Category Archives: Hot Wires

Mike Buetow’s thoughts on the industry

And Then There Were 2

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Isola and Rogers.

That’s what’s left of the US-owned laminate companies today after Taiwan’s Elite Material Co. announced plans to acquire Arlon EMD.

Yes, consolidation has been in the making for years. And with Isola owned by private equity group (Cerberus Capital Management), it’s anyone’s guess as to how stable that number is.

In reality, it was only a matter of time. The US share of global PCB revenues fell from north of 40% in 1984, to about 30% in 1998, to less than 8% in the recession of 2008. It now stands at roughly 4%. Naturally, the supply base is going to migrate to where the revenue is.

Time was, the US was home to several leading names in laminates: Polyclad (now owned by Isola), Westinghouse (acquired by Allied-Signal in 1992), GE (licensed to Cookson, now sold by Isola), Norplex Oak (sold by Allied Signal to Isola parent Ruetgers in 1999, then everntually shuttered), Taconic (bought by AGC), Nelco (ditto), among others. For its part, Arlon was acquired by Rogers in 2014, which then sold part of it to a private equity group the next year. That unit became Arlon EMD, which Elite is buying.

This is not to say there aren’t domestic sources of materials, of course. There are plenty: Ventec and Shengyi are among those that have expanded in the US in the past few years. A startup called Thintronics, with experienced laminate folks like Tarun Amla at the helm, has potential, but is likely years away from impact. There remain domestic flex circuit suppliers too, including DuPont and Sheldahl.

But the vast majority of multilayer and high-performance specialty material suppliers are held by offshore companies. As the US seeks to build back its manufacturing base, it needs to remember how critical the supplier infrastructure is to a successful industry.

Trouble in India

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The riots at a Wistron plant in Narasapura could have lingering effects long after the damage is cleaned up.

India has been touted as the “next China,” a label local trade groups and business executives have relentlessly promoted. Besides being the only countries with a population exceeding 1 billion, however, the similarities are perhaps too many for today’s climate.

Even so, despite Prime Minister Modi’s best efforts to convert the nation into an autocracy driven by a Hindu ruling class, India is fighting a current that China avoided during its rise to manufacturing power, and that flow is getting stronger.

Yes, Nokia and Apple suppliers like Foxconn continue to make plans to expand in the country. But the broader supply base still isn’t there, and, perhaps burnt out from their China experience, expats aren’t relocating by the thousands to help the locals set up and manage companies. The semiconductor industry has changed over the past 20 years. New foundry costs are still rising, and the number of players has shrunk. Putting multi-billion dollar plants in India that replicate older technologies while still finding the resources to compete on the leading-edge might be a longshot, at best.

Nor has India provided the incentives China did to relocate. Instead, it has taken a tack similar to Brazil’s: Steep import taxes that while aimed at China, might actually discourage others from migrating there. Already, India and the US have taken economic swipes at each other, with the US dumping India from its preferred buyer program that allowed zero tariffs exports to the US, and India hiking tariffs on product coming from the US. The EU Parliament is taking an equally dim view of the former British colony’s trade and humanitarian approaches.

Indeed, Modi’s approach to alienating and, some argue, encouraging violence toward India’s religious and ethnic minorities puts Western OEMs in a difficult spot. Already under the gun for their massive investments in China, which have helped prop up that country’s autocratic leadership and create an international powerhouse that is now flexing its economic and military muscle all over Southeast Asia, business leaders might be loathe to plow more assets into yet another unpredictable regime. With governments, including the United States, slapping restrictions on Chinese companies for their alleged treatment of Muslim minorities, it won’t be easy to win any PR battles over why India is somehow an exception.

And the pollution coming out of India might be on a par with China’s — or even worse — hardly an attraction for today’s green marketing campaigns.

It remains to be seen, but I think episodes like Wistron’s will delay the push to the “next China.”

A Not-So Public Affair

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Jiangsu Xiehe Electronic started trading today on the Shanghai Stock Exchange. The company makes flex circuits and performs SMT. That should be a big deal, since PCB manufacturers going public has become a rarity.

This is not your father’s printed circuit industry. IPOs are a novelty in our industry these days.

Moreover, almost all the IPOs of fabricators or EMS companies in the past 10 years have been in Asia.

This year, Covid be damned, Sihui Fushi Electronic Technology went public in July on the Shenzhen Exchange, and TLB is scheduled to be listed this month in Korea.

Insofar as I know, that’s it.

Last year was no better. Cal-Comp raised some capital by listing a subsidiary in the Philippines. Ventec went public in Taiwan.

