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

Believing Foxconn Means Suspending Belief

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The Foxconn makeover is in full swing, with the latest this piece from the New York Times that supposes that the world’s largest ODM is worried that Apple — yes, Apple — might be bringing it down.

When Apple was subsequently criticized for low wages and poor working conditions at his factories in China, it was Mr. Gou’s company, the Foxconn Technology Group, and not Apple, that caught the most heat.

What this conveniently ignores, of course, is that no matter how demanding and dictatorial Steve Jobs could be, those weren’t Apple employees jumping to their deaths from their Cupertino offices.

Such unpleasantries aside, what the story also reveals is that Foxconn does not intend to go head to head with its customers. There’s ample evidence to the contrary already, of course, not the least of which are the Foxconn retail stores popping up all over China, not to mention the litany of ODM phones and other consumer electronics it design and makes.

To paraphrase an old saw, believe what I say, not what I do.

 

 

 

 

 

All Quiet on the Wilsonville Front

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A timely piece from the hometown paper of Mentor Graphics looks at how Carl Icahn has calmed down now that Mentor’s stock price has doubled since he started accumulating shares of the company a couple years ago.

The legendary investor is Mentor’s largest shareholder, at just under 15% of the company. Since he starting buying up shares, Icahn has been vocal about the need for the software company to shed its country club culture. He forced the issue in 2011, successfully getting three of his nominees elected to the company’s board. Last year, Mentor only nominated one of the three, which drew fire from Icahn, but with the stock price up 50% over the past 12 months, all is quiet in Wilsonville.

 

‘Innovate or Die’

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While not directly related to printed circuit boards, this piece from Time Magazine on the Japan’s Uniqlo shows how one entrepreneur had the vision and courage to cast off decades of cultural aversion to risk to build one of the largest clothing companies in the world.

Founder Tadashi Yanai, now 64, took over his parent’s small-town clothing business and, realizing it would end up in bankruptcy without change, remade the entire company.

“Innovate or die,” Yanai reminds us. It’s a lesson that’s absolutely true in PCBs as well.

Collins Closing

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Count me among those sorry to hear the news that Rockwell is closing its printed circuit board fabrication plant.

I’ve been through that plant and this is sad to see. I wrote a profile of the plant for PC FAB in 2000. At the time, then GM Mike Driscoll was overseeing a major implementation of Lean manufacturing, making the site one of the early adopters of the practice.

I’m of the opinion (minority, probably) that OEMs retaining in-house knowledge and expertise of manufacturing processes is a good thing, even if they can’t necessarily generate a direct profit from it.

That, plus I knew several people who worked in that shop over the years and every one of them is a class act.

There are still a few major OEMs with in-house fab capacity. Let’s hope they see fit to keep it.

 

Broken Signal

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Lots of mainstream media hand-wringing over reports that Apple has returned a large number (5 million? 800 million? a gazillion?) iPhones to Foxconn for repairs.

Two things are on display here. One, that calling the companies involved for clarification or comment doesn’t appear to be part of the playbook. And two, the mainstream business press doesn’t totally grasp the Apple-Foxconn electronics manufacturing model, especially the part about repairs/returns.

 

 

Africa: The Next China?

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As it has many, many times before, Samsung, the world’s largest electronics company, announced in April that it is expanding.

No, that’s not exactly news, until you look at where it intends to grow: Africa.

And it’s going all in.

By the end of this year, Samsung plans to have set up shop in Ethiopia and Kenya, establishing manufacturing sites and directly or indirectly employing thousands of workers.

These are not just distribution centers, by the way. Samsung will assemble TVs and white goods in Kenya, and laptops and printers in Ethiopia. The new sites will build on the electronics giant’s existing operations in South Africa, Sudan and Senegal.

Samsung is moving fast for multiple reasons. Africa is home to one billion people, and the opportunity to capture market share is enticing. Ethiopia and Kenya are neighbors in East-Central Africa, where some 142 million people reside and the economies are flourishing. In Ethiopia alone, the economy has been growing an average 8% per year over the past five years. And East-Central Africa’s electronics market is forecast to grow 11% per year on average over the next decade.

It’s easy to see why that’s attractive to Samsung, whose sales to that region are relatively miniscule – a reported $250 million in 2011 – but expected to reach $2 billion by 2015.

