Editor’s note: This blog was originally published in August 2016 at www.weiner-intl.com and is being reprinted here with special permission from the author.
Solving Problems in High Density Electronic Packaging
This month, I was a guest at the High Density Packaging Users Group (HDPUG) meeting in Nashville, Tennessee. The consortium, composed of more than 50 companies (small and large) in the electronics packaging supply chain, conducts projects to solve real world problems or develop data for product parameters, package/component life, and production processing. All status presentations were short and to the point. HDP announced the impending completion of eight of its projects. Different companies around the world recommend and participate in the projects of import to their businesses. The results are available for use to members only. The rapidity and output of this particular consortia surprised me. It clearly appears to provide an affordable solution for problem solving and data development in the day of vanishing R&D (especially D) funds.
Lincoln International Adds an Innovative and Global Joint Venture & Partnering Practice
Lincoln International, the leading global, mid-market investment bank, announced today that it has added a new global capability in joint venture (JV) and partnering advisory service. Lincoln International’s JV & Partnering team’s expertise spans the entire JV and partnership lifecycle, from creating sustainably successful new JVs in emerging economies, to resetting, restructuring and exiting existing JVs and partnerships, globally. A particular area of focus for the team will be driving improved value from the diagnosing and resetting of terms and operations of individual (or portfolios of) underperforming JVs, partnerships and minority stakes.
The Reshoring Conversation Continues
Here are comments from the industry icon who has visited more printed circuit factories in the world, than any other industry member— Dr. Hayao Nakahara, President, N. T. Information, Ltd:
I have a comment or two on reshoring.
My boss at Photocircuits used to drive me out of my office by saying, "You cannot do business sitting on your rear!" Seeing is believing. In the early 1990s, I attended one of IPC's activities and commented, "Watch out for China in the future." One person in the audience stood up and said, "Hey Naka, we've got technologies; let Chinese take care of the cheap and dirty stuff." Where is he now?
China made about $450 million worth of PCBs at that time. It produced $29 billion in 2015. The North American PCB output peaked in 2000 at about $12 billion. In 2015, it made only $2.6 billion (actual production plus $500 million in imports for resale by PCB makers). There are now only two fabricators in North America that have revenue (made in North America) of more than $100 million. Jiangsu Suhan, ranked 50th in China, had revenues of $110 million!
Since my native tongue is not English, I don't know exactly the meaning of word "reshoring." Using my maximum imagination, "reshoring" is to shut down the plants built in foreign lands and bring the business (maybe equipment as well) back to your home land. There have been a few new PCB plants built in the United States in the last few years. I vaguely recall one in Texas, one in New York (GE Medical?) and one in New Hampshire. They are all very small. In my interpretation of reshoring, these are not "reshored" plants.
According to sources, GE Medical got fed up with PCBs sourced from China. I heard the rumor that the Chinese supplier offered 11 pieces for the price of 10. This happens when a buyer keeps looking for cheap suppliers.
Now, look at U.S.-headquartered PCB materials and equipment suppliers. More than 80% of the chemicals used for PCBs are now produced in Asia Pacific, mostly in China. We have only one copper foil manufacturer in the U.S.—Oak Mitsui, whose emphasis is more on thin copper foil for car batteries.
Where does DuPont (sorry, now Dow Chemical) manufacture dry film products, which it invented in 1968? How about laminates? U.S. makers dominated the world in the 1960s through part of 1980s. Only Isola, Park/Nelco and Rogers remain on U.S. soil, and the latter is making more and more overseas. The majority of Isola and Park's production is made in Asia.
How about equipment? Excellon, which dominated the world, is still surviving with a spare parts business and a few mechanical and laser drilling machines sold only in the U.S. What happened to multilayer press makers? TMP, Wabash, Pasadena, and so on? Chemcut is still surviving at the corner of Pennsylvania, but I saw only a few etching machines in Asia made by Chemcut. ESI is doing better than the rest of U.S. equipment makers, but most of its laser drilling machines for the PCB industry are made in Singapore. DIS, based on Long Island, is doing exceptionally well in the international market against ADARA.
ESI and DIS are the only U.S.-based equipment makers I see often at PCB fabricators operating in China, whose output accounts for more than 45% of the world output.
