So sorry to share the news that Jim McElroy, founding chief executive of iNEMI, has passed away.
I truly enjoyed Jim, and even though I probably ticked him off a time or two with things I wrote, he was such a gentleman he kept it to himself. He was a great choice by the iNEMI board to launch the consortium — technically knowledgeable and politically astute. A quintessential New Englander through and through, Jim wasn’t flashy. He just got things done.
An industry friend just reminded me I once told them I felt the reason that Jim was so successful at iNEMI was because he was able to put aside his ego. I don’t remember saying that, but I firmly believe it was true.
Obituary follows here: https://obits.csnh.com/james-mcelroy-sr
Category Archives: Hot Wires
Walmart-Vizio Tie-up Poses Supply Chain Questions
Walmart’s just-announced acquisition of Vizio will draw plenty of attention, but not nearly what it deserves.
The spotlight is on the synergy between the world’s largest physical retailer and a Top 10 maker of smart TVs. Walmart, which already sells Vizio’s smart flatscreens by the boatload, is expected to benefit by expanding its ad-targeting capabilities to connected television, per Axios and other analysts.
But I find it intriguing for other reasons: It is an audacious revamping of the OEM-distributor relationship.
Walmart is in fact the world’s largest retailer, with annual revenues topping $635 billion. That’s well above that of Amazon ($350 billion range in retail; much larger if services are included). The margin grows if we subtract the billions in revenue Bezos and Co. collect selling their internally sourced brands, such as Eero routers, Kindle e-readers, Fire tablets and TVs, and of course Alexa and Echo smart home devices. And that’s just the electronics side of its vast private label businesses.
Walmart, of course, has its own private labels as well, but they tend to be in the home and sporting goods and automotive spaces. Electronics was an after-thought.
Adding Vizio, however, adds a $1.7 billion electronics arm, complete will all the requisite supply chain demands, from design to parts procurement to manufacturing to logistics. How will this affect Vizio’s sourcing strategy? Will Walmart overlay its procurement approach? Will Vizio’s competitors attempt to undercut their tie-up with Walmart by asserting that the new owners will give their own channels precious advantages on retail walls and shelves?
I’m not discounting the already robust Vizio supply chain practices, but there’s a learning curve both organizations are about to experience: Vizio with a new corporate overlord, Walmart with an outside team whose operational methods are almost certainly different than its own. Who will bend, and how?
What’s the Deal with the Altium Deal?
The masses are atwitter over the announced Renesas acquisition of Altium, and for good reason. The $5.9 billion price tag is some real coin.
What’s less clear to almost everyone outside the two companies, however, is the underlying strategy and how the merged entity will look going forward.
In announcing the acquisition, Renesas chief executive Hidetoshi Shibata called it “an important first step into our long-term future.” But what is that future?
Obviously, Renesas is not going to take Altium private, for use for its internal customers only. The two firms do have many overlapping markets: IoT, consumer, automotive, among others. Renesas also plays in higher-end areas such as high-performance computing that Altium has not to our knowledge penetrated. If OEMs want one-stop shopping for a systems program, a combined Renesas-Altium starts to make some sense. But the latter lacks the chip package tool to complete the proverbial – and literal – circuit.
Less clear, however, is why Altium is worth so much to Renesas. Yes, it likely has as large an installed base as any major PCB CAD company. Its revenue, however, puts it behind Zuken in fourth overall, well behind Cadence and Siemens. Shibata highlighted Altium’s growth rates and profitability. But neither its revenue nor its net income ($43 million in its last fiscal year) will move the needle for Renesas.
As for the price: Renesas will pay $5.9 billion in the all-cash transaction. That’s a healthy premium relative to other significant deals in the industry over the past decade. I’m not of the mindset every deal must pay off in direct financial ways, but given the price tag, on the surface I think this one will be a tough climb.
That said, big deals are nothing new to Renesas. Including the pending Altium check, it has spent some $22 billion on various chip and software companies over the seven years.
How does this one rank with other high-profile M&As? Let’s look at some measures:
| Company | Prior 4Q Revenue at Acquisition | Acquisition Price | Stock Premium | Revenue Multiple |
| Cadence | $1.33B | |||
| Sigrity | $20M | $80M | na | 4x |
| Siemens | €79.6B (US$88.4B) | |||
| Mentor Graphics | $1.18B | $4.5B | 21% | 3.8x |
| Synopsys | $6B | |||
| Ansys | $2.16B | $35B | 29% | 16x |
| Renesas | $9.94B | |||
| Altium | A$263M (US$171.6M) | $5.9B | 34% | 22x |
Cadence bought Sigrity in 2012 for what now seems like couch change: $80 million.
