EIPC Technical Snapshot: A European Roundup
Although it was originally proposed to hold a one-day face-to-face EIPC conference in Frankfurt, travel restrictions in Germany made this impractical. But the Technical Snapshot webinar format has proved so successful that it was decided to run an extended version as an alternative—two sessions, with three presentations each. It worked extremely well. The carefully selected program on February 23 featured excellent speakers, and seamless organisation added up to an outstanding event.
Europe’s Financial Outlook
EIPC board member Dr. Michele Stampanoni, vice president strategic sales and business development at Cicor Group, moderated the morning session, which began with a business outlook on the global electronics industry with emphasis on Europe, prepared by Jon Custer of Custer Consulting and presented on his behalf by EIPC president Alun Morgan.
Morgan began by summarising the situation at the end of 2021, when global GDP had exceeded the 2020 figure by 5.7% although he reminded us that 2020 had been a bad year to compare with. In fourth quarter 2021, GDP was up by 6.9%, but that could be attributed largely to inventory increases. If these were excluded, GDP was effectively up by 1.9%. Consumer prices had soared by 7% in the fourth quarter. Port closures and the blockage of the Suez Canal had caused supply chain disruptions, and it was expected that supply reliability would continue to be an issue in 2022, as well as a continuing rise in transportation costs. Semiconductor sales had been very strong, growing by 25%, and the growth was expected to continue in 2022. Global PCB output grew by 9.9%.
The global outlook, based on World Bank figures for real economic growth from 2019 through 2021 with estimates for 2022 and 2023, indicated that the Euro Area had been the worst-hit in 2020 with -6.5%, whereas China had maintained a positive GDP growth of 2.2% in 2020 rising to 8.0% in 2021 with 5.6% forecast for 2022 and 5.3% for 2023. Corresponding figures for the Euro Area were 5.1%, 4.4%, and 2.2%.
Although European industrial production clearly showed a very sharp dip as we entered the pandemic in early 2020, the composite graph for the Euro 28 countries afterward continued its previous trajectory. There was concern that growth in individual countries like France and Germany continued on a declining trend for specific reasons.
Purchasing Managers' Indices had always been considered key indicators by Custer Consulting, and comparison of January 2022 with December 2021 values for the U.S., Europe, UK, Germany, France, and Japan showed some slowing-down in the U.S. and Germany, although Morgan stressed that all the values were better than 50%, suggesting growth rather than contraction.
The world electronic equipment monthly shipment graphs predictably showed China as the dominant market, with a very clear pattern of seasonality. There was a dip corresponding to the beginning of the pandemic, but this was followed by a dramatic recovery.
The bar chart comparing global electronic supply chain growth in 2021 with 2020 was strongly positive, with the exception of business and office reflecting working-from-home, and a significant negative in the automotive sector for a variety of causes additional to the pandemic effect. The automotive situation was similar in Europe. In the aerospace sector, although civil aircraft production had been severely affected, the space industry had fared quite well.
Overall, 2021 was a better year in most European countries. There was strong growth in PCBs and growth would continue in 2022 but to a lesser degree. Supply shortages, shipping costs, prices and inflation were areas of concern. Shipping costs in particular had risen spectacularly.
Morgan turned his attention to technology trends, and listed the top 10 according to Finances Online: IoT connectivity, robotics adoption, AI, and cognitive transformation, augmented analytics, API-driven productivity, customer support chatbot, blockchain innovation, and digital twin. In his opinion, the key trends to watch were artificial intelligence and augmented reality.
In conclusion, the outlook for 2022 is that growth will continue in all major subsectors. Projections by Deloitte anticipate a GDP growth in manufacturing of 4.1% for 2022. Supply chain disruptions will continue, with shortages and high delivery costs creating headwinds for shippers at a time when demand remains high. Worldwide inflation will likely remain near 5.0% in early 2022 before gradually easing in response to declines in industrial and agricultural commodity prices. On an annual basis, global consumer price inflation will average 4.1% in 2022 before subsiding to 2.8% in 2023. More than 1.3 trillion semiconductors devices are expected to ship in 2022 and PCBs are expected to grow by 8% globally.
Axiomatic and DSM Design Methodologies
Alex Stepinski of Smart Process Design in Poland, a specialist in advanced manufacturing and high-output, cost-efficient value creation, gave some knowledgeable insight into opportunities for European re-shoring with a technical roadmap exploring the economic viability of greenfield PCB fabrication.
