Category Archives: Hot Wires

Mike Buetow’s thoughts on the industry

Hacking the Hacks

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Wikileaks this week released a trove of materials purportedly from the CIA which demonstrate a range of methods used for spying on unwitting individuals. Among the revelations were how-to’s on accessing (read: hacking) most popular operating systems including Android and Apple. The CIA, it is alleged, has figured out how to bypass the encryption on a host of common apps including Signal, WhatsApp and Telegram, and even get around many antivirus programs designed to spy on the spies.

As it turns out, that TV set you have hanging on your family room wall might well be watching you. Worse, it was intimated that a vehicle’s electronics system could be hacked, rendering the car uncontrollable — with potentially devastating consequences.

It doesn’t take much to make the leap from hacking consumer and automotive electronics to overtaking machine language software systems. And that should be of paramount importance to those working on industry standards for Industry 4.0, including IPC’s Shop Floor Communication Standard Subcommittee and Mentor Graphics (OML).

As important as machine-to-machine (M2M) communication is, security should be the priority.

 

 

Where the Jobs Are

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This news item from the Associated Press cuts to the heart of the matter when it comes to reshoring of manufacturing and why skeptics (including this humble writer) abound over whether Foxconn, among others, truly intend to set up large manufacturing plants in the US:

WASHINGTON (AP) — President Donald Trump brought two dozen manufacturing CEOs to the White House on Thursday and declared their collective commitment to restoring factory jobs lost to foreign competition.

Yet some of the CEOs suggested that there were still plenty of openings for U.S. factory jobs but too few qualified people to fill them. They urged the White House to support vocational training for the high-tech skills that today’s manufacturers increasingly require — a topic Trump has seldom addressed.

“The jobs are there, but the skills are not,” one executive said during meetings with White House officials that preceded a session with the president.

The truth is there are hundreds of thousands of manufacturing jobs available in the US today. The US Census Bureau puts the figure at just shy of one million. In talking with circuit board fabricators and assemblers over the years, the biggest impediment to hiring is not lack of work but rather lack of qualified workers.

My belief is that the demographics of electronics design and manufacturing resemble a bimodal distribution (two humps), whereby workers over 50 years old represent the largest group by age and workers aged 20 to 30 the second largest. Those aged 30 to 50 are the smallest group (the valley in the graph, see below). My thesis is that workers in that segment were coming online right about the time the North American electronics industry cratered — late 2001 to early 2004, leaving them either out of jobs or unable to crack the then much-smaller workforce that was left after the tech recession.

(The graph below illustrates the basic concept, although in reality the right hump would be higher than the left as there likely are more workers over 50 than under 30 in electronics design and manufacturing today. But you get the idea.)

With the older wave starting to retire, coupled with an upturn in the industry’s fortunes starting around 2008, a new wave of workers has entered the industry. And while we often speak of the lack of millennials in manufacturing, a tour of Silicon Valley area shops takes the air out of that conversation. There, workers don’t ask where the young people are; they just look around — they are everywhere. And manufacturers are catering to them, setting up coffee (and more) bars inside their plants, creating workspaces that resemble outdoor atria that offset the traditionally sterile assembly lines.

Moreover, there is some concern that widespread move of manufacturing back to the US will only accelerate the implementation of robots, leaving thousands of operators on the sidelines. In anticipation, robot makers are ramping capacity, in some cases by as much as two times. This is not without precedent. Those of us who were around when PCB fabrication and assembly migrated to China en masse in the late 1990s/early 2000s recall how common semiautomatic machines were then. It was a nod to the Chinese government, which was adamant about protecting employment.

What’s your experience? Is your company weighing a return to the US? If so, will it come with an increase in automation?

(Please, no political comments.)

OEM Markets, Through the EMS’ Eyes

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What can we expect from the OEM markets this year?

While long-term visibility remains cloudy, the outlooks from major ODM/EMS companies give some perspective on the near-term expectations.

