Category Archives: Hot Wires

Mike Buetow’s thoughts on the industry

Filipino Fiasco

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The situation in the Philippines is starting to feel a lot like that of Turkey from July of this year: A paranoid leader turned strongman seeks to exert his supreme dominance over a democratic nation.

Will the country stand back while Philippines President Rodrigo Duterte effectively declares martial law? Or will the army — no fan of China — assert itself and ironically return law and order to the nation by overthrowing a budding dictator?

There are more than 30 EMS companies in the Philippines, the largest of which include IMI, ranked 28th worldwide in EMS revenue at $800 million last year, EMS Components Assembly ($110 million), and Ionics ($63 million), which has seven plants there.

Other major players with smaller operations include Siix, Celestica, Cal-Comp and Wistron.

Although US-centric for decades, the Philippines under Duterte are pivoting toward China. US companies have invested nearly $5 billion in the country; even if they no longer feel welcome, extracting that won’t be easy.

Either way, politically the Philippines are a complete mess. Duterte has taken a stable nation and completely disrupted it, without any clear end-game. If his goal was to expand his nation’s markets and hedge its bets — understandable, given their neighborhood — he could have done so in a much simpler fashion. As it stands, he has alienated many of the Philippines primary trading partners, and for what? Business partnerships don’t have to be a zero-sum game. He could have ramped his dealings with Beijing without destroying his relationship with Washington.

Duterte likes to rail against the West for being what he considers corrupt and hypocritical would-be overlords. His own military very well appreciate the security the West historically has provided, however. His words might play well with the public, but he could very well pay the price with his life.

 

Racing to Failure?

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Reuters is reporting that Samsung has temporarily suspended production of the Galaxy Note 7 smartphone after replacements for the first batch of devices also proved to be almost as good at spontaneously combusting as they are at surfing the Web.

One brand manager went so far as to compare the self-igniting smartphones to the Ford Pinto, whose rear-end fuel tanks had the unfortunate tendency to explode upon contact.

Samsung’s situation isn’t unique: Apple experienced similar problems with previous iterations of the iPhone. But given the speed with which new phone models are brought to market, one begins to wonder whether these defects are part of a larger failure of the process itself.

Is is possible we’ve reached an inflection point whereby, in the rush to get product to market, the validation phase is — pardon the pun — being short-circuited? Are suppliers properly vetted, product thoroughly tested, risks appropriately balanced?

Or has consumer electronics reached a point where it’s a race not to market but to failure?

Oct. 11 addendum: The Korea Herald and others are now reporting Samsung has decided to pull the plug completely on the Note 7. The estimated cost: Billions.

 

 

Foxconn India: Still a Pipe Dream

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It’s been a year (more actually) since India announced — to great fanfare — a memorandum of understanding with Foxconn to invest $5 billion over the next five years in the nation. For India, it seemed like a marriage made in heaven: the world’s largest electronics manufacturer would be an ideal partner for its goal to develop a local end-to-end supply chain that could not only serve its burgeoning domestic population but also provide a steady stream of exports to the rest of the world.

Yet as the Times of India points out today, the bride is still waiting at the altar.

As we said at the time, Indian officials shouldn’t hold their breath waiting for the relationship to be consummated. Foxconn is really good at promising huge investments, only to fall short in the end.

Actually, we’ve been saying this for years. Foxconn is Chinese to the core. It may on occasion have dalliances with other countries, but it always returns to its mate. Suitors, take note.

 

What’s the Deal with Delly?

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Gayla Delly left Benchmark with no notice last week. Why?

Changes at the top of Tier 1 and 2 EMS firms don’t happen often. Before Friday, in fact, Benchmark had had just two chief executives in its 30-year history.

Cary Wu founded the company as part of a buyout from medical device manufacturer Intermedics in 1986. He remained in charge until December 2011, when he promoted Delly, the company’s longtime head of finance, to the top spot.