What I am driving at is that if some dreamer tries to build a good size PCB plant on U.S. soil, he has to import practically all materials and equipment from Asia Pacific. Despite the labor laws in China regarding overtime, factory workers in China still work 12 hours a day and six days a week. Unfortunately, labor costs have been rising continuously in China, which is propelling factory automation. Robot panel loading is becoming a common scene in China (VCP plating, AOI, router, etc). Many have adopted the spray coating of solder mask inks, which allows total automation for this function.
I recently visited a PCB factory in China. "Lay-Up" panels are unloaded onto a conveyorized de-pinning line, pins are removed, "lay-up" structure is taken apart and each panel is sent automatically to a deburring machine, then carried into pre-cleaning and sent to a loading station where a robot mounts the panel onto a VCP plating line. This maker has an output of about $120,000/employee/year, about two-times the average of Chinese PWB factory output.
But this takes a lot of costly "internal" development and requires strong financing. Is there any U.S. PCB maker which can afford to or is willing to build a system like this today?
There are several U.S.-based PCB makers operating overseas, mostly in China. TTM Technologies, Multek, Sanmina, 3M, Amphenol PCB, and MFlex (mistake, this was recently sold to a Chinese metal stamping company). These are the ones that I know. If these makers shut down any one of their plants and bring back the business to U.S. soil, this would be true re-shoring. Do they have plans to do this? Hell no!
On top of this, many U.S.-based PCB makers have partners in China (or should I say subcontractors?). PCBs bought by these U.S.-based makers and sold in the U.S. amounts to no less than $500 million a year.
There will always be a need for PCBs made locally for logistical reasons. Design/develop stage, pre-production, design change iterations, small quantities, quick delivery, etc. are some of the reasons for locally made PCBs. But, once the volume begins to build up, ‘price’ becomes everything.
Price comparison of PCBs made in China and the U.S. is not easy because the quantity is normally different. However, hypothetically, for larger volumes, say more than 1,000 panels per order, the Chinese price is invariably 30% cheaper. Except for some very special products, every PCB made in the U.S. can be made in China if there is a need. I have seen 116-layer probe cards in China! I have seen 84-layer backplanes! 34-layer rigid-flex circuits!
Well, let's forget about these endless bashings and stop complaining. The fact is, the U.S. PCB industry is still reasonably healthy—but frail. Many small shops are profitable. The bottom line is profit. Let's keep it that way. Many Taiwanese makers make profits of more than $200–300 million after tax. If they want to, they could use a large chunk of these profits for investing further—mostly in China. There is only one Taiwan PCB maker that has shut down its China plant—Boardtek, because its Chinese workers could not make the types of boards it fabricates at a high enough yield. Unitech chose YiLang, Taiwan, for a new plant several years ago. It has recently broken ground (on 150,000 square meters of land) in Nantong for a new plant. Dynamic broke ground in Huangxi, Hubei Province, in June to build a brand new facility with a final capacity of 5.5 million square feet per month. Unimicron and Wus built plants there, too. AT&S's Chongqing plant is gigantic. Even Taiwan and some European makers are not at all considering reshoring.
My final remark: PCB manufacturing is a volume business if a manufacturer wants to grow sale revenue. Our current production capacity has been cut down to 1/4 of its peak time in 2000, during which we had about 96,000 people working in our PCB industry. Today, it is somewhere around 23,000, plus or minus a few, by adjusting with part-timers. IBM Endicott used to spend $100 million each year in the 1980s for PCB technology development with 600 R&D people. Today, the surviving entity is called i3 and has only $30+ million in revenue. Hewlett-Packard once had 11 plants worldwide. The last surviving plant (Multek Germany) was shut down three years ago because it kept losing money despite its high-technology profile. Viasystems shut down all the plants in North America and Europe. Now it is a part of TTM Technologies.
If and when the management of TTM, Multek, and/or Sanmina decide to shut down their overseas (China) plants and bring back the business to the U.S., I will remove my hat and bow deeply, saying ‘I was wrong.’
PCB West's attendance increased for the seventh year in a row to nearly 2,000—the show's highest turnout in 14 years. Technical conference registration rose more than 20% year-over-year. Attendees gravitated toward sessions on resolving fundamentals and practical solutions to engineering and design problems. More than 24 designers underwent IPC certification during the conference as well. The sold-out show floor featured more than 100 companies occupying 110 booths.
Ah, the wonders of government speed and accuracy in evaluating critical programs for the nation's security: the military electronics supply chain.