Looking at publicly traded EMS and related supply chain (connector suppliers and component distributors), median supply-chain sales came in ahead of implied fourth-quarter guidance, according to data from Deutsche Bank. For the December quarter, sales increased 5.1% year-over-year at the median, almost double that of guidance (2.6% growth).

Likewise, implied first-quarter median sales guidance is 4.3% growth year-over-year which points to continued growth for the supply chain.

“In general, supply chain growth continues to be driven by company-specific new program ramps, although management teams are seeing a more positive demand environment,” DB said.

Two players that just announced quarterly earnings, Celestica and Flextronics, agree that storage and server sales will slump. Another, Sanmina, sees that end-market as stable.

The related communications and telecom sector is seen by Celestica as a big gainer (up 20%), but not so much by Flex (down five to 10%) or Plexus (down 4 to 7%) or Benchmark (down 15% or more). Sanmina called the market stable.

Automotive has, ahem, driven much of the sales growth for many EMS companies for the past eight years. Flex and Fabrinet both expect the surge to continue. So does Kimball, for which automotive makes up 42% of its revenue.

Consumer is expected to take some hits. Flex sees a 20 to 30% drop, Jabil foresees a smaller loss, and Celestica expects flatness.

Medical/healthcare is a mixed bag. Jabil forecasts a 2% drop, IEC also expects it to be lower, while Ducommon and Plexus say flat. Benchmark, Sparton and Jabil see growth, likely in the low to mid single digits.

As for military/aerospace, IEC and Sparton see them as growing, while the larger EMS companies (Celestica, Sanmina, and Ducommon) see them closer to flat. Plexus is most bullish on the segment, at 14 to 16% growth.

Only Flex is bullish on industrial, forecasting 10 to 15% growth. Ducommon sees it as flat to 1% higher, while Celestica, Sparton and IEC don’t expect much either. Plexus predicts a 4 to 7% drop. Benchmark expects sales to fall in the high single digits.

Many EMS companies don’t break out semiconductor, test or instrumentation. An exception is Benchmark, which sees strength there, with anticipated growth or 10% or more.

Finally, remember when computing drove seemingly everything? Benchmark expects that sector to fall 30% or more. It’s a sign of how far computing has dropped in significance among North American-based EMS’s in that many of them now group it as part of consumer.)

Sorry Utica, Foxconn Isn’t Coming There

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Or Broome County, NY. Or Harrisburg, PA.

Despite repeated media reports of an impending Foxconn migration, the company will remain what is has been since its founding in 1974: Chinese.

Sure, there will be satellites in key spots elsewhere: Juarez. San Jose. São Paulo. But not the American countryside, and not in big fashion, as is being widely reported by international media.

If Foxconn were to bring one of its Death Star-like campuses to the US, it would buck not just every single manufacturing trend, but outright common sense. Here’s three quick reasons why to expect that won’t happen.

  1. Incentives. Foxconn routinely holds out for hefty discounts on taxes, favorable access to land, and other concessions (See India, Malaysia, Indonesia, Vietnam, etc.). Given the higher cost of land acquisition, building codes and labor costs, and taxes, among other things, Foxconn would certainly insist on favorable treatment. Even if it were to get it – and unlikely proposition – how would that play with Americans if a Chinese company were to be given such breaks? Such a backlash has already begun in India, by the way.
  1. Access to capital. Founder and chairman Terry Gou is Foxconn’s single largest shareholder. He has been leveraging his own capital, including company stock, to fund recent acquisitions, including the mega-deal for Sharp. Despite (or perhaps because of) being publicly held in Taiwan, getting a clear picture on Foxconn’s assets and true financial worth is exceedingly difficult. Would the company be willing to trade its famously secretive culture in exchange for access to American bankers and financial markets? Or would that be the blow that levels a house of cards?
  1. Access to labor. Foxconn is prone to promoting – or at least failing to dismiss – wildly optimistic forecasts of capital investment in local projects. In the past few weeks alone it has been tied to a nearly $9 billion display manufacturing investment in China and another possible $7 billion version in the US. The latter, the reports say, citing Gou as the source, would create 30,000 to 50,000 jobs. Putting aside the fact that few of these massive new job figures ever are completely realized, even 1/10th of that amount would be three times the workforce of the 6 million sq. ft. battery factory Tesla built in 2014, for which Nevada ponied up nearly $1.3 billion in tax credits and rebates.

