Tag Archives: EMS

Red Over Greenpeace

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Another day, another whine from Greenpeace.

This time, the would-be environmental group complains that several large PC makers are “backtracking” on promises to eliminate certain chemicals from their computers.

In a press release issued today, Greenpeace cites Hewlett Packard, Dell and Lenovo – for “failing to improve their low scores.”

Dell and Lenovo are called out for delaying their migraton to non-PVC and BFR materials, while HP is cited for “[postponing] its 2007 commitment to phase out PVC and BFRs from its computer products from 2009 to 2011. [I]t is not even putting PVC and BFR-reduced products on the market.”

“Greenpeace takes voluntary commitments very seriously and holds companies accountable for their promises. There are no excuses for backtracking, and no reason for these companies not to have PCs free of PVC and BFRs now,” said Greenpeace International Toxics Campaigner Tom Dowdall in the statement.

Which is great, except it’s also wrong.

Keep in mind those scores are set and tabulated by Greenpeace. And note that those targets are constantly moving. Greenpeace exists only to wag its finger at large corporations. It needs enemies in order to survive, even if that means conjuring up ghosts and bogeymen.

Meanwhile, Greenpeace also ignores that the science does not yet support the elimination of BFRs, and in fact, may suggest otherwise. As Dr. Arlene Blum, executive director of the Green Science Policy Institute and a member of Chemists Without Borders noted in her blog in May, “it is difficult to make a causal connection between chemical exposure and health impacts.”

And it ignores that all the major PC vendors now have significant takeback programs in place, providing some level of protection against these chemicals entering the waste stream.

While it pats Apple on the back, claiming its new PC lines “virtually free of PVC and completely BFR-free,” Greenpeace misses that Apple is perhaps the worst of the bunch when it comes to auditing and ensuring its vendors — which include Foxconn — follow acceptable labor practices.

BFRs may be bad, but what’s the alternative? Remind me: Does fire cause pollution?

No Main Point

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Check out this exchange from Jabil’s recent quarterly conference call:

Alexander Blanton (Ingalls & Snyder analyst): Okay, second question is you mentioned earlier the possibility that some manufacturers initially might decide to move some things in-house. Do you have any examples of that in your business?

Timothy L. Main (Jabil CEO): I think the one that’s been well-publicized is the Nokia announcement three, four months ago. … Other than that, we don’t have any significant customer accounts that [inaudible] that type of move.

Blanton: Because recently NCR announced that they would in-source some ATM manufacturing and as I can determine, the reason they are doing that is so they can get some tax incentives from the State of Georgia that require a certain number of jobs to be created in the State of Georgia. And it really has nothing to do with the economics actually of in-sourcing. But there was some comment accompanying that in some of the local press that oh, there’s a trend toward in-sourcing. But from what you can tell, is there any such thing?

Main: I don’t think there’s any such thing. I might have mentioned NCR but I’m glad you brought it up. I forgot that that was a public statement that they made, so — you know, these OEMs will have certain drivers, different personalities, and opportunities like NCR has to receive significant tax benefits for an activity that maybe they think can be supported domestically within their own site. [If you take] a couple of data points, a $1 trillion dollar industry and say that’s a trend, I don’t think so.

Blanton: Yes, well, there was a bill in the State of Georgia that if you can create 1800 jobs or more, you can get some tax incentives. Well, the only way they could do that was to in-source this ATM manufacturing because they didn’t have enough people coming from Dayton to meet the 1800 bogey. This is not the way the press presented it but it’s obviously the case, so it had really nothing to do with lowering costs or anything like that.

Main: Right, well, the politics that we are in today are going to really be very negative towards outsourcing and that type of thing. I mean, that’s — let’s just accept that but recognize that the trend to out-source and the cost benefit of out-sourcing are so compelling that these temporary political statements I think will impact the temporary and the broader economic force of what compels OEMs to do what they do will prevail.

Blanton: Well, you are absolutely right. The CEO of NCR bragged that oh, we’re bringing jobs back from overseas when in reality, they are coming from South Carolina.

Egged on by a so-called analyst, Main essentially discounted any trend toward insourcing. But both men completely ignored the recent decision by Alcatel-Lucent to insource an estimated $2 billion worth of assembly. And it misses Ericsson’s announced purchase of certain Elcoteq operations. Moreover, it dismisses the role governments play not just in convincing OEMs to locate operations in their jurisdictions, but EMS companies as well.

In fact, just last year, the state of Florida, along with various local governments, granted almost $35 million in tax incentives to keep Jabil in St. Petersburg. How, exactly, is that any different than what Georgia is doing for NCR?

