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.
By Rafael Gomez, Director Product Strategy, Bright Machines
The pandemic’s economic impact started as a supply chain shutdown in Wuhan, China, but rapidly became a three-tier global disruption. As the virus spread, worldwide supply chain was interrupted, followed by an unprecedented shift in product demand and most recently by mandated factory shutdowns imposed on non-essential product manufacturing lines.
Let’s discuss the impact of these disruptions and explore how we can mitigate these forces that threaten to destabilize manufacturing.
Disruption #1 – Manufacturing and the supply chain
The first disruption to manufacturing and the associated supply chain was in China. This was due to the outbreak of novel coronavirus (Covid-19) forced workers in that county to stay home rather than return to work after the Chinese New Year holidays. The resulting impact was that a significant amount of the world’s manufacturing capacity was essentially shut down for an extended period, more than two weeks in most of China, and much longer in Wuhan.
This manufacturing and supply chain shutdown turned out to be just the start. As the virus spread, manufacturing shutdowns rapidly spread throughout Europe and the US. We are now faced with the challenge to scale additional capacity or rapidly move production from one facility to another, neither of which are feasible in the manufacturing industry.
Disruption #2 –Demand volatility
Just as China’s factories started to come back online it became abundantly clear that the challenges were global and that certain products like PPE (Personal Protective Equipment) and medical devices were in unprecedented demand in terms of volumes and urgency. Meanwhile, workers, who are themselves consumers, were staying home and not shopping, sending economic shockwaves around the world, resulting in a dramatic downturn in market demand for non-essential or discretionary products. Add government and administrative intervention, including the loosening of FDA regulations and the use of the Defense Production Act in the USA, and it’s easy to see how the manufacturing industry was suddenly forced to deal with the unprecedented reactionary shift in market demand.
Disruption #3 – Workplace challenges
The third disruption came in the form of government directives to shelter in place and enforcement of workplace social distancing (including new OSHA guidelines). Furthermore, non-essential factories have been shut down for an extended period. Once factories reopen, manufacturing plants will need to adhere to new and complex regulations. For example, when factories re-opened in China, they were mandated toto demonstrate ten-day supply of face masks for each worker. For example, a factory of 500 operators would need 10,000 masks to be authorized to continue operations. For many factories, an ongoing supply of PPEs in short supply and can be challenging and costly to obtain.
Once manufacturing companies receive authorization to restart operation, workplace social distancing on the factory floor will impact every discrete manufacturing function Traditionally, manual assembly lines are designed with minimum operator to operator spacing to facilitate the passing of product between stations and to minimize required floor space. With the new OSHA directives, these manual lines will need to be redesigned to increase operator spacing. factories have met these challenges in creative style, like running extra shifts to redeploy staff and keep them distanced.
The data-haves and data-have-nots
Manufacturers that have embraced digital transformation, and the associated software-controlled automation, are best equipped to succeed in light of these disruptions. Real-time data drives visibility, which allows these “digital haves” to see the impacts of disruption sooner. Meanwhile, smart automation provides tools to adapt and adjust course quickly. Not only are these companies able to adapt production to meet increased demand or comply with new regulations, they are able to rise to the challenge of manufacturing the machines, devices, and consumables needed to help fight the virus, perhaps offsetting the loss of orders for ‘non-essential’ products.
The Future is agile and resilient
This perfect storm of disruption has exposed limitations of traditional manufacturing ecosystems and their associated supply chains. It has become clear that manufacturers need to move away from traditional analogue operational models, where production takes significant and costly time to set up on a line and requires constant tweaking or adjustment by experts with tribal knowledge of manufacturing processes.
To minimize the impact of economic disruption, manufacturers need to operate in a new paradigm. This new version of manufacturing is fully data-enabled and software-driven to deliver an automated solution that provides the resilience to cope with disruption and the agility to react and adapt when that inevitable disruption occurs.
Considering previous viral outbreaks and natural disasters, Covid-19 isn’t the first global event to disrupt manufacturing and the supply chain, and it certainly won’t be the last. One key learning from this unprecedented event is that companies that have embraced digital transformation of manufacturing are the most robustly equipped to survive this economic disruption. These forward-thinking manufacturers will surely reap the prosperous benefits of their proactive digital transformation.
A colleague asks whether companies are looking at India as a country they can source electronics goods.
Good question. I would say that right now it’s not high on the list. It has a long way to go to develop the infrastructure and mass of supply chain companies dedicated to electronics (component manufacturers, laminate suppliers, chemistry suppliers, etc.).