Simply put, there aren’t that many qualified engineers and technicians available in and around the American countryside to fill a campus that large. (Even China, which supposedly graduates two to three times the number of students in engineering and related fields each year doesn’t appear to have sufficient manpower to handle those employment estimates.)

The US Census Bureau, which tracks such things, notes there are nearly one million job openings at US manufacturers today. And a single company is going to add 5% more to that figure? Not likely.

There certainly aren’t that many available workers in Utica (population 61,000) or Harrisburg (population 50,000). The latter, famous as home to the Hershey chocolate company, should know to resist Foxconn’s temptations. On second thought, maybe it does:

“One location Foxconn already is familiar with in Pennsylvania is Harrisburg, where the company has a small operation and, in 2013, announced intentions to spend $30 million on a new plant that would employ up to 500. For that project, Havens said, DCED officials met with Foxconn representatives on various occasions and showed them potential locations for the planned site, but the project did not come to fruition.”

As part of the same announcement in 2013, Foxconn said it would invest $10 million for research and development at Carnegie Mellon University in Pittsburgh. When asked whether Foxconn ever delivered on its pledge, CMU spokesman Ken Walters said Wednesday the university had no comment.”

According to my sources, Foxconn is outsourcing, or seeking to outsource, work to other EMS companies in Southeast Asia. That doesn’t sound like a company that intends to take on manufacturing consumer products in North America. Pointedly, Gou himself told Reuters of news Foxconn would expand in the US: “There is such a plan, but it is not a promise. It is a wish.”

So with apologies to Utica, Harrisburg and other fine American cities, we say if you are waiting on Foxconn, don’t hold your breath.

P.S. For a great breakdown see this piece: http://www.livemint.com/Opinion/uzqTrvW0hMxgkSKCnh41dP/US-faces-risk-of-Foxconn-panel-plans-that-dont-add-up.html

Time to Go?

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I spoke today with a longtime friend in the PCB industry who shared that multiple times in the past year his company had made inquiries to various suppliers about various lines of equipment. They specifically asked for quotes on certain machines. And yet this company, which pays its bills and has a long track record, never received the quotes. Followup calls went unanswered for months.

I asked the names of the persons at the suppliers to whom my friend’s company made their inquiries. I’m sorry to say, they were names I recognized. Good, knowledgeable people. Old-timers, all. Hangers on. Definitely folks that no longer initiate contact. What some would call the “working retired.”

I’m no ageist. There’s no question the electronics industry today can sap one’s energy. While the end-product are nothing short of exciting, it’s been a long time since something came along to upend the manufacturing side. And even in good years business isn’t growing so fast that the prospect of making Zuckerberg-like coin is enough motivation to hustle. I get it: Once you get in the rut, it’s tough to get out.

Here’s my plea. If your passion for building, promoting or selling the industry is gone — consider hanging it up. Find a younger person, train them and step aside. If you want to maintain your industry friendships, show up at a trade show once or twice a year. But don’t let your inability to let go impede your company, or your industry.

Out of energy? The PCB industry needs you … to retire!

In Trade War of Words, Huawei Goes on Offensive

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“Huawei won’t move manufacturing to America.”

The headline sounds, well, weird, almost like “Tiffany’s not robbed.”

But the crux of it is a tale of global politics and business tactics growing ever-more-fascinating by the day.

In short, at the Consumer Electronics Show this week, the head of Huawei’s consumer business group issued a statement saying the smartphone maker doesn’t think much of the incoming Trump administration’s habit of calling out companies that build and import product to the US.

While Trump has thus far had mostly automakers in his sights (GM, Toyota, Ford), Apple has been the poster child for the war of words over trade. By speaking out at CES, the world’s largest technology trade show, Huawei is among the first companies, and likely the biggest, to go on the offensive.