Another reason is the tax incentives. Much like Brazil, it’s far cheaper to build locally than to import finished goods. Foreign entities pay import taxes of up to 60% of the value of goods. The new plant could halve that sum, Samsung says.
It’s about time, some may say. After all, Africa is the second-largest continent in terms of both area and population. Of course, those aren’t necessarily mutually attractive features. It’s logistically far cheaper and faster to serve end-markets where population density is high and infrastructure is intact, for example Shanghai or Munich or New York. The broad swath of land, coupled with its dubious infrastructure and questionable security, adds unwanted complexity to establishing and maintaining supply chains. Ethiopia and Kenya also neighbor Somalia, whose lack of a functioning government and 17th Century approach to wealth redistribution are notorious the world over.

It’s not that Africa hasn’t been penetrated to a degree by outside interests. Northern Africa is host to mid-tier EMS companies like Eolane (Morocco) and AsteelFlash (Tunisia), which are attracted to the low labor rates and proximity to Western Europe.

But while noting such attributes, Eolane general manager Marc Pasquier told us in a recent interview, “There is no business in Morocco. There is no oil. There are no customers. There is no (end) market.” The same could be said of Tunisia, where the lack of a robust domestic supply chain and local civic unrest are also drawbacks.
Low wage rates are always enticing. In the Sub-Saharan population centers, minimum weekly pay ranges from $12.50 (Tanzania) to $20 to $25 (Ethiopia, Kenya).

Moving to the West Coast doesn’t move the needle much; the pay ranges from $14 (Cameroon) to the relatively princely sum of $29 (Angola). Those pay scales will no doubt draw some attention.

But while much has been made of China’s low labor rates (although they aren’t so low anymore) as the underpinning of its rise to become the World’s Workshop, it says here the ability to slash through red tape, coupled with the relatively safe environs, is what gave it staying power.

Companies trickled somewhat quietly into China for the better part of two decades before the major wave in the late 1990s ushered in a new era in electronics globalization and fundamentally changed the market dynamics. Yet, while it trumpeted its huge population and low costs, China’s advantage was (and is) the relative agility of its government. When one party makes all the rules, and the means for contesting those rules is highly limited, decisions can for better or worse be made quickly. In that respect Africa is not China. It is home to 65 countries, territories or entities, and at least as many governments, in some cases iron-fisted tyrants. The Northern half is Islamic; the southern is predominantly Christian. Tension is everywhere. Africa is a long way from being a single, pliable and functioning entity.

So while Taiwanese ODMs ramping in Western China can bemoan a scarcity of workers, the difference is the Chinese can almost seamlessly port hundreds of thousands of its citizens westward to fill those openings. The decision is made and action is taken. That won’t happen in Africa, at least not in the near term. The basic mechanics are different.

Most of the attention Africa has drawn in recent history has been for negative reasons: mass starvation, brutal “civil” wars, forced child labor, murderous despots, big game poaching. Led by Samsung, this latest ray of sunshine is not only long overdue, but looks like it will linger.

Western companies should be looking at Africa, but doing so with a healthy dose of caution.

Slowdown at Foxconn

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Could PCs do what the rest of the EMS industry could not — derail the Foxconn train?

Over the past decade, Foxconn has been practically unstoppable. Not a backlash against China, outrage over dozens of worker suicides, at least two plant explosions, campus riots, or other pressures could stop the Taiwanese manufacturing titan.

But as Apple goes, so does Foxconn. And nowhere are the reverberations from the occasional Apple hiccup felt more than at Foxconn, where sales dropped nearly 20% both year-over-year and sequentially during the recent March quarter. While Apple also uses other big and small name suppliers, and is a 10% customer of Jabil, Foxconn’s sales to Apple could be in the range of $60 billion to $70 billion (although I tend to doubt they are quite that high, as Apple’s cost of goods sold for 2012, less depreciation and amortization expenses, were $84.5 billion, and Apple buys its own components).

Worse, however, is that the main market Foxconn plays in — PCs — continues to shrink, with no obvious signs in sight of turning around. So as HP, Dell and other key Foxconn accounts experience double-digit declines, the near-term outlook at the world’s largest electronics contract assembler has suddenly dulled.

Could the PC (as in personal computer) customers do what the PC (as in politically correct) crowd couldn’t? Finally fell Foxconn?

H-1B Free?

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Those in favor of lifting limits on the US government H-1B visas, which allow workers from other countries to take jobs in the US, might want to read this alternate view.

Tech companies in particular say the program is essential to filling critical job openings requiring math and science acumen that too few Americans have. Critics fire back that the program turns the foreign citizens into indentured servants — they generally receive significantly lower pay relative to their American counterparts and no benefits, and have no opportunity to leave the sponsor company for another (better) job.

There’s also commentary from the author of the H-1B visa program, too, who says it has evolved into something far afield from what was originally envisioned.