But … the bloom is way, way off the rose in China. China is less attractive from a labor rate perspective, and coupled with the tariffs, firms were already looking at alternatives even prior to Covid. See below for the year-over-year changes in electronics imports to the US from certain nations:
US electronics imports from selected nations, 2017-19
India’s electronics imports to the US grew 20%+ year-over-year in back-to-back years. Granted, it was starting from a low base: imports in 2016 (the base year) were just $754 million, and so even with the increase the total is just over $1.1 billion. Vietnam, another big gainer, is at now at $22.7 billion. China, even with the dip in 2019, was at $170 billion.
I do think US companies will to a greater degree be looking at nations outside China as potential manufacturing centers. India’s massive population continues to make it attractive of course. Now it needs to attract a few more assembly companies, which in turn will drive the suppliers to locate there.
A friend writes to say he’s been about the effects of “social distancing” policies. Will they have a permanent effect on our lives, he wondered. And will they impact events such as trade shows?
My short answer is, I think there will be an impact, but it will swing toward more contact, not less. Indeed, after being cooped up for so long, I think people will crave human connections. Moreover, I don’t think it will have an effect on trade shows. In fact, I think this will reveal lots of holes/flaws in inter-/intra-company digital communications, which gives us all something to work on for the next quarantine (heaven forbid).
We aren’t the only ones contemplating what happens next. The Boston Globe this week published a piece in which several self-styled business futurists and science-fiction writers expect the world will look like next fall/winter.
I can’t say I’m impressed with most of their responses, which if anything feel exaggerated for effect. But see for yourself.
You’ve probably heard of turnkey PCB assembly, an all-in-one solution design and specifications are sent to the PCB manufacturer and they return the assembled PCBs to you (or your client) ready to use. It sounds convenient compared to doing all the legwork yourself, or having one of your engineers do it, but did you know that turnkey assembly also offers the shortest possible lead times for PCBs?
Let’s take a look at some of the ways that turnkey PCB assembly can shave time off of the design process and reduce turnaround time.
It Saves Engineers Time
Turnkey assembly saves engineers time in a couple of important ways. First, time spent hunting for components and availability is eliminated. Manufacturers that offer turnkey assembly have teams dedicated to component sourcing. This also extends to component substitution and BoM management. If something isn’t available, your turnkey team will be able to deal with substitutions for you and check that all substitutions are compatible with the overall design.
Second, and maybe an even bigger time savings, is the reduced communication load. When an engineer is organizing multiple component suppliers, a PCB fabricator, an assembler, and shipping among all of them, keeping everything sailing smoothly can eat a lot of time. Keep your PCB designers focused on their main job—designing and revising PCBs.
That
will mean that prototypes are designed, tested, and redesigned faster. No time
spent following developments with assembly; no logistics work organizing the
movement of boards or components between vendors.
With turnkey assembly, engineers have a single point of contact to deal with any and all questions related to the development of the product. They will keep you up-to-date on the process, and any changes that need to be made can be addressed quickly.
It Reduces Transportation Time
(and Costs)
When dealing with multiple companies for every aspect of the production process, the time that goods spend moving from one stage to the next can really add up. Compare that with a turnkey assembly solution:
The PCB manufacturer already has ties with component suppliers and knows which parts to find from each one.
They have a store of common components already on hand and can handle component inventory storage for you.
The assembler is either in-house or nearby.
Instead of orchestrating businesses across borders and possibly continents, the entire process is localized, moving quickly from one stage to the next. That leaves shipping the final product as the only major shipping time.
There Are Fewer Quality Concerns
With a turnkey assembly solution, there are fewer quality concerns to deal with, especially when shipping between vendors.
In a multi-vendor scenario, if you instruct your PCB fabricator to ship your bare boards to an assembly house and they arrive with an error or a large percentage of damaged boards, your only option is to make a new order and wait. With turnkey assembly, this situation is impossible.
The
company you deal with is responsible for your project from PCB creation to
final testing, if they make a mistake with one step, they catch it and fix it
in the next. As we mentioned before, you have a single contact or team within
the manufacturer overseeing the progress of your order and checking for quality
at each stage.
Not
to mention, you’re dealing with a single organization. Internal teams are
familiar with each other and have experience working together.
Miscommunications and mix-ups are reduced and it’s in the manufacturer’s best
interest to make sure that each stage supports the next and products move
through the process as efficiently as possible.