If Main has a point, it must be hidden under his hat.

Capacity Constraints in a Recovery

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My friend Dominique Numakura writes from Japan that consumer electronics is rebounding in Taiwan, Korea, China and Japan. But, that bit of good news is tempered, he says, by constrained capacity — so many companies cut inventories and took down production lines, they now face material, component and labor shortages, he says.

“Everyone’s warehouses are almost empty! Distributors and suppliers can’t feed the manufacturing houses fast enough. Manufacturing companies have secured large orders for products, but materials are back-ordered, and there are not enough workers to accommodate these new sales.

The result, he notes, is material price spikes.

In Southern China, he adds, things are more grim, with reportedly more than 200 area EMS companies unable to obtain sufficient materials for production, and caught between the higher materials prices and lower end-product margins. Many will close.

This is not unusual. Several case studies have shown as many companies exit an industry in recovery
as do leave during a downturn. They get caught in the cash flow trap, where the upfront costs and associated risk to running the business outweigh the margin.

Not unusual, but unfortunate nonetheless.

The Price of ‘Faking It’

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Counterfeit electronics components supposedly are destroying the integrity of our hardware.

One estimate holds that “five to 20% of electronic components in distributors’ chains are probably counterfeit” at a cost to industry of some $100 billion a year.

In response, several organizations (not to mention a cottage industry of consultants) have jumped on the bandwagon, launching programs to warn of the hazards (death! destruction! locusts!).

Let’s put aside, for the moment, the obviously inflated numbers ($100 billion, after all, is more than the sum of all the semiconductor revenues of Intel, Samsung, Toshiba, TI, STMicroelectronics, Infineon and Renesas — in other words, the world’s top 7 semiconductor OEMs — in 2007.

The SIA, for example, now has an anti-counterfeiting task force, and is working in concert with SEMI to combat the problem. “Counterfeiting is a serious and growing problem in the worldwide electronics industry,” says SIA president George Scalise. “Counterfeit products pose a significant risk to consumers as well as to the manufacturers of semiconductors and electronic products.

In the UK, something called the Component Obsolescence Group published a list of best practices said to help minimize the risks associated with the growing supply of faked parts.

And of course, makers of traceability software, XRF and other gear have ramped up marketing efforts to pitch their solutions.

But…in all the hue and cry, one thing is missing: The guilty users. Over the past few companies, I’ve asked at least two dozen EMS companies if they’ve seen any counterfeit components. None would admit to it.

Now, we estimate that there are at least 1300 EMS sites in the US, so my sample is hardly representative. Still, is the problem overblown? Or are my contacts – gasp! – lying?

And if they are fibbing, in the end, who gets hurt? (Answer: The customer.) Is it worth it?

‘Hot’ Blog!

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Today we added a link to ProfilingGuru.com, a new blog launched by the good folks at KIC Thermal. As the name suggests, the blog — and it’s really more informative than that — covers tips on profiling.

You may recognize the names behind it: Mike Limberg, who has been kicking around our industry for some 20 years between Intel, Seika USA and KIC. He estimates he has worked on on hundreds, if not thousands, of production lines.

His partner in crime is the funny and energetic Brian O’Leary, Americas Sales Manager at KIC. Brian has worked for KIC and Sono-Tek, and the pair teamed up on the recently published 2009 Profiling Guide, an entertaining and informative guide for the reflow process.

Check it out.

Blue Sun

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IBM’s potential merger with Sun is hardly a done deal, and reporters at The Wall Street Journal and elsewhere now think the deal may be off. (For the record, neither OEM has yet commented on the deal.)

Which, for EMS companies, is probably just as well. Deutsche Bank estimates a merged IBM-Sun would be able to cut as much as $1 billion in costs from the bottom line. Some of that, no doubt, would come from deleting redundant product lines and even greater buying leverage with the companies’ respective suppliers.

Sales to Big Blue make up about 10% of the revenues at Celestica, Benchmark and Sanmina-SCI, five to 10% of Jabil’s revenue, and two to five percent of Flextronics’ sales. Several of those companies supply significant volumes to Sun as well.

Faced with the pullbacks of Nokia and Alcatel-Lucent, which took some $6 billion combined out of the EMS industry’s collective pockets, word that a deal is off should touch off industry rejoicing, even if just for a day.

If anyone has reason to be sad about the reported deal’s collapse, it would be Sun, which was already on shaky ground. Instead of Big Blue, Sun might turn out to be just blue.

Apex or Bust!