Stretching back over the past decade, there are a few nuggets. But just a few.

Shennan Circuits (2017 IPO) and Zowee Technologies (2010) are public on the Shenzhen Exchange, and OK Industries (2017) is traded in Japan. And Dixon Technologies debuted in 2017 on the India Exchange.

Over in the UK, fabricator Trackwise Designs had an IPO in the UK a couple years ago. And NCAB went public in Sweden.

As private equity firms continue to consolidate fabricators and (mostly) EMS companies, as New Water Capital did with Veris and Saline Lectronics this week, the question becomes, what is their end-game? Will they amass enough revenue through M&A to make a public offering viable? Or will they try to button it up and sell to another PE firm — or perhaps an even larger manufacturer?

And is the era of the publicly traded circuit board manufacturer winding down?

HDPUG’s New Head

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The High Density Packaging User Group has named Larry Marcanti executive director, ending Marshall Andrews’ 15-year run as head of the trade consortium.

Larry is an excellent choice. He has a degree in chemical engineering, and has more than four decades’ experience in the printed circuit board industry with Honeywell, Nortel and Avaya, including the eight spent in various levels of involvement at HDPUG. He knows the industry needs inside and out, and will get things done.

But let’s give Marshall his deserved due. He is perhaps the most experienced technical consortia executive this industry ever had. From MCC to ITRI to HDPUG, Marshall had a hand in all the major nonprofit research groups affecting printed circuit boards and packaging.

Many folks step in and out of the trade group participation. Marshall was a lifer. His legacy will last for years.

When 2 is Better Than 5

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Before we get too excited over TMSC’s 5nm chip foundry in Arizona — which, keep in mind, is only on the drawing board at this point — we are reminded the chip maker is working on a 2nm factory in Taiwan.

In fact, it could have 2 and 3nm processes online abroad before it even breaks ground in America.

The US needs to get in gear if it wants to be a leader in wafer production.

Reshoring, with a Catch

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A trio of recent posts on manufacturing reshoring — or not — caught my eye.

It’s not happening. Writing in Forbes, Workbench chief executive Prince Ghosh points out that the US lacks the human capacity to fully actionize a return of mass production: “US manufacturing still suffers from problems of labor skills and wage costs. Tariffs have succeeded in lowering global dependency on Chinese manufacturing, but they have failed in driving manufacturing back to the US.” He has a point: It took China 20 years to build up the workforce needed to become the World’s Factory, and that’s even with a roughly 800 million or more citizen advantage over every nation but India.

And there’s no assumption investment in the US will go toward the truly leading edge technologies. To wit: If TMSC builds a 5nm semiconductor wafer fab plant in Arizona, as promised, it will still be behind the state-of-the-art 3nm node process expected to be available in 2022.

It’s happening. A more optimistic view comes from Nick Stonnington, a Forbes Councils Member,* says the US “has the potential to be one of the few countries in the world that is essentially self-contained from a manufacturing standpoint.” 

“Reshoring US manufacturing,” he adds, “would not only save enormous transportation costs; it would tie up less capital for less time. When you manufacture your product 5,000 miles away, you must spend extra time specializing your process to each market. In contrast, localized production facilitates just-in-time manufacturing, which optimizes workflow to more quickly produce a more specialized product for less capital investment. 

It’s happening, but not how you think. In Footprint 2020: Expansion and Optimization Approaches for US Manufacturers, consulting giant Deloitte says “the next shift in manufacturing locations is imminent,” but adds “some 98% of companies surveyed plan to either expand existing sites, or open new facilities, in countries with existing operations. This trend is true for virtually all types of facilities, from production to assembly to R&D. China and the US are anticipated to receive the highest number of existing country expansions.”

One topic, three views. Which do you agree with? And why?

*For the uninitiated, the Forbes Council is basically a network of bloggers who pay Forbes to publish their work. So take that for what it’s worth.

Heavenly Circuits

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Jerry Falwell Jr. is in the news again, for salacious reasons that have nothing to do with electronics (I hope).

It seems like he’s having a bad week, and I’m certainly not going to pile on.

But mention of his name reminds me of the time I spoke with the son of the famous evangelist, and it was in my professional capacity as an editor, no less.

As I recall, I answered the phone one day — I can’t remember which year it was, but it would have been sometime around 2004 — to find a very professional voice on the line.

“Mr. Buetow?”

Yes.

“Would you have time to speak with Mr. Jerry Falwell Jr.?”

Umm, sure.

