Category Archives: Hot Wires

Mike Buetow’s thoughts on the industry

Think Like the Owner (and One Day You Will Be!)

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How to Maximize Your Value to the Boss

Jerry wasn’t your average engineer.

While his college classmates fascinated on academics, Jerry raced down the sidelines snagging sizzling passes for the Baylor Bears. Soon he scored a much sought after intern offer from NASA and bought an acoustic guitar to serenade the boot scooters. What could have been more thrilling than to see an inspired young man from Shreveport, LA reaching for the stars and achieving success?

But, ultimately talent is finite, youth is fleeting and good looks are quite common.

As he rose through the corporate ranks, the traits that made Jerry his company’s most valuable player year after year had little to do with his athletic prowess or his love for a catchy tune. Jerry’s secret formula was his priceless perspective. His worldview.

Jerry thought like a business leader. Every day. In every situation. And when the opportunity presented itself, Jerry overcame all the challenges of an economically distressed childhood to buy majority ownership in his company. Jerry thought like an owner and became one.

Could you do the same? Could you propel yourself into another universe by changing the way you approach your job. We believe you can. We hope you will. But, hope is not a strategy.

As it turns out, there is no average engineer. There are only engineers who think like employees and engineers who think “like a boss.” The daily choices you make are indicative of the path you’re on. So test yourself while there’s time to adjust and ramp up your game.

Here are 12 questions you can quietly ask yourself to predict your outcome.

True or False:

_____ I do what is right for my customer, company, and team regardless of personal sacrifice.

_____ I press forward with good ideas, even if they are unpopular.

_____ I aim for goals higher than any manager will set for me.

_____ I do not give in to group pressures simply to avoid confrontation.

_____ I consistently give truthful feedback to customers, superiors, and teammates.

_____ I adhere firmly to a code of business ethics and moral values.

_____ Change always brings opportunity. Stagnation limits opportunity.

_____ I practice a disciplined approach to self-improvement.

_____ I have a method for prioritizing my opportunities today.

_____ I successfully make others enthusiastic about opportunities that require extra effort.

_____ I transmit a sense of purpose about all that I do.

_____ I am accountable for my actions and accept responsibility for my mistakes.

If you answered true to nine or more of these statements, you are on the right road to wind up steering your own endeavor. If you answered false to three or more of these statements, you’ll likely always report to someone else. It’s all a matter of your objectives.

Jerry knew from early in life that he wanted to reach his full potential, whatever that might be. I have no doubt that if you asked him today, he’d tell you that he’s still in the relentless pursuit of excellence. In other words, he isn’t done! He’s still streaking for the goal line.

Baylor University recently built a stunning new stadium in Waco, TX, with world-class amenities. On any given Saturday night, you’ll find Jerry up in the stands. His heart is always in the game. And if you wander up to Jerry, ask him if you should aspire to own your own company. He will likely chuckle, wish you much success and suggest that you will have to make that decision for yourself. But regardless of your goals, Jerry will say, “be the best YOU that you can be.”

 

Keith Martino has a passion for helping engineering executives achieve stellar results. Martino authored the book Expect Leadership in Engineering. In addition, the team at Keith Martino has designed and launched Leadership Institutes at multiple engineering firms across the US. Martino is quoted in Young Upstarts, Entrepreneur Magazine, NewsMax Financial, the FedEx Worldwide Manager’s Pak, and several metropolitan business and industry trade journals. For more information visit keithmartino.com.

 

 

 

 

What’s In a Brand? In EMS, Apparently Everything

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The evolution of the EMS company as a “brand” is nearly complete.

Since a group of industry folks (including our columnist Sue Mucha) came up with the term at an industry meeting more than 25 years ago, the once common jargon of “board stuffers” has been vacated. In its place, the industry substituted CEM (contract electronics manufacturer) or EMS (electronics manufacturing services). Contract assembler, while still commonplace in conversation, is less preferred in writing, especially on corporate websites.

Now, the self-branding of EMS companies has taken over. No longer content with being grouped as an industry, EMS firms are taking matters into their own hands, outsourcing (get it?) their marketing to high-profile branding firms and adding a heavy dose of pizzazz along the way.