His agenda began with an introduction to the principles of axiomatic and DSM design methodologies. I learned that axiomatic design is a systems design methodology using matrix methods to systematically analyse the transformation of customer needs into functional requirements, design parameters, and process variables. Design structure matrix (DSM) methodology is a tool for analysing and managing complexity in a project by focusing on interactions and interfaces between project elements.
In a PCB manufacturing context, he compared brownfield and greenfield fabrication projects. Brownfield facilities typically had equipment of various vintages with varying chemistries, and a lot of variation in people and their experience. The big difference with the greenfield was that everything was put together as a single project and it favoured the use of axiomatic design principles. Functional requirements would be developed to meet specific customer attributes, followed by the development of design parameters and process variables. With everything calculated to be independent it was straightforward to manage and to model.
To adopt such principles in a brownfield situation is much more complex, but a start can be made with a design structure matrix: products, people, skills, and process activities, all mapped to each other, and the nature of the interaction identified at each interface. Tools are available to enable efficient roadmaps to be developed using the axiomatic approach to greatly improve the efficiencies of the system.
Stepinski turned his attention to green technologies, mentioning that there were already a few facilities in the U.S. running with close-to-zero water consumption. Latest techniques even enabled zero consumption using humidity from the air to replace water lost to fume extraction. Open-source zero-liquid-discharge system designs are currently on the market, for which capital expenditure was up to 40% less than conventional systems and operating expenditure between 30% and 92% less, giving proven returns-on-investment of two to five years.
He estimates that 70% of PCB fabrication chemicals are recyclable with current technology, but recycling is typically used only for generic commodity chemicals because proprietary process suppliers are very protective of their formulation details.
On the subject of automated handling, Stepinski sees the Pareto frontier for low-mix mass production to be low-tech in-line automation, whereas the Pareto frontier for high-mix new-product-introduction or brown-field is based upon custom automated-guided-vehicle systems. But in-between new product introduction and mass production, automation is typically surpassed by low labour costs. He suggested a new product family approach to the work cells based on a production part approval process and product lifecycle management with process: product interface mapping. Although collaborative robots offered some opportunities, he considers there is an urgent need for standardisation in the automation approach. There are also many opportunities for automation of indirect labour functions, for example, in laboratory analysis and simple artificial intelligence loops with in-line metrology could substantially reduce indirect labour demand for production part approval.
He briefly outlined the benefits of digital-twin modelling and model-based systems-engineering methodologies to define the most effective ways of building products and optimising pricing.
Stepinski has recently been involved in the development of four different OEM PCB fabrication facilities in the U.S., manufacturing product technologies ranging from double-sided, through advanced aerospace HDI to semi-additive processing. He quoted some impressive cost-savings and production efficiencies, and he remarked that each of these facilities uses no more than 200 litres of water per day, with a headcount less than 25% of that of a typical PCB plant.
Opto-electronics on PCBs
The final presentation of the morning session came from Richard Pitwon, CEO of Resolute Photonics in the UK. As a technologist with many years of transformational expertise in optical and photonic system interconnect and integration for data-communications applications, he gave an energetic and informative introduction to the increasing role of opto-electronics on printed circuit boards, with particular regard to technologies we could expect to see in the next 5-10 years as optical communication migrated onto the PCB and right up to the chip.
He began by discussing the driving trends in hyperscale data centres, enormous environments comprising at least 100,000 servers and their associated technical infrastructure, required to support the mass scale requirements of data and cloud computing. Hyperscale has become the dominant form of data centre in the world; examples of the largest are those operated by Amazon, Microsoft, and Google. Of the many communication protocols employed, Pitwon has chosen the trend in Ethernet speeds to illustrate the exponential upsurge in the consumption of digital information causing a rapid evolution in data rates. And the proportion of machine-to-machine communication within the data centre greatly exceeds that of machine-to-user communication.
The evolution of data rates is driving the migration of optical interconnect into data-centre systems to overcome bottlenecks resulting both from the increase in data rates and the lengths of conventional internal interconnect which could be several hundred metres. Moreover, separating servers into their constituent compute and memory resources by optical disaggregation allowd them to be allocated as required by the needs of each workload, and distance agnostic links enabled high bandwidth communication bridges so that resources can be dynamically assigned and traffic and compute loads can be balanced across the data centre.
A further consequence of increased data growth is the need for an increase in switch bandwidth. Pitwon explained the concept of advanced “spine-leaf” optical switching architecture and its benefits compared with the conventional “fat tree” system.