The U.S. Department of Commerce, Bureau of Industry and Security, Office of Technology Evaluation presented the preliminary results of its Defense Industrial Base Assessment "U.S. Bare Printed Circuit Board Manufacturers" at PCB West 2016. The study was initiated at the request of NAVSEA Crane, the Executive Agent for Defense printed circuit boards. The report provides a reasonable view of the industry based upon a large number of interviews. It does not mention the likelihood of losing another 20–25 domestic fabricators in the next year or so, but does anticipate that possibility over the next four years. It does not discuss the fragility of the domestic bare board supply chain, but does show that capacity utilization of small board shops is under 50%.
The DoC is reported to be engaging a consulting organization not familiar with the industry, rather than one familiar with it, to take the next step forward. It seems like the U.S. Government has made it to the 50-yard line and now is going back to the 5-yard line, despite a new Defense program of openness and cooperation—for instance the new Defense Innovation Units in San Jose, Boston, and coming to Austin. There still seems to be too much "stove-piping."
Challenging National Initiatives
With the announcement of "National Guideline for IC Industry Development" and “Made in China 2025” initiatives, the China government and industry are set to significantly improve self-sufficiency for integrated circuits (ICs) manufacturing in China by 2025. This stimulated recent China M&A activity across the semiconductor manufacturing supply chain (Spreadtrum, OmniVision, ISS, Mattson Technology, STATS ChipPAC), new investments by Chinese companies (SMIC, XMC, etc.), and investment in China factories by multinationals (Intel, Samsung, SK Hynix, TSMC, GlobalFoundries).
WL-FOP Rapidly Gaining Market Share
The 40+% gain in performance of Apple's A 10 processor, largely attributed to TSMC's use of this packaging technique, is spurring demand for this reduced-cost packaging approach. If demand continues to spread at this rate it will most certainly affect laminate suppliers (negatively) and boost wafer lever substrates suppliers.
Prices Going Up Again Even as Many Chinese Shops Struggle to Break Even while Avoiding Layoffs—this Sounds Sooooo Familiar
There has been a huge increase in activity by Chinese fabricators soliciting business in the U.S., with a number of companies are going direct and bypassing brokers. Some have already transferred employees here or are opening new offices. They will have a presence at IPC APEX EXPO in February.
Most PCB factories which had a materials price increase in March have received new price increase notifications from Guangdong Kingboard Laminates and Shengyi Technology, according to sources in China. This has raised widespread concern in the industry. CCL, prepreg (PP) and copper foil prices are going up 5−10%. Shengyi's new plant in Changshu will start production this quarter, adding 11 million square meters of capacity. This will increase the company's output potential to more than 80 million square meters per year!
Copper foil price rises are said to be the primary causes of the current increases. Cu foil represents around 30% of the cost for 0.062"CCL, and 50% of 0.039"CCL.
Until recently, copper supply exceeded demand. Now copper shortages have significantly increased due to demand by the lithium battery market. Some shortages have appeared. Some suppliers of copper foil are said to have transferred some production from the PCB copper foil to lithium copper. However, lithium foil capacity expansion is lagging behind supply and demand. This has resulted in foil producers to collectively being unable to meet the CCL and PCB production demand. Result? Copper prices are increasing.
Currently raw material costs are about 40% of the PCB. In this case, some PCB factories may choose to absorb the increases by themselves, others may need to charge their customers more. The situation has caused hoarding of CCL. This, in turn, causes a longer lead time than usual. Normally 3−5 working days are needed to purchase raw materials. Now 5−10 working days, sometimes even longer periods are needed.
Dell Inc. completed its $60 billion deal to acquire EMC Corporation, the largest technology merger in history. The new company, to be named Dell Technologies, plans to be a one-stop shop for information technology sold to business. The company employs about 140,000 people globally and will maintain operations in Hopkinton, Massachusetts where EMC was located. With $74 billion in revenue, Dell Technologies will be the world’s largest privately controlled tech company.
Nan Ya Plastics will acquire the remainder of its ownership interests in its two PFG fiber glass joint ventures from PPG by year-end. Nan Ya and PPG each hold a 50% stake in the JVs. PFG manufactures yarn fibers for laminates and fiber-glass reinforcement materials for automotive applications. It has production facilities in Chia Yi, Taiwan, and Kunshan, China.
