Author Archives: Mike

About Mike

Mike Buetow is president of the Printed Circuit Engineering Association (pcea.net). He previously was editor-in-chief of Circuits Assembly magazine, the leading publication for electronics manufacturing, and PCD&F, the leading publication for printed circuit design and fabrication. He spent 21 years as vice president and editorial director of UP Media Group, for which he oversaw all editorial and production aspects. He has more than 30 years' experience in the electronics industry, including six years at IPC, an electronics trade association, at which he was a technical projects manager and communications director. He has also held editorial positions at SMT Magazine, community newspapers and in book publishing. He is a graduate of the University of Illinois. Follow Mike on Twitter: @mikebuetow

Benchmark’s Latest Acquisition

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Is Benchmark’s acquisition of CTS a good move?

Yes, it says here, and for multiple reasons. In no particular order:

1. Profits. Benchmark says the acquisition will be accretive starting in fiscal 2014, which suggests they think they can make it profitable in short order (Bench’s fiscal year ends Dec. 31.) Before reporting successive losses in the first and second quarters of 2013, CTS had turned in 10 straight quarters of operating profits.

2. Integration. It’s true CTS’s first-half revenue ($97 million) was down from 2012 ($148 million) and 2011 ($158.4 million). For that matter, it’s down versus 2008 ($197 million, ’09 ($146.6 million), and ’10, too. It compares most closely to 2010 ($122.6 million). But to be fair, CTS has been closing plants, which in part drives the revenue loss. (Of course, had those sites been profitable, perhaps they’d still be open.) This may play in Benchmark’s favor in that the organization as currently sized should be fairly easy to integrate.

3. The better mix will help margins. IBM was 21% of Benchmark’s revenue in 2012, more than twice the percentage in 2010. Benchmark has been looking to balance its (over)dependence on the computing segment. CTS is focused on industrial, automotive, aerospace and defense. This pickup will definitely help.

4. CTS’s footprint is in areas where Benchmark is strong. The deal includes five sites, four in North America (two in California, one in New Hampshire and one in Mexico) and one in Asia (Thailand). (While CTS still lists two EMS sites in Scotland and one in China on its website, these have either are already closed or are now being shut down.) As for the acquired sites, CTS will shut down the sites that they can’t fill, and move production to existing plants. They might lose a few customers along the way, but probably not so much that it will hurt them. Moreover, the deal doesn’t force Benchmark to learn a new region on the fly.

5, Benchmark’s track record with acquisitions is good. That’s not to say every site remains open. Far from it. But Benchmark doesn’t bite off more than it can chew, and that’s improvement in industries as cyclical and cash-intensive as EMS.

Since CTS is losing money, good luck calculating the valuation as a multiple of earnings. In that regard, the $75 million price tag seems a big high. By comparison, Benchmark paid $19 million in June for Suntron, which had sales of about $70 million. Given that CTS is more expensive, I’m guessing it is operating closer to breakeven than Suntron was.

 

Tool Reconditioning: Part of a Lean Program

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Although many manufacturing processes have become automated over the past 20 years, a fair amount of manual or hand assembly and rework is still required. Gone are the days when electronics and industrial assembly required row upon row of technicians carefully assembling circuit boards, electronic modules or entire assemblies without the assistance of automated or semiautomated equipment.

Today, lean manufacturing procedures are accepted and implemented by most companies to help reduce expenditures, improve quality, shorten lead times, and improve the bottom line. Cost-saving measures need to be carefully reviewed to ensure they can deliver without sacrificing quality. One cost-saving option that seems to fly well below the radar within many companies is hand tool reconditioning.

Now, the term “hand tools” covers a very wide spectrum, so let’s zero in on just a few items for consideration. Within electronics manufacturing , cutting pliers and cutting or precision point tweezers are still used extensively for a wide variety of applications. When you consider high quality cutting pliers can cost $40 to $150, and quality cutting tweezers can cost between $30 to $125, it becomes obvious that simply disposing of these tools when they get dull or no longer function properly is a waste of money.

The same issue applies to crimpers, probes and other similar tools. Refurbishing or reconditioning services are available that, when done properly, can provide extended service life to these tools by as much as four times. Typically, the cost to refurbish a tool is about 75% less than the cost of buying new, and in many cases, the refurbished tool will function as good as (or often better than) a new tool. In addition, reconditioning pliers will usually include resharpen jaws, new grips, new springs and a complete buff and polish. In effect, the tool is like brand new at a fraction of the cost.

