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

Will Juki-Sony Talks Get Others Going?

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Industry chatter has long said M&A activity among the major placement companies is inevitable.

Yet throughout the gut-wrenching downturn of 2001-02, the widespread pause in 2008-09, and the subsequent fallout starting last spring, nothing concrete took place.

Sure, a few companies have changed hands — Mydata was bought out by Micronic, Dover divested Universal Instruments to Francisco Partners, which in turn sold it to Patriarch Partners, ASM took Siplace off Siemens’ hands, and H2 Equity Partners did the same for Philips with Assembleon.

But there are more than 25 pick-and-place OEMs around the world, and despite fierce competition the number is actually growing.

Today, Juki and Sony announced the signing of a non-binding memorandum of intent to discuss the possible integration of their respective surface-mount technology equipment and related businesses. Will this finally get things rolling?

Under the MOI, Sony and Juki would integrate their SMT businesses under a newly established company, whose name is yet to be disclosed. Both companies are ponying up cash for the “startup,” Juki presumably providing the lion’s share as stands to receive two-thirds of the shares in the new venture.

The deal could be consummated by September if everything holds up.

It’s unclear what a merged entity’s worldwide market share would be, but I suspect it would be the largest in the world. Juki currently is neck-and-neck with Yamaha and Fuji in Asia, and is probably the current leader for new units sold in the US. Sony hasn’t been able to penetrate the US, but has done well in Mexico, where many Japanese OEMs have or had larger factories. It also sold thousands placement machines to Foxconn, reportedly as part of a an arrangement under which Sony outsourced production of various consumer electronics. Latin Americas is up for grabs. Siplace and Assembleon continue to hold sway in Europe, but others have made inroads of late.

This could also affect Juki’s deals as a full-line distributor for other suppliers. Sony currently makes everything from screen printers to placement machines to AOI. Juki resells printers (GKC) in the Americas and Europe, as well as various soldering equipment lines.

The bigger question, however, is will this spur other M&A? Not many companies align so neatly as Juki and Sony. So while many placement companies have been on the block for some time, and the lure of better share, less competition and — hopefully — greater margins is always on the CFOs’ minds, the merging of differing technology, approaches and cultures (not to mention the acquisition price) haven’t been enough to seal any deals thus far. And we don’t see that changing any time soon.

What About PCB?

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As the major CAD vendors hold their quarterly conference calls, one thing to watch is whether analysts are asking about PCB design tools.

For the most part, they aren’t.

So while Cadence’s PCB and IC packaging software lines saw good growth in 2012, with revenue climbing 11%, its hour-long call on Jan. 30 was devoted to fielding analyst questions on semiconductor and emulation products.

OK, we get it, we aren’t the tail that wags the dog. But given the market size and relative  profitability PCB tools generate, it would be nice to get a little more notice.

 

In Their Element

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One of the truly fun diversions of the electronics manufacturing community has been the ongoing Friday Element Quiz on the IPC TechNet email listserv.

For nearly two years, a few clues have been posited to the TechNet members each week, who then try to guess the corresponding element. (No element was repeated.)

The quiz was the brainchild of Dave Hillman, an engineer at Rockwell Collins and one of the longtime contributors to the listserv. Each week, Hillman (with the help of a few reference manuals), poses a question to the group. For example:

This element has no biological role for humans. History shows that the mineral containing this element was encountered in silver mines in the Bohemia (Czech Republic) in the Middle Ages and was give a name that is the combination of the words “ill luck” and deceiver” because it was found to have no use. This element plays a significant role in industry today in several different industry segments and is more abundant that tin in the Earth’s crust. What element is being described?*

For those not keeping track, the first winner was Lamar Young of SCS Coatings; the most recent was Hillman’s colleague Doug Pauls. Over the 96 weeks the quiz has run, there have been several repeat winners. The leaders to date are Dr. Bev Christian of RIM, who has picked the correct answer eight times, nosing out Leland Woodall of CSTech, who has correctly named seven elements.

Given there are 112 elements, the FEQ should be winding down. By popular demand, however, Hillman has stocked up on new reference books and pledges to start over.

Let the good times roll.

*The element is Uranium (U).

 

Nam Tai Joins $1B Club

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It’s flown way under the radar but Nam Tai just became the newest member of the EMS $1 billion club, joining 13 other companies (not including the major Taiwanese ODMs like Quanta, Wistron and Compal).

The company crossed the threshold thanks to a spectacular fourth quarter in which sales jumped more than 250% year-over-year. Nam Tai, which ranked 22d on the CIRCUITS ASSEMBLY Top 50 in 2011, will certainly move into the Top 15 when all the 2012 list comes out in April. Nam Tai’s fourth quarter sales alone would be enough to place the company in the top 30.