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Tuesday marks the opening of Apex, the largest electronics assembly trade show in North America. With it, the industry suppliers hope buyers will turn out in force for the Las Vegas event. The early returns don’t look promising, with suggestions that preregistration attendance numbers are down some 15% or more from last year, coupled with travel bans by several major OEMs. Here’s hoping this week marks not another nail in the coffin but the beginning of the turnaround.

Tonight, CIRCUITS ASSEMBLY will announce winners of its NPI and Service Excellence Awards. Check back for frequent updates.

A bit of early gossip: IPC will induct Dan Feinberg to its Hall of Fame on Tuesday. Years ago, Feinberg was president of the dry film and soldermask division of Morton (now owned by Rohm & Haas) and was a major driver behind the IPC Printed Circuits Expo trade show.

The Rush to Russia

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Timing is everything, isn’t it?

On the same day IPC named an official representative for Russia, calling it “a market with enormous growth potential,” a leading research firm basically threw in the towel on Putinland.

“Russia now is facing a cessation of new investment, along with shutdowns in existing facilities and delays in new ones,” iSuppli said in a press release today. The firm pointed to aborted attempts by Foxconn, Flextronics and others in trying to get operations there up and running, and noted that while Elcoteq has been building in the country for years, its investment there has been so unprofitable, the telecom EMS tried in vain to find someone to dump it on and finally decided to shut it down.

In its announcement of Yury Kovalevsky as its official representative to Russia and Russian-speaking countries, IPC said the appointment is part of a “long-term plan to expand services and standards globally.” Kovalevsky, IPC said, will make IPC services “widely available to companies in Russia, a market with enormous growth potential for both electronics manufacturing services and printed board production.”

That comes as news to iSuppli.

I’m not saying one side is right and the other is wrong. By outsourcing translations and distribution of its standards, IPC can position itself to make money even if the market doesn’t materialize any time soon.

But it’s hard to escape iSuppli prinicipal analyst Adam Pick’s damning statement: “With the ongoing recession and financial crisis, however, it appears that most of the interest in penetrating the Russian market has disappeared. Furthermore, the historical record for electronics manufacturers operating in Russia has been plagued by multiple problems.”

Pick ticks off a series of reasons: the Russian economy; social and political issues; tariffs and value-added taxes; shifting policies and laws; slow material supply chains and a lack of electronics supply chain infrastructure; inefficient distribution; Russian mobs; counterfeiting rates so high it would make the Chinese blush.

On the other hand, in market terms, IPC is probably buying low. Like I said, timing is everything, right?

Relisted

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Research firm iSuppli’s Top 10 Global EMS firms list, which came out today, differs in several respects from Circuits Assembly’s findings.

Why? It may be that the iSuppli data for Foxconn take into account non-EMS related sales (the company also produces bare boards and connectors, among other things). Even so, Foxconn itself last week reported 2008 revenues of $42.3 billion.

iSuppli also excludes Cal-Comp Electronics/Kinpo Electronics from its list, despite that company’s contract manufacturing revenues of $3.2 billion last year, which would place it seventh overall.

Finally, iSuppli includes Universal Scientific in its ranking, although the Taiwanese company reports EMS sales of just $490 million in 2008.

Just Say No, IBM!

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Over the years, OEM after OEM has fallen prey to Foxconn, lured by the temptation of higher margins by outsourcing product to the Taiwanese ODM. H-P, Motorola, Dell, Sony and Apple are among the many, many companies that outsource billions of dollars worth of product build each year.

Sadly, IBM, one of the few remaining major holdouts, appears on the brink of ending its streak. Big Blue is set to announce a deal to to codevelop something called “environment-friendly” products.

Pending release of financial terms, it’s unclear what IBM stands to gain from the program.

IBM has ventured down the environmentally friendly path before. In 2007, it committed $1 billion to fund Project Big Green, an effort toward environment-friendly, energy-efficient products and services. This is its first known deal with Foxconn, however.

It shouldn’t happen.

As The Economist pointed out earlier this month, China’s reputation for workmanship remains a negative in consumers’ eyes. “The poor external reputation of China’s products hurts not only Chinese companies but also Western firms known to be selling Chinese-made goods.” Citing last year’s scandals over various Chinese-produced toys, the US and India have passed new laws governing imports from the World’s Workshop.

And myriad stories have cited Foxconn’s dismal and imperialist working conditions.

IBM is America’s crown jewel, the greatest electronics company the world has ever known. Getting in bed with scofflaws like Hon Hai cheapens its luster and diminishes its reputation. IBM should walk away.

UPDATE: Whew! That wasn’t so bad. The Wall Street Journal is reporting Foxconn is licensing IBM’s GreenCert technology for estimating the amount of greenhouse gas emissions pumped from factories. It could have been much worse.