower capacities at the acquired company mean layoffs and restructuring costs will follow. Still, investors are impatient and the deals were met with criticism in some quarters.
Much like Sparton and its now-departed CEO Cary Wood, Benchmark faced strong opposition from a loud activist investor who accused the EMS company of poor fiscal management. (Interestingly, unlike many of its similar-sized competitors, Benchmark has typically been patient with its M&A strategy, choosing to keep its debt levels low.)
The intensity of that criticism, which was public in the spring, had quieted down during the summer after the investor won two board seats. On its quarterly conference call in late July, Delly went to far as to deny any strategic changes in the direction of the company following the seating of the new directors. This makes the timing of Delly’s departure all the more curious.
Last Friday, the announcement came that Delly was being replaced as president and chief executive with veteran electronics executive Paul Tufano, effective immediately. Tufano is a Benchmark board member who has spent more than three decades in the technology and telecommunications industries, most recently as chief financial officer of Alcatel-Lucent. He also has a background in EMS, having been executive vice president and CFO of Solectron. It’s possible the move implies the company will refocus its sights on computing and telecom. We shall see.
Neither Delly nor the company has yet commented on the change.
Turnover among the heads at the major suppliers of electronics design-related software is rare indeed. Since 2010, the top spot of a leading PCB software company has changed hands only once.
The dean of PCB EDA, Makoto Kaneko, founded Zuken in 1976. Wally Rhines has run Mentor Graphics since 1993. His counterpart at Cadence, Lip Bu Tan, has been in place since 2009.
Altium has had three chiefs in its existence, the most recent being Aram Mirkazemi, who was installed in 2014. But for a shareholder revolt in 2012, however, Nick Martin, who founded the company in 1985, might still be in charge.
That’s why it’s was so unusual this week when, on the same day this week, Ansys and NI each named the successors to their respective thrones.
Ansys appointed Dr. Ajei S. Gopal CEO-in-waiting, succeeding longtime head Jim Cashman. Gopal’s been a familiar face around the company, however, having joined its board in 2011.
Cashman joined Ansys as president in 1999, and was named CEO a year later. On his watch, Ansys’s revenues have grown from $50 million to almost $1 billion.
In NI’s case, it’s in some ways an even bigger transition. As a researcher at the University of Texas, James Truchard cofounded National Instruments in his garage in 1976. Come Jan 1., when Alex Davern takes the reins, it will be as chief executive and president of a $1.2 billion firm employing more than 2,000 workers worldwide. If Davern has an advantage, he’s held a variety of positions in finance at NI dating to 1997, and he’s been Cashman’s right-hand as COO and CFO since 2010.
What’s clear is that the software industry, while dependent on innovation, also prides itself on stability. Since the market is characterized by a relatively small number of major players, the ability to maintain relationships with key customers may have something to do with that. That the leadership at most of the aforementioned companies has been relatively controversy-free doesn’t hurt, either.
From the looks of it, the heir apparents promise more of the same. Given the respective performance of the CEOs they are following, that’s not a bad thing.
What would the electronics industry do if automotive demand were to pull a Thelma and Louise and head off the proverbial cliff?
The auto recovery has been the axle of the Western supply chain since 2008. The drivetrain is starting to show some wear, however, with market followers forecasting nominal growth at best for 2016.
The good news is that electronics content in vehicles continues to increase, rising to 8.9% of the $1.42 trillion worldwide electronic systems market last year, up slightly from 8.6% in 2014. Moreover, forecasts call for the share to continue to rise over the next several years.
Less clear is the extent, if any, the seers account for the potential for widespread ride-sharing trends or — worse for some — outright banning of vehicles.
To wit: Some 27 million Americans alone will use some form of ride-sharing at least once this year, a figure that doesn’t include traditional car-pooling. Urban millennials are growing up without the preconception that vehicle ownership equates to status, an important cultural shift.
A drop in demand for hybrid/electric vehicles (HEV) could also decelerate electronics growth. Hybrid sales alone dropped 15% year-over-year in 2015 — reversing a big gain in 2014 — and bottoming oil prices have kept the market for electric sluggish. Hybrids carry almost twice the electronics content of conventional gas autos, making HEVs a key growth engine for electronics makers.
More disconcerting to the auto supply chain is the prospect of a carless environment. This is actually happening, and in places you wouldn’t necessarily associate with technological backlash. For example:
Car-free days are becoming so widespread, the phenomenon has its own Wikipedia entry. In fact, now there’s even a World Car Free Day (Sept. 22).
The electronics supply chain has gotten plenty of mileage from the automotive industry for nearly a decade. It might be time to find a backup plan, however, if the sector wants to keep trucking on.
My latest editorial looks at how buyers in the electronics supply chain are using their suppliers as an extension of their bank.