Ventec International Group has doubled its B-series insulated metal substrate (IMS) materials production capacity at its Jiangyin, China facility. The company invested $2 million to double its IMS materials production capacity.
According to Research and Markets in Dublin, sales of conformal coatings will increase to $12.3 billion by 2021 on demand for printed circuit boards and automotive products. "...the need for conformal coatings on PCBs for better performance in vulnerable environments have been the key drivers for the dominance of the electronic industry in the conformal coatings market," the research firm said.
Update from Productronica India
The bare board market in India is now $1.2 billion of which only $360 million is made domestically. The market size is optimistically forecasted to quintuple to $6 billion by 2020 as there is a strong push by local industry and governments (local and national) to increase the percentage of domestic production. There are currently over 200 PCB fab companies in India of which about 60% are classified as "small-scale" industry. Infrastructure for bare board fabrication is still a problem as key high-tech supplies such as copper clad laminates and dry film photoresist must come from abroad. Most domestic PCB production is made from FR-4 and is low-tech, 4-layer (or slightly higher).
Chinese telecoms giant Huawei Technologies will start to make smartphones in India next month joining a wave of compatriots setting up in one of the world's biggest mobile phone markets. The plant will be operated with the Indian arm of electronics manufacturer Flextronics International in the southern Indian city of Chennai, Huawei said in a statement. As growth in China stagnates, India, the world's fastest-growing smartphone market, is providing Huawei and rivals like Xiaomi with new expansion opportunities.
HP is buying Samsung Electronics' printer business for $1.05 billion. Samsung has agreed to make an equity investment of $100 million to $300 million in HP through open-market stock purchases after completion of the sale which is expected to close in less than a year—subject to regulatory approval.
Back to the Drawing Board
Camtek will reorganize its current mode of operation with respect to its functional inkjet technology (FIT) activity. It will cease supporting the four Gryphon systems currently installed at customer sites, and will re-focus on creating the next generation of digital printer. Camtek estimates that the development of the next generation printer will take approximately 18 months. Rafi Amit, Camtek’s Chairman and CEO, commented, “Based on feedback we gathered from the four customers that have been evaluating the Gryphon system, and in order to increase the addressable market, we have decided that there is a need for a significant redesign of the system, the process and the ink. This will enable us to better gear the technology to market requirements. The Project run rate savings forward are expected to be $2.5 million.”
The D2P (Design 2 Part) show in Marlborough, Massachusetts had far fewer 3D printing displays as well as fewer bare board fabricators. Most of the 18 EMS companies including one from Australia, reported good sales this year; one attributed it to its "open sourcing" policy. This company was operating at a one-plus shift capacity. It stated that it showed its customers its margins on the services performed for them. Attendance seemed light.
Return of the Reps?
The first thing that I saw after picking up my badge at the D2P show was a board with a sign "REPS WANTED." On it were 22 5"x7" cards describing the company, the opportunity, and the company's booth number where further information could be obtained.
Last month's NEPCON South China was busy—with "tire kickers." There was a lot of interest in the products shown, but few buyers as the industry continued in its doldrums outside of a few hot spots—automotive, military, and medical. There did not seem to be any grousing about the two-year wage freeze imposed by the government after years of mandated increases of 18−20%.
On November 16, Gene Weiner will present an IPC "Wisdom Wednesday" Webinar titled: "A Vision for the Industry." The free webinar will be an IPC members-only presentation.
Are you an executive of a company that makes printed or flexible circuits?
Do you plan to attend IPC APEX EXPO 2017 in February at the San Diego Convention Center?
If so you should definitely participate in the Executive Forum produced by the members of the Raymond E. Pritchard Hall of Fame designed to help you go forward in these difficult times.
An all-star program comprised of suppliers, fabricators, buyers, and consortia leaders will provide their expertise. Others will participate in a panel discussion to provide you with ideas that they used to succeed. A special speaker from Asia will give you the real scoop as to what is going on there.
Did you say that you are not an IPC member? No matter! Let me show you how to save nearly $1,000 on a first year membership and over a $1,000 on an all-inclusive package for the show.
You can take advantage of this one-time special arrangement to attend the February 13, 2017 Executive Forum at the same price as IPC members, and then take a few days to decide if you wish to take advantage of the special membership offer.
As Chairman of the IPC 2017 Executive Forum, please do contact me for detailed information.
Gene Weiner is president of Weiner International Associates. To contact Gene, click here.