Before you consider a reconditioning program for your electronic or industrial hand tools, do your research. Most tool manufacturers do not offer or promote reconditioning tools, for obvious reasons. High quality (and expensive) cutting pliers and tweezers are manufactured to very high standards, especially in regards to the cutting edge itself. Reproducing the original cutting edge profile, without affecting the temper of the steel, is a true science and requires a technician with vast knowledge of grinding techniques and equipment, as well as an extensive knowledge of the various manufacturer’s specifications. When considering a reconditioning service, ask the vendor to recondition a few of your tools for evaluation and test, at no charge. This will provide you with a baseline of what you can expect in the future, and you can then compare the functionality of the reconditioned tool as compared to a new tool. If refurbished properly, tool life should be equal to or better than new.

Taking a few moments to audit your tool expenditures for any given year will help put these cost savings into perspective. Saving 75% of your “new” tool expenditures over a given period should fit nicely within most lean manufacturing formulas. As mentioned, this is a cost-saving consideration that continues to fly under the radar within many companies. I’m betting your tool crib has bins full of non-useable tools. Or are they?

— Jim Norton (guest blogger)

Poison Apple?

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Move over, Foxconn. First Pegatron and now Jabil have joined you on the Apple-watcher hit list.

In June, the New York-based employee rights group known as China Labor Watch singled out three Pegatron sites for worker abuse. The alleged violations are now like a refrain: excessive overtime, harsh working conditions and employment of underage workers.

Today it was Jabil’s turn, as its Green Point unit in Wuxi drew CLW’s ire. Perhaps most concerning is the accusation that Jabil workers must agree to a “list of punishments.” That sounds sickening and demeaning.

The common thread, of course, is Apple, whose corporate standards are apparently more for show than practice.

Chinese law prohibits more than 49 hours of work per week. Yet the CLW report shows 80% of the 80 Jabil workers interviewed put in more than that. While both Apple and many workers claim they want the overtime, the sad truth is they need to work the extra hours in order to make sufficient wages. Yet with Apple sitting on more than $100 billion in cash, it’s illogical to argue that company needs to suppress wages in order to make its iPhones and related products affordable to Western consumers.

Just 18 months ago, then Jabil CEO (and now chairman) Tim Main excoriated Foxconn for its “very abusive policies, employment policies.”

“I think their business will begin to suffer because of the way they treated their employees,” Main told Jabil shareholders. “And you can all be quite comfortable and proud that, you know, that’s not your company. We treat people like human beings like we want to … treat our own kids. So you don’t have to worry about that with us.”

Sadly, CLW’s report says something very different.

At the time of Main’s comments, Apple had just become a 10% customer of Jabil. Now, Apple is estimated to make up 13%, or $2.23 billion, of Jabil’s annual revenue. So like Foxconn and Pegatron, does serving Apple necessarily cost a company its soul?

Correlation is not causation, but the circumstantial evidence is getting mighty difficult to ignore. Will any EMS company be able to resist the temptation of Apple’s poisonous riches?

 

Designer Salary Data, Elaborated

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Every year it seems we received a few requests for additional information from our annual Designer Salary Survey. This year was no exception.

One request asked, “I would be curious to know the salary ranges for those identified as “PCB design” only.  The maximum stated in the article is unclear if it may include some of those in management, engineering or other corporate management roles.”

Ask, and you shall receive:

 

Do Fakes Count?

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The news today regarding the seizure by US Customs of nearly a quarter-million counterfeit electronics devices makes me wonder: Do the various industry market research data include all those faked goods?

Consider: Some reports claim as much as $100 billion a year worth of fake electronics products is trafficked. Given that the entire consumer electronics supply chain produces about $1.2 trillion worth of products per year, and most fakes are consumer goods, that’s a pretty good chunk to add to it.

Not all fakes work, of course. For years, “salesmen” would hawk counterfeit PCs outside the doors at Nepcon China. But they were missing most of the important parts — motherboard, CPU, memory, etc. Caveat emptor to those who fell for the scam.

But what’s changing is that in many instances, the knockoffs so closely resemble the look and functionality of the originals, it’s hard even for company officials to discern. And you don’t get there without using real parts, even if they are of lesser quality.

The wildest example I know of concerned NEC. A few years back, the Japanese computer and chip company learned of a massive multinational counterfeit ring which attempted to essentially recreate the entire company! More than 50 factories in China and Taiwan were producing faked NEC PCs and consumer handhelds.

Fifty factories is a scale that’s hard to hide. That’s a lot of production lines to buy, too. It makes you wonder if they were building them on knockoff SMT equipment.

Brazilian Blowup?

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Which way is Brazil headed?

It looked up, after Foxconn decided to invest — how much is the subject of much speculation, as one report pegs it at about $500 million, another at as much as $12 billion — in new manufacturing campuses in São Paulo and elsewhere.