When JFJ came on, he was very polite and to the point. A gentleman in our industry — a printed circuit designer — had developed a concept for putting identical components on opposite sides of a board and running vias through to shorten the length of the connections. The designer, with whom I had spoken from time to time over the years, had offered the concept to Liberty University, where Falwell was vice chancellor. Mr. Falwell Jr. wanted my thoughts on whether Liberty should invest the monies to patent the idea.

I don’t recall what I told him, but a check of the USPTO shows that Liberty did follow through. A colleague reminded me representatives from Liberty actually attended PCB West one year as well to promote the mirror pinout concept. Still, I doubt they made much money off the idea, which has been overcome by other advances in component packaging anyway.

Whatever my advice to Mr. Falwell Jr. was, I hope it didn’t put him in a bad position with his trustees. I’m fairly confident it has nothing to do with the predicament he finds himself in now.

And if he calls me again, I’ll still be happy to talk. Provided we stick to electronics.

Whither Hong Kong?

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The dispute between China and the US over trade, IP protection, human rights, and basically everything else ratcheted up a notch today as President Donald Trump announced the start of the process to revoke Hong Kong’s favored trade status with the US.

“I am directing my administration to begin the process of eliminating policy exemptions that give Hong Kong different and special treatment,” Trump said in a statement.

“My announcement today will affect the full range of agreements that we have with Hong Kong, from our extradition treaty, to our export controls and technologies. We will take action to revoke Hong Kong’s preferential treatment as a separate customs and travel territory from the rest of China.”

Hong Kong is not a major landing spot for manufacturers anymore. There are roughly 30 EMS companies of any size with operations there, per the CIRCUITS ASSEMBLY Directory of EMS Companies. VTech and Wong’s are the only Top 50 EMS companies based there. There are no bare board fabrication operations of any major size.

According to one source of mine, some companies use Hong Kong as a legal way to finish assembly to bypass tariffs on Chinese made goods from the mainland. If so, the president’s action will render that moot.

My question is, what will this mean for the scores of electronics companies that have sourcing operations in Hong Kong? While most of their business is done across borders, Hong Kong offers a more Western feel (and rules) for ex-pats. With the Beijing taking an ever greater interest in the city-state, that is almost certain to change.

I could see companies moving their program management staff elsewhere, if for no other reason than Hong Kong is expensive — maybe the most expensive place in the world for ex-pats. But if so, where would they go? And what will happen to Hong Kong if other industries follow suit?

Zarrow and Hall’s “Board Talk” Becomes a Book

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Folks,

There are a few good books that relate to electronics assembly. Ray Prasad’s Surface Mount Technology: Principles and Practice comes to mind. However, few (none?) teach the skills that need to be developed to become an electronics assembly process engineer, so Jim Hall and I collaborated on Handbook of Electronic Assembly and Guide to SMTA Certification a few years ago.

There was still a gap, however. No book existed that discussed troubleshooting everyday assembly defects and challenges. My good friends Phil Zarrow and Jim Hall have addressed this information in their Circuit Insight radio show Board Talk. All that was needed was a little encouragement to assemble it in book form. This task has now been accomplished!

Phil and Jim’s Troubleshooting Electronics Assembly is certainly one of the most useful books available for everyday SMT and though-hole assembly challenges.

Phil and Jim’s Book Can Help with Everyday Assembly Challenges

Check it out.

Cheers,

Dr. Ron

‘The Era of Offshoring US Jobs Is Over’ … or Is It?

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That’s what the US Trade Representative says in an editorial in the New York Times today. And he gets the drivers right, mostly. But the results? “The United States lost five million manufacturing jobs. That, in turn, devastated towns and contributed to the breakdown of families, an opioid epidemic and despair.”

That’s just a crazy extrapolation. The US was at 3.1% unemployment prior to Covid-19.

Repeat after me: There. Were. More. Jobs. Than. Qualified. Workers.

For two decades, the no. 1 complaint I’ve heard from US business owners is the lack of manufacturing talent. Even in times of higher unemployment rates (the last two months notwithstanding), managers consistently noted the lack of basic communication and math skills among the workers available.

In his op-ed, USTR Robert Lighthizer adds, “If you want certainty, bring your plants back to America.”

It’s not that simple. You need the whole supply chain. And you need an end-market. The US, at 327 million people, isn’t big enough to sustain a company of any real size; those firms must be able to sell into other (larger) markets too.

And all those other big markets (China, Brazil, EU, etc.) have their own “make local” requirements and incentives.

I wish Lighthizer were right. But I’ll say it again: The US does not have enough worker talent to handle manufacturing at the cost necessary to satisfy the US market.