The Ansys acquisition announced last month reportedly will increase Synopsys’ total addressable market by a 50% to $28 billion. While Synopsys is strictly EDA, Ansys plays heavily in the automation space, with focus on large end-markets like automotive, aerospace and industrial. Semi makes up less than one-third of Ansys’ revenue. (Asked on a conference call for how the Altium deal would affect Renesas’ TAM, the company demurred.)
This all can be traced back to Siemens’ 2017 acquisition of Mentor Graphics. Under duress after multiple hostile takeover attempts, including one by Cadence, Mentor was acquired by the German conglomerate as less than 4 times annual revenue. Synopsys is paying 16 times revenue for Altium, Renesas is paying more than 22 times revenue for Altium. How the CAD company’s former shareholders must be wishing they were still on the block now!
Renesas hinted that Altium shouldn’t be viewed in a vacuum but as part of a larger strategy. Will Zuken be next? At $250 million in revenues over the past four quarters, and a market cap of $630 million, it would likely be a far cheaper buy. And Zuken could add chip package and high-end PCB tools to the suite, while also bringing several major military and aerospace customers. Zuken has danced with others through the years. Might it someday find a new home with Renesas?
Involution Revolution
Electronics design and manufacturing aren’t specifically mentioned in this report on China’s “involution“* in certain key sectors including solar, batteries and EVs, but the parallels and implications are clear. China commands a 50 to 99% share of those latter markets worldwide, and similarly dominates the electronics space.
Moreover, the conclusions brought forth — extreme efforts from the West to subsidize and block Chinese suppliers from their markets; China continues its race to the price bottom, making R&D spending all but impossible — clearly suggest a treacherous road ahead for those serving the electronics market.
*the act or an instance of enfolding or entangling; a shrinking or return to a former size
A Look at the Past, A Glimpse at the Future
I had the pleasure of I speaking to about 20 8th graders this month about careers in electronics.
It took me back to my first real introduction to the industry: the Summer Consumer Electronics Show in 1992. There I saw the prototypes for HDTV and widescreen TVs, and more interesting, the first foldable screens.
I was enthralled with some of the devices and innovations I saw there, some of which have yet to come to mass production. They were a far cry from what I was used to at that point: floor TV models as large as a desk and computer terminals the size of small ovens.
I like to remind folks that it takes a generation or more for most ideas to become mainstream. At this year’s CES, there were transparent TVs (thanks to LG and Samsung), foldable OLED PC monitors (Asus), and a portable rolling robot projector (Samsung again) that, well, you really to see to understand what it is capable of.
Of my cohort that January morning, two of them are already thinking in terms of engineering careers, but in my opinion what’s more important is that none of them rules out this path.
Mentoring peers is great and important, but I’m a big proponent of talking to youth and helping them connect the dots. After all, we are often reminded that if you want to see the future, take a look at your kids.
And if you agree that we need the next generation to consider careers in electronics design and manufacturing, are you doing what you can to encourage them?
Add Wisconsin to the List of Failed Foxconn Bettors
The ink was barely dry on the lawsuit filed by Lordstown Motors against would-be savior Foxconn when the next round of news hit: the world’s largest ODM/EMS company is pulling out of Wisconsin.
If we go back to 2019, we will recall Lordstown opened the doors of its plant, formerly owned by GM and seen as critical to its hometown’s economic future, to Foxconn, which came bearing (the promise of) much-needed cash. In return, the ODM was to obtain access to Lordstown’s electric vehicle technology, which Foxconn sought as it reportedly focuses on building electronics and other products for what is seen as the future platform for individual and fleet transportation.
That dream ended in a crash, unfortunately but unsurprisingly. The investment never really materialized, Lordstown went bankrupt, and the winners will be the lawyers.
Some 30 miles south of Milwaukee, Foxconn’s much-ballyhooed splash into the Wisconsin cornfields is resolving with the sale of its 315-acre campus to Microsoft.
That’s a far cry from the $10 billion in investment and 13,000 jobs the company forecast — and lots of politicians touted — as longtime homeowners were hit with eminent domain mandates to make way for the 200,000 sq. ft. plant. Some $500 million of taxpayer money later, the prairie landscape is left with a mostly vacant shell. Likewise, company plans to build innovation centers in Madison, Milwaukee, Green Bay, Eau Claire and Racine have mostly been shelved, and the properties are going on the block.
What both deals had in common was that they took place in states that of late are highly contested in federal elections. That’s no surprise: Foreign companies have often (always?) tried to influence the outcome of US elections to suit their strategic interests. (The constraints foreign entities should have on such maneuvers, if any, are for others to decide.)
Experienced bettors know when to fold their cards, however, and Foxconn is well-known for exiting the table when it doesn’t like the stakes. When the trade winds blew cold, the company headed for warmer climes.