But Multek recently bailed, leaving the country without its largest bare board fabricator, and now Benchmark is leaving too, citing customers that were “challenged by some of the regulation challenges there.”

Brazil has eased some of its notoriously rigid (and expense) laws that taxed imports, rules designed at essentially forcing companies to build their supply chains inside the nation. It’s a tremendous potential market, with nearly 200 million residents. A few companies leaving isn’t necessarily a trend. But the flow always starts with a trickle.

 

 

 

Slow Train a Comin’

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Where are the next generation of good engineers going to come from?

If I had a nickel for every time I’ve been asked this …. well, you can do the math.

A good friend asked me this just today. He has noticed many of the 25 to 45 year old engineers have left the SMT industry, and questioned where the new ones would come from.

My response: The same place they always have — they will be poached from other companies, or trained in house.

Twenty years ago, we had the same problems we face today regarding the availability of qualified process engineers. But we looked at it differently. Then, with the industry in its relative infancy and growing 15 to 30% per year, we accepted that hiring novice engineers and training them was simply part of the cost of doing business. Somewhere along the line (get it?) the mindset changed. We started to expect that experienced yet affordable engineers would always be available, and when they weren’t — especially after the tech meltdown, when many left for greener, less cyclical pastures — we as an industry went into a collective mode of “woe is us.”

What we forgot, however, is that the electronics industry has traditionally been self-reliant. We don’t need universities to send us mechanical and industrial engineers ready minted and prepared for action. We need to get back to recognizing that every industry has its learning curve, and we need look no further than ourselves for the solution.

It’s time to stop worrying about the next-generation of engineers and get back in the business of recruiting, mentoring and shaping the orbs as they exit college, engineering degrees in hand, into insightful and careful process engineers.

Companies that do well in this regard will have a competitive advantage over those that don’t.

And if we are lucky, we may just learn something along the way.

 

 

Robots Get Off the Bench

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Benchmark’s fascination with robots is paying off not just on the assembly line but with attracting new customers, too.

The EMS company yesterday announced a deal with KeyMe, a maker of automated key-cutting kiosks that will be first deployed in 7-Eleven stores across the New York City area.

The technology itself is neat: The kiosks enable customers to scan and store a digital copy of their keys to enable the creation of a spare copy at a later time eliminating the need for a physical key in order to make a copy.

KeyMe was very clear that Benchmark’s experience with robotics played a role in winning the program. “[Benchmark’s] extensive knowledge in automation, robotics and precision cutting enabled us to develop this revolutionary product, solving an age old problem and ensuring that consumers never get locked out again,” said CEO Greg Marsh.

Benchmark has been installing a series of interactive, programmable robots called “Baxter” designed by Rethink Robotics to perform simple tasks. The human-like machine has two arms, a head and an animated face that can display a range of emotions or thoughts ranging from “I understand” to  confusion. Benchmark uses them for packaging, testing and sorting.

While Baxter isn’t ready for the precision of the SMT line, at $22,000 per unit, he is very affordable. Benchmark not only uses the Baxter series, the EMS company builds them too.

Now, it would appear, Benchmark has gone the next step to leverage that knowledge toward building a new, industrial customer base. As its dependence on IBM wanes, this is an important development.

Change Coming to Jabil, But Where?

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Jabil is cutting staff, but where?

The EMS company’s management this week acknowledged an ongoing restructuring — to the tune of $188 million in charges — but declined to address specific actions. “We intend to realign our manufacturing capacity and cost base to appropriately size our manufacturing footprint with current market conditions and our customers’ geographic needs. We have begun consultation with employees during the third fiscal quarter and out of respect for those employees, we shall not be providing details as to specific sites or locations under consideration at this time.”

Under repeated questioning from analysts on a conference call, CFO Forbes Alexandar did suggest that the restructuring would include plant closures. Discussing when the charges would hit, he said, “[I]t’s really to do with the timing of when we can, essentially, start closing sites or releasing employees and transferring business.”

Obviously, this information will come out, likely sooner rather than later. But it can’t help that while Jabil is trimming, Flextronics’ shuttering of several sites this year has been effectively drowned out by the announcement of a massive new operation outside of Dallas, where it will build the new Moto X smartphone. Jabil also does business with Google (which owns the former Motorola handset business), but my understanding is these tend to be prototypes, while Google performs the volume and final assembly in Fremont, CA.

 

 

 

Wistron On the Move

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We’ve said it before, we’ll say it again: EMS companies don’t sit still.

Notebook ODMs, faced with falling demand and profits, are not going gently into the good night. Flextronics dumped the PC ODM business a couple years ago to concentrate on higher margin, higher growth markets. Sanmina did the same. Now Wistron is pushing into medical as well. Others are sure to follow.