Of
course, it’s possible to run into a bad manufacturer, which could cause you
even bigger problems than one bad vendor might. So, it’s important to vet your
potential manufacturer carefully, and find reviews or references if possible.
Scale Up Quickly
The
benefits go beyond the turnaround time for your initial prototype. Once you’re
satisfied with your PCBs, the manufacturer can immediately start to produce
them in quantity.
Think about it. Instead of juggling multiple suppliers and manufacturers to finish the prototypes and then searching for a manufacturer for production, you could finish prototyping quickly and move forward immediately with a company with which you have already developed a relationship.
Not all PCB manufacturers that offer turnkey assembly offer large-scale production, but if your needs fit with the manufacturer’s capacity, turnkey assembly could offer a truly seamless production process. Some manufacturers can even ship to clients for you or offer drop-shipping services.
With turnkey PCB assembly, you get a single, devoted team backing you up as you take a design from PCBs to working products. With less time spent on logistics and organization, you can expect much faster results. It could turn the design process around by reducing product turnaround.
—
Contributed by Chris Dickey, vice president of sales and marketing at SVTronics
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OEMs have long been told that, as their suppliers, EMS companies would not compete with them.
Then EMS companies added design services. “We won’t compete with our customers.”
Then EMS companies added full turnkey services. “We won’t compete with our customers.”
Then EMS companies added logistics services. “We won’t compete with our customers.”
Then EMS companies started calling themselves ODMs. We won’t compete with our customers.”
I think all pretenses are over. Check out this latest report from DigiTimes from the Embedded World trade show, where Pegatron exhibited an all-in-one dashboard for smart driving vehicles.
Foxconn, for once, was probably the first company in the electronics manufacturing sector to acknowledge the looming financial hit from the coronavirus. Apple, which relies on the Taiwanese ODM for the majority (?) of its production, was naturally forced to follow.
In a timely column on CIRCUITS ASSEMBLY, EMS expert Sue Mucha lays out a strategy for handling sharing bad news with suppliers and customers. “Transparency matters,” she says. “The goal shouldn’t be to paint a rosier picture than the situation dictates. The goal is to fill the communications void and establish trust that your company will provide news as the situation evolves.”
That begs the question, why haven’t more firms come forth with sales or profit warnings? Are Apple, Foxconn, Jabil and Plexus the only ones that will be affected? Or are they simply the vanguard?
I’m not one to make light of health epidemics, especially given that my college major was initially epidemiology. But the global slowdown in electronics demand — underscored by the earnings reports over the past couple months — is poised to worsen in the grip of the coronavirus outbreak, which started in China and has now reached more than a dozen more countries.
In response, businesses in Wuhan, the epicenter for the disease, have closed and Chinese government has effectively quarantined the entire city of 11 million. Wuhan is the capital of Hubei province, and between the two entities there are roughly 1,500 factories and related facilities.
Among the electronics manufacturers affected at ground zero are Avnet, Siemens, and Foxconn. After Hubei issued a mandatory shutdown notice, Foxconn furloughed more than 13,000 workers at its campus there. (The plant generates an estimated $300 million in revenue per year.)
As the disease spreads, so too have the shutdowns. IMI announced last night it is suspending operations at plants in Shenzhen, Jiaxing, Chengdu and Suzhou. The furloughs will last up to several days.
While electronics assembly plants can be brought back up to speed fairly quickly, the impact missing even a few days of revenues will be felt in the quarterly results. And here’s the possible silver lining.
Many companies have been reporting weaker results in the most recent quarter. For instance, Celestica’s revenues were down 14%, Amphenol’s dropped 3.3%, and Sanmina’s were off 16%. TTM went so far as to sell its entire mobility unit. Plexus saw sales rise, but is cutting an entire design unit. (UPDATE: Flex reported sales down 7%, adding to our picture of how widespread the weakness is.) Often the US-based firms see a slowdown in presidential election years as OEMs take conservative approaches to ordering ahead of potential administration changes. The outbreak, deadly and unwished for as it is, gives cover to management for any recurring revenue drops, at least for a quarter or two, and perhaps longer if the coronavirus gains a wider foothold. A cynical view, to be sure, but hardly an unrealistic one.
Already, airlines are bracing for lower capacity utilization and Asian firms are fearing the worst as businesses enact travel restrictions. Again as with SARS, the timing comes as Asia (and most of the world’s major economies) is experiencing tepid growth, and the best way to stop a recovery in its tracks is to sever the flow of goods and services.
For everyone’s sake, let’s hope this virus burns out fast.