“If [companies] move all manufacturing to the U.S., some manufacturing is not good for US companies, because costs will likely increase,” said Richard Yu, who was also a keynote at the show. “If you move all that [low-cost] manufacturing to the US, you’ll damage the US.”

Huawei has an uneasy history with the US. Its head is a former Chinese military officer Ren Zhengfei, and the company was banned from supplying telecom equipment to US government buyers after a Congressional committee accused the firm of spying on behalf of China. It is also the third-largest smartphone OEM in the world, and given the easy nature of using those devices as tools for capturing user habits and data, that is hardly less troubling.

More complex, Huawei, like Apple, depends heavily on Foxconn as a contract manufacturer. Although based in Taiwan, Foxconn founder and chairman Terry Gou is a strong supporter of China. He also is reportedly considering a run for president in his native Taiwan, a move that if successful would likely strengthen the ties between the island and mainland — and potentially further complicate already precarious relations between China and the US.

Until the new administration is officially installed in two weeks, the machinations are mostly bluster. But the chatter shows no signs of abating, and the campaigns for — and now, against — Made in America are just starting to heat up.

The Top 10 of 2016 — Circuits Assembly

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Each year we review the 10 most-viewed features of PCD&F and CIRCUITS ASSEMBLY. This year, we’ll start with CA. Keep in mind that the counts are not adjusted by the date of publication. Therefore, an article published in January has an advantage over one published in December. The month of publication is listed in parentheses.

10. “New Embeddable Technologies,” by Chris Reynolds. (January)

9. “Applying Lean Philosophies to Supply Chain Management in EMS,” by Wally Johnson. (February)

8. “GHS: The Final Countdown,” by Scott Mazur. (Note: This isn’t his only entry in this year’s top 10.) (January)

7. “Field Performance of pH neutral Cleaning Agents,” by Umut Tosun, Jigar Patel, Kalyan Nukala and Fernando Gazcon. (September)

6. “Online Bath Monitoring,” by Rebecca Dettloff. (March)

5. “Via-in-Pad Design Considerations for Bottom Terminated Components on PCB Assemblies,” by Matt Kelly, Mark Jeanson and Mitch Ferrill. (February)

4. “How to Use the Right Flux for Selective Soldering Applications,” by Bruno Tolla, Ph.D., Denis Jean and Xiang Wei, Ph.D. (April)

3. “Blurred Lines,” by Mike Buetow, a review of the Top 50 EMS companies from 2015. (April)

2. “Extreme Long-Term PCB Surface Finish Solderability Assessment,” by Gerard O’Brien and David Hillman. (July)

1. And the most-viewed article on CircuitsAssembly.com this year (by 35 views) was  “Energy Reduction in the Electronics Facility” by Scott Mazur. (March)

Thanks to everyone to contributed this year, and thanks especially to all our loyal readers!

Don’t Expect Apple to Fall for US Again

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Analysis of the impact of Apple moving its production — or at least some of it — to the US will continue over the next several months but with the imminent change in US administration it could be peaking now.

Back and forth continues among various media sites debating whether Apple can or can’t, and should or shouldn’t, relocate some of its assembly.

Forbes today points to multiple studies, one by Syracuse and another by MIT (from June) that estimate assembly costs for a high-end domestically produced iPhone would rise 5% ($30 to $40). Other estimates peg it at closer to 13% ($100).

To be sure, there will be more of these types of discussions taking place. But much of the chatter disregards that Apple can’t do this alone. We have argued previously that Apple’s mastery of the supply chain has as much to do with its success as the occasionally startling hipness of its designs. The cool factor is subsidizing; keep in mind Apple has only 12% share of the cellphone market, and the tablet market — in which it once commanded a 90% stake — is now absolutely flooded with competitors and shrinking by the year. Apple’s net income has been falling with it, and the Watch Series 2, its latest entrant in the smartwatch sector, is not only losing share, the entire category is diving.