Highly dependent for years on the high-end computing sector, especially IBM, Benchmark had been trying to balance its portfolio via acquisitions. With its acquisitions of Suntron and the EMS operations of CTS, both in 2013, the company attempted to broaden its reach into the high-reliability industrial, medical and aerospace/defense markets. It then snapped up industrial communications OEM Secure Technology in 2015.

Many bigger EMS acquisitions are slow to be accretive. The large amount of fixed assets and (typically) lower capacities at the acquired company mean layoffs and restructuring costs will follow. Still, investors are impatient and the deals were met with criticism in some quarters.

Much like Sparton and its now-departed CEO Cary Wood, Benchmark faced strong opposition from a loud activist investor who accused the EMS company of poor fiscal management. (Interestingly, unlike many of its similar-sized competitors, Benchmark has typically been patient with its M&A strategy, choosing to keep its debt levels low.)

The intensity of that criticism, which was public in the spring, had quieted down during the summer after the investor won two board seats. On its quarterly conference call in late July, Delly went to far as to deny any strategic changes in the direction of the company following the seating of the new directors. This makes the timing of Delly’s departure all the more curious.

Last Friday, the announcement came that Delly was being replaced as president and chief executive with veteran electronics executive Paul Tufano, effective immediately. Tufano is a Benchmark board member who has spent more than three decades in the technology and telecommunications industries, most recently as chief financial officer of Alcatel-Lucent. He also has a background in EMS, having been executive vice president and CFO of Solectron. It’s possible the move implies the company will refocus its sights on computing and telecom. We shall see.

Neither Delly nor the company has yet commented on the change.

 

Auto Electronics: Gearing Up or Headed for the Cliff?

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What would the electronics industry do if automotive demand were to pull a Thelma and Louise and head off the proverbial cliff?

The auto recovery has been the axle of the Western supply chain since 2008. The drivetrain is starting to show some wear, however, with market followers forecasting nominal growth at best for 2016.

The good news is that electronics content in vehicles continues to increase, rising to 8.9% of the $1.42 trillion worldwide electronic systems market last year, up slightly from 8.6% in 2014. Moreover, forecasts call for the share to continue to rise over the next several years.

Less clear is the extent, if any, the seers account for the potential for widespread ride-sharing trends or — worse for some — outright banning of vehicles.

To wit: Some 27 million Americans alone will use some form of ride-sharing at least once this year, a figure that doesn’t include traditional car-pooling. Urban millennials are growing up without the preconception that vehicle ownership equates to status, an important cultural shift.

A drop in demand for hybrid/electric vehicles (HEV) could also decelerate electronics growth. Hybrid sales alone dropped 15% year-over-year in 2015 — reversing a big gain in 2014 — and bottoming oil prices have kept the market for electric sluggish. Hybrids carry almost twice the electronics content of conventional gas autos, making HEVs a key growth engine for electronics makers.

More disconcerting to the auto supply chain is the prospect of a carless environment. This is actually happening, and in places you wouldn’t necessarily associate with technological backlash. For example:

  • Bogota, Colombia, has been car-free on Sundays since 1976, a move that sidelines an estimated 1.5 million vehicles.
  • Likewise, Jakarta has sponsored Car Free Day every Sunday since 2007.
  • San Francisco shuts certain streets to vehicle traffic on various Sundays throughout the year.
  • Oslo plans to ban cars from the city center by 2019.

Car-free days are becoming so widespread, the phenomenon has its own Wikipedia entry. In fact, now there’s even a World Car Free Day (Sept. 22).

The electronics supply chain has gotten plenty of mileage from the automotive industry for nearly a decade. It might be time to find a backup plan, however, if the sector wants to keep trucking on.

What Do You Do If You Can’t Have Reference Designators?

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The first answer to that question is probably going to be along the lines of, “Put them on the board.”

But, sometimes you can’t have reference designators on your board. Maybe it’s too densely populated and there isn’t room. Maybe, for aesthetic reasons, you’ve chosen to leave them off. With some products, like development boards, it’s sometimes necessary to use the space for instruction or functional identification and reference designators would confuse your customers. 