What drove the upswing? The company finally saw its investments in LCD modules for smartphones and tablets pay off.It was also boosted by sales of LCDs to the automotive industry, particularly US OEMs.

But can this last? Nam Tai has invested heavily in capacity in southern China, and has another 1.2 million sq. ft. “parcel” of land that it plans to develop — twice the amount of its present Shenzhen campus. This is all the more amazing because Nam Tai’s two existing factories are capable of about $150 million in revenue per month each, meaning its current capacity utilization is around 30%. Yet its stated operating margins are a healthy 8.2% and the gross margin as a percent of net sales was 10.5% for the quarter.

Chairman Ming Kown Koo humbly suggests Nam Tai was “lucky” to see gross margins top 10% last quarter, but thinks they will stabilize around 6% to 7% in the coming quarters, even though the company plans to hire 43% more staff — 3,000 workers — this year.

This is a story worth watching. Either Nam Tai will push forward into the next EMS tiers, or it will come crashing down, another victim of over-expansion and unpredictable end-markets.

 

Why a Tight Supply Chain Is Actually Less Restrictive

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This is a great first-hand account of why a tech OEM found manufacturing in Mexcio to be far superior to China. The shorter supply chain, lower inventory, access to plentiful skilled engineering and machine talent (and accountants versed in manufacturing operations) — all of these have played roles in the decision-making and success of 3D Robotics.

Smoke and Mirrors?

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Apple has cut ties with Guangdong Real Faith PZ Electron on the grounds that it was using scores of underage workers.

So while noting that this is a step in the right direction, is it cynical to suggest that Apple’s decision to fire a fairly run-of-the-mill supplier for using underage workers while basically ignoring its much larger (but harder) problem of Foxconn was promotional in nature?

 

Mid Tier EMS Firms Have Top Tier Managers

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Lincoln International today published its quarterly EMS stock index and, as usual, there are several interesting nuggets to be gleaned. One thing that stands out is how well Celestica has been managed over the past several years. It’s the only one of the four top tier companies that is currently net positive in cash. Given that the sector historically offers little or no dividends to shareholders, that tells me Celestica is really ahead of the pack when it comes to creating a profitable business, regardless of whether this is reflected in its share price.

What also stands out is how much better overall the mid tier EMS companies have been at managing their debt loads. Four of the six mid tier companies tracked have no debt, and the other two have net debt of 2% or less of their annual revenues.

 

On Jerry Murray’s Passing

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We at UP Media are, of course, very sad and distressed to hear the news of of our former colleague Jerry Murray’s passing.

Jerry worked for UPMG and its predecessors for more than 20 years. I came late to that party, but I worked with Jerry for five years and think of him every day. As a matter of fact, just before I received the news that he had died, at age 82, I was making plans for coming to San Diego for the IPC Apex show, and I was thinking about where to meet him.

I think of Jerry almost every day, and I am so sorry that he’s gone. He was one of a kind, in the best of ways. Who else had a life like his? He lived in the hottest places on earth and the coldest places on earth. He wrote and wrote and wrote some more: technical, pulp fiction, you name it. He married the love of his life, Suzie, one of the kindest persons I’ve ever had the pleasure of meeting. He was funny and warm and cranky and quirky, sometimes all at once. He knew so much about so many things and was always happy to share it. He had a great life. I’m glad I came along in time to share a little piece of it.

I will be sad, and will cry and mourn my friend. But today I’m just glad he got to live the life most of us dream of.

RIP, my friend.

Public Data

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I was pleasantly surprised this morning to receive a note from IPC indicating a change to its data collection methods.

In an announcement touting its new market research subscription series, IPC said it would use aggregate company data along with “carefully vetted secondary research.”

That sounded like IPC would now use data from the publicly traded EMS companies to help flesh out numbers its participating members report. A quick inquiry to IPC director of market research Sharon Starr confirmed as much.

“The growth rates reported each month will be based on IPC’s survey sample, but we will be looking at published data from the publicly traded EMS companies as a cross-check and may also use this data in our market-size calculations. If growth rates from the publicly-traded companies differ significantly from what our survey participants are telling us, we will address that in the reports,” Sharon told me.

This represents a departure from the past 20 years, where IPC would rely only on the data directly reported by survey participants. For years, report after report showing various manufacturers’ monthly sales numbers would arrive on an unsecure fax machine in the IPC office. Eventually, that fax was moved to someone’s office, but there was little in the way of confidentiality offered, and even if the the reporting company used a unique code, its name on the top of the fax always gave it away. As companies went public and disclosures became more scrutinized, there was a real disincentive for manufacturers to submit monthly data. Over the years, this trend undermined the usefulness of the IPC data: if larger companies weren’t reporting, were the figures as published truly representative?

Parsing the publicly traded firm’s quarterly numbers will go a long way toward ensuring that the data reflect the macro industry trends.