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

Africa: The Next China?

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

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?

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.

 

The Top 50 EMS Companies Chat

The electronics manufacturing services industry in 2012 saw something of a changing of the guard as major European players like Elcoteq, ElectronicNetwork and SRI Radio Systems dropped off the map, and dependable stalwart industries like military and PCs experienced slow growth.

What did we learn from the events of last year, and what will the future of the EMS industry look like? Come chat with me on April 23 over at PCB Chat from 12 noon to 1 pm (Eastern). I will also discuss the annual CIRCUITS ASSEMBLY Top 50, which was released in April.

(Membership in PCB Chat is free, but you do need to register first.)

 

EU to Feel Conflict Crunch?

Is Europe about to get its environmental comeuppance?

After perhaps billions of dollars were spent transforming the electronics supply chain to reflect the European Commission’s RoHS and WEEE directives, the EC is now considering adopting a version of the US law governing conflict minerals.

The US law, promulgated last year, mandates businesses using or trading in certain minerals must have impeccable documentation proving they were not mined using forced labor in the DRC.

As contributor Barbara Jones wrote last month, approximately 6,000 companies in the US may be subject to the reporting requirement, and the National Association of Manufacturers estimates that the compliance costs industry-wide could hit $16 billion.

RoHS, of course, brought painful and, some say, unnecessary costs on the electronics industry, even those companies that were either exempt or otherwise not selling to European customers, as suppliers migrated toward lead-free products in order to ensure compliance. Many companies that were not directly covered by RoHS found themselves scrambling for lead components, for example.

Now that the US has taken the lead on conflict minerals, however, Europe might find itself forced to play geopolitical catchup for a change. The EC is accepting public comment through the end of June, and while it hasn’t tipped its hand as to whether rules are in the offing, it says here political pressure will lead Brussels to enact rules for European businesses as well.

I’d call it payback, expect it will end up costing everyone.

 

Robotics Competition an Eye-Opening Experience

Ever wondered, as you survey the ever-greying and balding crowd at a trade show, where our next crop of engineers, technicians and scientists will come from? Gary Ferrari and I* had just this conversation at a recent Designers Council event –how do we attract young men and women to our industry?

One possible resource is FIRST (For Inspiration and Recognition of Science and Technology) Robotics – a not-for-profit organization that helps students ages 6 to 18 to discover and develop a passion for science, technology, engineering and math.  (FIRST Robotics was founded by Dean Kamen, inventor and entrepreneur, whose inventions include the Segway PT and the first drug infusion pump.)

This past Friday, I had the privilege of attending the 2013 FIRST Robotics Competition Peachtree Regional, presented by Georgia FIRST Robotics. It’s one of 60+ competitions taking place throughout the country the next few weeks. Wow! What passion, creativity and inventiveness from public, private and home-schooled high school students.  They work in teams alongside professional engineers and mentors to design, build and program robots; they apply real-world math and science concepts; they learn and use sophisticated hardware and software. In the process, they develop critical skills such as design, project management, programming, teamwork, and strategic thinking – plus have the opportunity for college scholarships.

(A shout out to two of our PCD&F customers – National Instruments and Altium – for being Crown sponsors of First Robotics).

I was given a personal tour of the “Pit” – 10 x 10′ working spaces for each team – and the “Arena Floor” by the TERAdactyls team from Suwanee, GA. (There are some great team names, by the way. Two of my favorites were “CircuitRunners” and “GLAMbots”). On the Arena Floor I saw robots in action playing the Ultimate Ascent game involving pretty complicated maneuvers shooting Frisbees to hit specific targets and climbing pyramids.  Imagine a high school science fair with a heavy dose of DRAGONCON and WWE and you’ve got the picture.

The sheer creativity of the teams, the enthusiasm and obvious love for science and technology was so evident.  And young women – lots of them – just as engaged as their male counterparts.s

Cisco was lead sponsor for this event, and local high tech companies such as Rockwell Collins, Novelis and Lockheed Martin were among the sponsors.  NCR and Spectral Response were just two of many  companies providing judges.  (Note: The Atlanta SMTA Chapter has selected Georgia FIRST as its designated charity for its April 18 Expo and robot demonstrations will be held on the exhibit floor!)

If you get a chance to attend one of these events, go for it!  The passion, creativity, energy and enthusiasm of these kids will amaze you.  (And you might want to take some job applications with you just in case!)

*By Frances Stewart, vice president of marketing and sales at UP Media Group.

China v Japan

I’m not sure what to make of this video describing the economic impact of a war between China and Japan. Now, please understand that I think the odds of this happening are almost impossibly remote under the current administrations. When economies dip, nationalism almost always rises, and China at its upper levels is an All-Star when it comes acting insulted.  And its relevance to most of our readers is both high and low, as any major dispute — be it military or an extensive trade war — would have consequences for up almost every industry, not just electronics manufacturing. Yet there’s little on a practical level that our readers could do about it.

But whether you agree with the hypothesis, it’s an incredibly creative way to tell a story.

The March Issue of PCD&F/CA

… is now out.

The cover story, “Bridging Technology between Conventional 3D and TSV 3D Stacking,” looks at two new multi-die DRAM packages with thin profiles that minimize wirebond length.

Among the other features:

  • My recap of the Apex Expo trade show in February.
  • Some key areas of the Benchmark Electronics’ Robotics manufacturing process, from a prototype or new-build stage to steady-state production.
  • The new IPC-2221B design standard.
  • Designing high-speed, small area boards.
  • Determining whether a process generate an electrostatic charge, and if so, how much.
  • We answer the question, Can a flex circuit be made with platinum or gold conductors rather than copper?
  • Selective soldering dwell times.
  • And the latest in a yearlong PCD&F series highlighting promising new enterprises in printed circuit board design looks at startup CircuitHub’s user-driven parts library.

Check it out.

 

Robots on Trial

This Boston Globe article poses interesting questions about the legal and moral responsibilities of robots (yes, robots).

In summary, does the legal system need to adapt to adjudicating cases where artificial intelligence-run machines make decisions based on their own reasoning, as opposed to faulty programming? (Think HAL in 2001.) Some are arguing that robots with full autonomy “can and should be held criminally liable” for their actions. It other words, malice or intent aren’t at issue, but the action itself.

The implications will resonate as electronics manufacturing migrates to robot-operated manufacturing.

HAL is watching us. Do we need to watch HAL?