It’s always best to put reference designators as close to the part as possible, and on the same side as the part, but if that’s not possible, you can still create an assembly drawing. When laying out the board, put the reference designators in a different layer than the text you want in silk screen. Then, create a PDF that has all the component outlines in their place, with reference designators. Make one for the top and one for the bottom. Call this document “assembly drawing” and include it in the files sent in to be manufactured.

Figure 1 shows a good assembly drawing format. It has reference designators and polarity marks.

You might ask why reference designators are needed when all the surface-mount parts are machine-assembled. First, any through-hole parts are hand-assembled. Their locations and board side needs to be clear for the people stuffing them.

Second, CAD systems don’t always have 100% accurate information. If the center point of the footprint is off, surface mount machines (ours and anyone else’s) will center the part where file says to put it, which, in the case, would be the wrong spot.

The reference designators are also part of quality control. It’s another opportunity to remove ambiguity. Ambiguity bad. Certainty good.

Duane Benson
Car 54, where are you?

http://blog.screamingcircuits.com/

Mycronic-Axxon Deal a Symbolic Milestone

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Mycronic’s purchase of electronics dispensing OEM Shenzhen Axxon Automation Co. today signals a novel, if inevitable, milestone in the SMT processing equipment history: Chinese process equipment OEMs have reached the point where they are sufficiently viable and significant for Western companies to invest in.

Certainly there are no shortage of domestic Chinese OEMs. But relatively few have reached the technology or market share level needed to draw the interest of Western buyers.

No more.

The Last VCR

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The news that the supposed last maker of VCRs, Funai Electric, will cease production on the video medium at the end of this month took me back to this blog item I wrote in 2009.

That’s when I retired my previous VCR, a Hitachi VT 2000A workshorse that served me well for 21 (!) years.

They say otherwise, but I’m still convinced that my first college roommates invited me to live with them because I was the only one they knew who had one. Happily, the friendship has outlasted the machines.

So sayonara to one of my favorite technologies!

P.S. I still have a few blank cassettes, if you know anyone who is looking.

‘Mike Buetow Humor’

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When the reader titles their email “Subject: Mike Buetow humor,” you know I’m opening that one first.

Reader TE writes:

Just going through the July 2016 issue when I came across two (well, three really) very interesting announcements.

On page 14 is a small blurb in the first column: “Canadian mining firm First Majestic Silver says a surge in smartphones and tablets is creating a silver shortage that could send prices up 775%.” Now go over to page 15, first column and you will see not one, but two different articles, one on smartphone sales slowing by 2.6% and the second that tablet shipments will decline by 9.6 % this year.

These opposing announcements seem to be right up your alley regarding the irony of our industry, and even perhaps our times. Both can’t be true, so now I am wondering if either is. It’s a big lol from my corner.

Well played, TE: I loved the note, and your observation absolutely appeals to my sense of irony!

I can possibly account for why both could be true. The silver market, like any commodity or precious metal index, changes daily and can be highly speculative. If you look at the Metals Index chart on pg. 15, the Handy and Harman Silver index jumped 15% between Apr. 4 and May 9 this year, then fell 6% by the end of May.

Second, smartphone growth appears to be declining in terms of its rate, but still rising overall. So growth this year will be 3% instead of 11%. I wouldn’t call that a “surge,” but who knows what goes through the minds of those good persons at First Majestic Silver. Also, overall handheld phones shipments are actually growing — probably in the high single digits this year. And it’s also possible that silver speculators are guessing there will be a spike in the second half because of new models that will overcome the lackluster first half sales.

As for the tablets, well, I don’t have a good rationale for that one. We have two in my house and both are used as expensive coasters.

All that said, I highly doubt the silver price will “surge” (or even grow) 775%. At least not because of electronics demand, anyway. After all, election years do play funny tricks on things.

But that’s a column for another day.