One well-known makeover is the company formerly known as Flextronics. Its style experts gave a haircut to its name (“Flex”), and added a sleek tagline: From Sketch to Scale.

Not to be outdone, Jabil is “A Trusted Product Solutions Partner+.” I’m not sure what the “+” means, exactly, but maybe it has something to do with Jabil’s alternate slogan: “Empowering Brands / Empowering the World.” That sounds exhausting.

Asia is getting in on the act. Wistron will serve you “Cradle to Cradle.” (That refers to the lifespan of electronics, but if my kids’ habits are any indicator, it could extend much further.)

Compal‘s catchphrase leans toward the esoteric: “From Vision to Reality.” If that’s too vague, the rest of it (“Innovation Empowered”) won’t help.

Taking its cue from the intelligent factory, Sanmina is now Sanmina 4.0. Plexus is “The Product Realization Company.”

Tier 2 companies are also jumping on the bandwagon. Neways is now “Your EMS Lifecycle Partner.”

Of course, not every firm has caught the branding wave. For instance, AsteelFlash is Electronics Manufacturing  Services, Mastered,” while NeoTech is taking a more traditional approach with its slogan, “Providing Electronics Manufacturing Services That Deliver Value.” Someone better clue them in, stat.

 

 

‘Fake Parts’ Data as Perplexing as the Issue

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Interesting report on counterfeit component trends, prepared by ERAI.  PLICs and microprocessors are the most commonly reported counterfeited parts.

One big takeaway: “Suspect/counterfeit parts that have not been previously reported are constantly entering the electronic supply chain and the threat of encountering one of these parts remains very high.”

All that said, the number of fake parts reported is minuscule — just 774 were reported to ERAI. As epidemiologists know, the best way to reduce risk and occurrence of negative outcomes is through research and communication.

Nothing Doing on NAFTA

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For all the chatter (rancor?) over various deals with Iran and China, left almost completely unnoticed is that the soft deadline to present any changes to NAFTA has come and gone with nothing to show for it.

US legislators had set a May 17 target to allow Congress the time needed to OK a new deal this year. That date wasn’t picked out of thin air. The US Constitution bestows Congress with the power to regulate commerce with foreign nations (the so-called Commerce Clause). As such, President Trump can’t circumvent Congress and sign a deal himself. Instead, he must give Congress 90 days’ notice before he signs any agreements.

Then, thanks to the Bipartisan Congressional Trade Priorities and
Accountability Act of 2015, the US International Trade Commission must submit two reports to the House Committee on Ways and Means and the Senate Committee on Finance on the economic impact of the pending agreements. Once those reports have been digested, Congress will be facing a countdown to the January swearing-in of new legislators, at which point all bets are off.

Compounding the situation, Mexico’s presidential election takes place July 1, and the leading candidate is expected to replace Mexico’s negotiating team when he takes office in December.

While President Trump campaigned on rewriting NAFTA, the rush to tender a new agreement has stalled as priorities have shifted. Of late, the three sides spent weeks debating how to carve up the lucrative automotive supply chain, without success.

One look at a 2106 US ITC report crystallizes the impact of NAFTA, in particular, the key auto supply chain. Per the report

from 1993 (the year before NAFTA entered into force) to 2014, Mexican motor vehicle production increased from 1.1 million units to 3.4 million. Mexico’s share of NAFTA vehicle production increased to 19% from 8% during the same period. At the same time, Mexico became a more important automotive parts producer for the North American market. Mexico’s share of value-added content in North American final demand for motor vehicles, trailers, and semi-trailers from 1995 to 2011 increased to 9% from 4%, while US content declined from 63% to 43%.

According to the US Census Bureau, the US exported $243 billion worth of goods to Mexico last year, while importing $314 billion. Both totals are the highest ever with the southern neighbor.

The US does even more business with Canada, exporting $282 billion worth of products last year and bringing back $300 billion. While China is our single largest trading partner, combined our abutters make up 29% of our overall trade, which is considerably more than China’s 16%.

This week Reuters quoted US Trade Representative Robert Lighthizer as saying a deal was “nowhere near close.” The finger-pointing is starting in earnest.

None of this is good for businesses, which must make long-range decisions on everything from equipment purchases to plant locations to staffing. Whatever problem we are trying to solve, let’s hope it doesn’t cause a bunch of new ones.