So a shout out to Georgia, Arizona and Nevada, among others: If Foxconn comes calling, look hard at the cards before asking for a hit.
Online Component Market Ideas Never Die, But Can They Prosper?
More than 30 years ago, one of the first stories I reported on in the electronics industry was a startup whose founder wanted to create a marketplace for electronics components.
Called FastParts, the idea was based loosely on the US stock exchange. Sellers of excess parts could come together with buyers, and FastParts would act as the intermediary — much like the NYSE — providing a trusted guarantor of one company’s inventory and another company’s monies.
Depending on your perspective, founder Gerry Haller was either ahead of his time, or a solution in search of a problem. FastParts never panned out, but over the years we’ve seen several other companies attempt the same thing.
Today, the supply chain has rebounded more or less back in balance after the Covid shortages. In fact, there’s probably more inventory than buyers right now. Right on queue, another startup has entered the fray, offering safe harbor for buyers and sellers.
I’m not entirely sure what separates BidChip, the latest entrant, from its predecessors. But I do know this: Sooner or later, Amazon will recognize that the electronics components industry is one of the largest in the world and jump in with its both of its very oversized feet. And when that happens, will any of the others be left upright?
Optimizing Test Cost Webinar
There are many cost drivers in today’s electronics manufacturing environment. That is why it is important to eliminate unnecessary cost wherever possible.
In a new free webinar, Optimizing Test Cost, EDM’s test engineering team discusses how best to optimize inspection and test strategy. Product design considerations, automation, standardization and best mix of test technologies are discussed. Test robot options will also be demonstrated. The webinar length is 20 min with a 5-minute Q&A.
Date: Tuesday, November 2, 2022
Time: 11 am Eastern Time
To register, click here.
Grounded! What The Electronics Industry Can Learn from Airlines
Anyone who has boarded a plane in the past several months knows this all too well: the near-term future of airlines is up in the air.
From smallest to largest, all the carriers have been dramatically affected by the post-Covid rebound in passenger air travel. Delta and United Airlines each cut 30% of their respective staff in 2020.
And while many observers point to the attractive buyouts the carriers dangled before critical employees (read: pilots) as means to cut costs amid the mass groundings during the pandemic, employment has shot up over the past 18 months.
Take Delta, for instance. The second-largest airline in the world has hired 18,000 new employees since January 2021. But even with its staffing back to 95% of what it was pre-Covid, capacity reportedly is some 10 percentage points lower. Reason: it takes time to train the newbies.
“The chief issue we’re working through is not hiring but a training and experience bubble,” said Ed Bastian, CEO, Delta.
And the more complicated the job, the longer the training period. Which reveals yet another crack in the fuselage: a lack of trainers. To wit: American says its pilots are basically stuck waiting for training classes to open up, as the number of new hires far outpaces the available slots. The backlog is said to be six months or more.
The issue runs so deep, it has its own name: the Juniority problem.
United has gone on the offensive, blaming — who else? — the government. United chief operating officer Jon Roitman estimates “over 50% of our delay minutes and 75% of our cancels in the past four months were because of FAA traffic management initiatives.”
But all this comes back to the industry’s lack of foresight — or unwillingness — to continue to invest in its workers during the inevitable economic cycles.
You know where I’m going with this.
The PCB industry is historically boom/bust. We are coming off a run of very strong years, and the forecast, according to Dr. Hayao Nakahara, the preeminent researcher in the industry, continues to look bright.
But the graying of the industry is very real, and its long past time OEMs invested in recruiting and training the next generation of designers, design engineers and manufacturing engineers. (And yes, I am pointing at OEMs, since they are top the of the pyramid and ultimately their needs are the driver for the rest of the supply chain’s decision-making.
Let’s learn from the airlines, or, more precisely, their mistakes. It’s time for the push to onboard the next generation of engineers to take flight.
Conductor Sizing Software: How Much is Knowledge Worth?
My name is Mike Jouppi and I am the sole owner of a software application for sizing electrical traces in Printed Circuit Boards. A description of the application is here.
I would like to sell this software application and all of the material that went into creating it. My company has developed 68 design charts. It also has the capability to create charts for any technology and tools to import the results into the software application.
The electronics design community has started to recognize the importance of the pre-design phase of conductor sizing. Altium has incorporated IPC-2152 for trace sizing and has training on the topic. There are many calculators on the Web that are applying IPC-2152 design charts.
Unfortunately, very few understand the physics behind what they are employing as a tool and continue to add confusion to the electronics design community.
If you are interested in contacting me for a conversation on this topic and having a discussion about purchasing my company’s software, my email and phone number are provided below.
Mike Jouppi
Thermal Management LLC
303-359-3280