The migration of optical interconnect is progressing from external optical connectors on the front panel to system-level integration, from front-pluggable transceivers and mid-board optical modules to chip-level optical interconnect with co-packaged optics as the ultimate objective.
He defined three categories of optical circuit board: fibre-optic flex-planes, polymer waveguides and planar glass waveguides, and showed examples of each in proprietary systems. The results of a major North American round-robin project on polymer waveguides are shortly to be published, and Pitwon referred to a series of European projects in which he has participated.
He concluded his presentation with a glimpse into future developments in quantum computing and the characteristics of its ecosystem. He predicted that future hyperscale data centres will increasingly incorporate quantum computer and communication nodes to complement their capabilities.
PCB Market Update
The afternoon session, introduced and moderated by Martyn Gaudion, managing director at Polar Instruments in the UK, began with a PCB market update and outlook from Dr. Shiuh-Kao Chiang, managing partner at Prismark Partners in the U.S.
“We just passed through an amazing year,” Chiang said. Prismark has almost finished its analysis of 2021 data for the electronics and PCB industry. Many companies have not yet fully released their earnings, but the overall picture of 2021 is becoming clearer. “Even though we’re still in the later stages of the pandemic, the amazing thing last year was the overall growth of the electronics supply chain, and the momentum that is happening across the board,” he said.
Chiang listed the highlights of the 2021 PCB market, which achieved 23.4% growth and exceeded $80 billion globally, due to recovered demand, product upgrades, inventory restocking, average selling price increase, and a weak U.S. dollar. The packaging substrate market was very strong, especially for flip-chip-ball-grid-array, flip-chip-chip-scale-package, and antenna-in-package and system-in-package components.
Notebook personal computer demand remained strong in the first half of 2021, aided by changes in server platforms. Automotive electronics recovered, fueled by the transition to electric vehicles and advanced driver-assistance systems. Demand remained strong for industrial electronics, medical wearables, gaming, smart consumer electronics, and internet of things.
A characteristic of the 2021 PCB market was surging revenue and profit growth in packaging substrates, although strong demand, high material costs, fractured supply logistics, increasing inventory, and tightening cash flow squeezed the margins of most PCB companies. Other important issues influencing the 2021 market were supply availability and capacity constraints for PCB raw materials, currency exchange rates, long lead times for critical processing tools and supply shortages for selective semiconductors and other devices.
Chiang expects more caution as the industry enters 2022 against strong headwinds—inflation, high interest rates, geographic conflicts, increasing materials costs, supply chain logistics, labour shortages, and other issues. But even in the later stages of the pandemic, the recovery momentum would continue and the electronics market would continue to grow, although at a more moderate rate, while substrates would continue to register double-digit growth.
To support the strong growth in the PCB industry through 2021, the upstream materials industry has suffered extreme turbulence: supply issues, cost issues, selling price issues. Prismark observed that relatively low-end commodity-type FR-4 laminates have increased in price by at least 50%, reflecting price increases in copper foil, glass fabric and resin; several suppliers in China and Taiwan have achieved revenue growth of over 100%.
Two factors that have affected the whole industry during the pandemic are a weak U.S. dollar and a change in purchasing mentality from “just-in-time” to “just-in-case” resulting in double-booking as people sought to secure supplies.
The semiconductor industry is in the middle of a five-year “super-investment” cycle, 2019 to 2024, with an expected spend of over $20 billion to build capacity for substrates, particularly those based on Ajinomoto build-up film (ABF). This increased capacity will create additional demand for associated assembly, and test and inspection equipment.
The market for HDI PCBs is expected to grow in 2022 as more non-consumer applications such as automotive, high-performance computers, high-speed networking, and satellite communications require HDI products. The smartphone market is expected to grow moderately. The demand for computer and communications infrastructure would continue in the economic recovery phase, supported by fiscal policies and infrastructure-rebuild programs, and this would strengthen the market for multilayer boards. Automotive production would be re-established when component shortage issues were resolved.
Chiang commented that the value growth in 2021 for the multilayer sector has been partly supported by increased selling prices resulting from material price increases, but when the cost structure for basic double-sided, four-layer and six-layer is examined, it is clear that direct materials costs account for almost 60% of selling price.
Growth is expected in the market for flexible circuits, particularly on low-loss substrates for millimetre-wave applications. Additional applications in areas such as automotive battery management, displays, wearables and internet-of-things will also increase demand.