 

 

Just What Gets Counted in the CIRCUITS ASSEMBLY Top 50?

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I received a note today from an EMS company that had revenues exceeding $400 million in 2017. Why, they asked, did they make the MMI Top 50 EMS list but not the recently released CIRCUITS ASSEMBLY Top 50?

It’s a fair question, and one that comes up each year. In short, MMI calculates its Top 50 differently than we do. While it states it uses calendar 2017 EMS sales, that is demonstrably incorrect.

Key Tronic, for example, which is No. 35 on the MMI list, had sales by quarter of

  • Q1 113.6 million
  • Q2 118.5 million
  • Q3 109.2 million
  • Q4 111.7 million

for a total of $453.1 million. MMI lists Key Tronic’s revenue at $467 million, which was actually the amount for its fiscal year ended July 1, 2017.

Another example: Ducommun. It is similar to many EMS/ODM companies in that it is part of a larger corporation that has other divisions unrelated to contract assembly. MMI has Ducommun listed as 32 on its ranking, yet its EMS sales were, by quarter

  • Q1 $78.7 million
  • Q2 $81.8 million
  • Q3 $79 million
  • Q4 $77.2 million

for a total of $316.7 million. The rest of its sales come from unrelated products such as motors, switches and other non-PCB components. The no. 50 company on the CIRCUITS ASSEMBLY Top 50 was Global Brands Manufacture, with EMS sales of $430.2 million in 2017. As such, in EMS only, Ducommun does not belong. (And again, MMI used the fiscal year, not calendar year, for the revenue total, even though its chart explicitly states otherwise.)

Another reason why the lists don’t match up is in the definition of “EMS.” CIRCUITS ASSEMBLY counts ODMs such as Foxconn, Quanta, Compal, Wistron, Pegatron, etc., because they design and assemble products for other companies. (We also take care to remove the revenue unrelated to direct design and manufacturing for third-party customers.) MMI includes some of these companies but not all. But MMI does include Alpha Networks, which is an OEM, selling almost all its products under its own name.

MMI also counts revenue from bare board fabrication (Flex, Sanmina, etc.), which we remove. Yet MMI does not include companies such as ZDT, Mektron and MFlex which perform vast amounts of contract assembly although their primary business is flex circuit fabrication. We do so because their respective assembly operations are huge – in the billions. If you buy components and assemble them onto circuit boards for external customers, you are an EMS. To not include such firms is a huge omission.

I will say, it’s not easy to align companies’ EMS/ODM revenues, especially when they use different fiscal years, accounting standards, and reporting methodologies. Throw in the fact that most of these firms have businesses unrelated to pure EMS, some are private, and several report in languages other than English, and the task becomes very exacting. This certainly should not read as a criticism of MMI (or anyone else’s) methods, because 1. I know how hard it is to get everything right and 2. I truly respect the data that MMI (and others) add to the industry domain.

 

PCB Industry on Fire — Literally

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The potential for fire is an occupational hazard of printed circuit board fabrication and assembly. Plating lines can be highly flammable, as can be ovens and the exhaust systems.

The deadly fire at Chin Poon in Taoyuan, Taiwan, over the weekend underscores how careful workers must be when building circuit boards — and how important it is for management to ensure safety practices are in place and followed.

The US tends to be reliable when it comes to fire safety. The last publicly cited incident was in 2016, when a minor fire broke out at TTM’s fab site in Anaheim.*

Overseas is a different story. Wurth’s plant in Neiderhall, Germany, was decimated by a blaze in 2014. The company rebuilt. Likewise, Unimicron spent millions to rebuild its site (the former Ruwel) at Geldern, Germany, following late December 2016 fire.

In Southeast Asia, blazes are all too common. Fires have been reported at ITEQ, Compeq Manufacturing, Gold Circuit (twice), Unitech (twice), Unimicron, Wus Printed Circuit and Tripod Technology (twice). Viasystems in Guangzhou was shuttered for a period of time following a 2012 blaze, and also sustained a fire in Zhongshan. Gold Circuit in Changsu .Taiwan PCB Techvest suffered a blaze in Suzhou, and Zhen Ding (ZDT) sustained one in Jiangsu.