Capacity would not only be a huge issue, but the costs of scaling up are not included in any of the financial analyses I’ve read. The very real costs of $1 million or more per high-volume line would be to be absorbed — and passed on. (Zhengzhou is said to be the largest Foxconn/Apple factory in the world, with 94 lines currently running.) That’s not including the costs of finding and/or greenfielding factories, hiring, training, and so on. By the time all that is done, a new administration could be in place.

And then there’s the issue of taxes, which most reports fail to assess or even discuss. A New York Times article today, however, quotes a former chief of staff of the congressional Joint Committee on Taxation as saying: “US multinationals are the world leaders in tax avoidance strategies. In doing so, they create stateless income — income that has become unmoored from the countries to which it has an economic connection.”

Apple has stashed scores of billions of dollars offshore to avert a ginormous tax bill. The US corporate tax rate is third highest in the world on a top marginal basis, according to the Tax Foundation. This is a bit of a red herring — the lowest listed non-island nations are Uzbekistan and Turkmenistan, and no one is thinking of rushing there. But Ireland is among the lowest 20, a fact Apple has used to its advantage (although that could bite them, if the EU has its way).

All of this adds up to a very unlikely scenario that Apple will be motivated to relocate production. I could see a bit of highly publicized migration to what’s essentially a US showroom as a means to give politicians a “win” and displace some heat, but it would be trivial relative to the overall volume.

Update: Here’s yet another opinion, published on Dec. 29. And other, from the South China Post, asking whether China’s manufacturing is “hollowing out.”

Dec. 30 update: Foxconn’s CEO says will invest $8.8 billion in a new flat-panel display plant in China.

Car Talk

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The US Department of Transportation is recommending mandatory vehicle-to-vehicle communication for all new cars and trucks through a short-range wireless technology, as part of a plan to reduce the number of road accidents.

The agency’s recommendations come after a pilot program under which some 2,800 cars, trucks, and transit vehicles (and some infrastructure) was equipped with wireless connected vehicle devices and let loose on public streets to test safety applications using dedicated short range communications (DSRC) technology. The model deployment was designed to determine the effectiveness of the technology at reducing crashes.

Using DSRC, vehicles were able to tell when another vehicle with connected vehicle technology moved into the immediate driving area. Conducted from 2012 to 2013, the one-year model deployment, held in Ann Arbor, MI, was the first test of this magnitude of connected vehicle technology in a realworld, multimodal operating environment.

The implications for electronics manufacturers are profound. Automotive already has been a major (bad pun alert #1) driver of the North America electronics industry since the 2008 (bad pun alert #2) crash. To add all these sensors and boards would be tremendous from an assembly point of view.

That said, the opportunities are equally ripe for mischief. Maintaining the security over these networks is critical — and likely impossible. Even today, the Bluetooth on my wife’s car can recognize my phone from two car lengths behind. And if you can digitally see it, you can hack it. And that doesn’t begin to touch on the added capability for government to monitor the movement of its citizens and residents.

 

Just one more thing to be excited — and nervous — about.

Self-Driving Car Laws Take the Road

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Michigan on Friday became the first state in the US to pass extensive statewide regulations related to self-driving vehicles, and one of only eight in total to ratify any laws governing the technology.

The laws are significant in that for the first time a state has attempted to define the infrastructure of the self-driving vehicle. They set requirements for how such cars can be tested on public roads. They revise a prior law that mandated a “backup” driver be available to take over the controls at any time, paving the way for a car without a steering wheel or pedals.

When the self-driving feature is engaged, the law establishes the vehicle itself as the “driver” for the purposes of obeying all traffic rules. (What’s not clear is whether such a “driver” can be suspended from the road.) And for those wondering, my read of the law is s that it still requires the self-driving car to contain at least one designated licensed “driver.”

Importantly for automakers, the law indemnifies autonomous vehicle OEMs from liability stemming from changes made to the system without manufacturer consent. But less appealing is the new state ban on non-auto-makers from using their autonomous technology on Michigan roads. In short, Apple, Google and Lyft, for example, would either have to partner with the Fords and GMs of the world, or create their own car companies. Let’s hope that doesn’t slow innovation in this key emerging area the way Ma Bell’s monopoly on telecom did throughout much of the 1900s.