Although Europe has seen a growth rebound in 2021, China remains the principal manufacturing location for rigid and flexible boards and is attracting significant investment, particularly in substrate capacity. He remarked that Japan, Korea, and Taiwan also have strong growth in substrate manufacture.
Chiang closed his presentation with a note of caution. “We are looking at this year with tremendous uncertainty,” he said. “Overall, we expect that 2022 will still achieve mid-single-digit growth, and hopefully the situation will gradually improve after the first half.”
Final Finishing Technologies
The focus of the session moved from market forecasting to chemistry, as Dr. Britta Schafsteller, Atotech's Global Product Manager Selective Finishing, discussed future opportunities for final finishing technologies.
Her selective finishes roadmap charted established and next-generation processes, together with an R&D outlook for rigid PCBs, SLPs, flex, and flex-rigid circuits as well as IC substrates. She listed the key finishing challenges to be overcome for each category.
For circuits operating at higher frequencies, these include tight impedance control, lower trace roughness and nickel-free surface finish for improved insertion loss. For line and space downscaling, the requirements are for a finely structured surface finish, advanced process control and particle reduction for higher yield.
Additionally, flex substrates with reduced lines and spaces required bendable layers, improved layer homogeneity and cyanide-free immersion gold.
As input-output density of IC substrates increases, there are requirements for bump pitch reduction and improved coplanarity for bump arrays, improved compatibility with materials, reduction of the consumption of precious metals, and extended process lifetimes.
Schaftsteller described in detail the characteristics and recommended applications for a whole series of Atotech finishes: a universal process for electroless-palladium-autocatalytic gold, electroless-nickel-immersion-gold, electroless-nickel-electroless-palladium-immersion-gold, a new palladium bath for pure deposits, a mixed-reaction gold, an immersion tin for flexible applications, an electroless-nickel-immersion-gold and a cyanide-free gold for flexible applications, and an immersion tin for IC substrates.
A newly developed fully-autocatalytic tin with no limitations in plating thickness or substrate will open new opportunities, with potential applications in IC substrates and micro-LEDs as an alternative to solder printing as finer feature sizes make such printing impracticable.
R&D in PCB
The final presentation came from Thomas Cramer, project manager for research and development at ILFA in Germany. He discussed the significance of research projects for the PCB manufacturer.
Introducing ILFA as a well-positioned and successfully owner-managed PCB manufacturer, EN9100 accredited as an aerospace supplier, with its own R&D department and owning several active patents, he commented that ILFA re-invested 10% of annual revenue to achieve its roadmap goals. ILFA was not identified solely as a PCB fabricator; the company is very customer-orientated and keen to cooperate as technical consultant in projects from the concept stage, right through planning, CAD layout, PCB production, and assembly of components until the final product.
Current technology demands from ILFA’s market are for miniaturisation, signal integrity, thermal management in high-current and ultra-thin multilayer designs, and withstanding harsh environments. Inevitably these demands must be met under time and cost pressures. Sometimes it is sufficient to optimise existing processes and materials, but often it is necessary to invent or implement new technologies.
ILFA has set up a technology roadmap to set timelines on their progress. One project is solely focused on a glass PCB with combined electrical and photonic vias, with glass layers and electrical layers in 10-layer construction, with blind via aspect ratios up to 1:3.
Cramer discussed routes to achieving research and development goals. Obviously the first is to recognise a market need, and possibly work together with a customer or supplier. Could the objective be realised by optimisation of existing technology? “Most important is to concentrate on your strong points, don’t focus on your weaknesses, but advance and go forward,” Cramer said.
The first option is to tackle the project alone, internally, on your own timeline, at your own pace, and keep all the success to yourself. Many companies operating in ILFA’s field are doing this but it could be a smart decision to widen the circle, possibly with an institute that has expertise in that area. The really smart solution is to join a government project that will provide both expertise and funding.
The extent of funding varies with the size of the operation, smaller companies benefiting most, and there is the opportunity to work with several different partners. If the project is ultimately not successful the costs are shared, and with the government contribution, the costs to individual consortium members are effectively reduced. The strong points are the larger audience and the benefit of being included in the partners’ marketing strategies.
Cramer quoted some statistics that illustrate the enormous growth in China’s share of the world market over the previous decade, whereas the German industry has retained a small but reasonably steady share. He stressed the importance of “going forward together” and trying to strengthen each other so that this share can be maintained.
Gaudion moderated the question-and-answer session, and then thanked all participants, especially the EIPC staff for the smooth organisation of a memorable event.