And that doesn’t include another tragic incident which occurred last year at Unitech Printed Circuit Board in Taiwan, where four workers died after falling into a wastewater tank. They reportedly were overcome with fumes from the hydrogen sulfide present and lacked proper protective gear.

Assembly plants are risky too. Ovens and wave solder baths are potentially combustible, and it seems a cleaner explodes at least once a year.

A plant at EMS provider SVI Public Co. in Bangkadi, Thailand, burned to the ground in 2015. The last time we can recall a US assembly plant sustaining such damage was more than a decade ago, in 2005. That was a rough year for assemblers, as at least two were decimated by fires. Fawn Electronics, in North Carolina, chose to rebuild after a December fire leveled the plant. (It has since been acquired by ACDi.)

Workers at Mid-South Electronics weren’t so lucky: The EMS provider closed after a disastrous fire to its plant in Kentucky in January that year, leaving more than 700 workers out of jobs.

It’s commonplace to for management to say their workers are their greatest assets. We hope the tragedy in Taoyuan is a wakeup call for companies everywhere to review their safety practices and ensure the utmost caution is taken to prevent future disasters.

 

*Update: A good friend noted after this piece was published that ICM Controls’ captive board shop in North Syracuse, NY, was demolished by a fire in May 2017.

In Acquisition Mode, Foxconn is Turning Up the Heat

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OEMs, beware: Foxconn is coming for you.

No, not just to buy your components, build your boards and run your logistics. Foxconn is coming for your data, your markets, and your customers.

We’ve been sounding the alarm about this for years. It’s not healthy for your primary supplier to be bigger than the nearly the entire rest of the market. Foxconn, pushing $150 billion in revenues, is as large as the next five EMS/ODMs combined, and more or less as large as numbers 7 through 500.

The 2016 buyout of Sharp could be chalked up to a desire by Foxconn to nab a key technology and supplier to Apple, it’s top customer. The just-announced deal for Belkin, however, coupled with its foray into developing 5G computing and cloud platforms,, suggest a drive to higher margin, branded products. Foxconn’s revenue is larger than almost everyone of its customers, and a new plan to issue $50 billion worth of stock could give it the capital it needs to go on a massive acquisition spree.

OEMs, beware.

In China, A Bet on Tariffs

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Several news stories are breaking today about President Trump’s anticipated tariffs on scores of goods from China. On the list of items that will see new import duties is consumer electronics.

The effects of this move have the potential to go far beyond the administration’s stifling of a series of high-profile acquisition attempts, including Singapore-based Broadcom’s attempted not-so-friendly takeover of Qualcomm, or that of a Chinese investment firm’s deal for Lattice Semiconductor. One wonders, if the TTM-Meadville deal were in play today, what the ruling from the feds would have been.

China has successfully reached its goal of the “world’s factory,” but is it good for the US — or the world, for that matter — to have so much critical manufacturing concentrated in one place? I would argue no. Foreign companies get a raw deal trying to access the China market. The rules are set up to favor domestic companies, the government’s reach extends into all levels of private businesses, and the judicial system is weak, at best. As we have noted before, in China, “copyright” means “the right to copy.”

The US is the only economic body, except perhaps the European Union, capable of forcing China’s hand. China will not change on its own.

It would take a better fortune teller than me to predict how this will play out. On principle, some critics are primed to dismiss the administration’s move. But governments interfere in economic systems all the time. The entire US import system is one giant hurdle. So is Europe’s. It says here the risk is worth taking.

 

Talking Government Relations with IPC

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In my latest podcast, I speak with John Mitchell, president and CEO of IPC, and Chris Mitchell, IPC vice president of global government relations. They discuss the trade organization’s key government programs and initiatives, its annual member lobbying event coming up in May, and the importance of lobbying by member companies. Listen in at upmg.podbean.com.

Latest Podcasts Look at AS9100D, EMS Innovation

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A couple new podcasts to call your attention to.

In one, I speak with my longtime friend Randall Sherman, the EMS/ODM analyst and founder of New Venture Research, on recent developments in the market and how EMS companies are leading innovation by building intelligence into production systems.

In the second, I discuss the ongoing issues faced by the supply chain, and especially fabricators, in the wake of AS9100D.

The podcasts can be found at https://upmg.podbean.com.