Tempo Accelerates

Which EMS has received the most private equity funding over the past few years?

Chances are, it’s Tempo Automation. The San Francisco-based contract assembler just added another $45 million (that’s right) in new capital. That’s on top of the $20 million it garnered a year ago, which it used to build a new factory. Overall, we estimate Tempo has raised around $75 million over its six-year life.

Investors are falling in love with Tempo’s emphasis on software-based manufacturing. It has caught the attention of blue chip OEMs like Lockheed Martin, which is also a customer and investor. The latest round of funding, called a Series C, was led by existing investor, Point72 Ventures and includes an array of new and existing outside investors investors. Series C is typically the final funding round prior to an IPO or acquisition.

In an era where PCB assemblers aren’t rushing to go public, this is an interesting development. Privately held Tempo does not disclose its revenue, but it’s likely to be less than $100 million. That level of investment suggests a high level of confidence by outsiders that Tempo is on the right track.

Read our profile of Tempo here.

https://https://circuitsassembly.com/ca/editorial/menu-features/28301-ems-profiles-1711.htmlcircuitsassembly.com/ca/editorial/menu-features/28301-ems-profiles-1711.html

Should Terry Gou for It?

Terry Gou, Foxconn founder and chairman, is contemplating a run for the presidency of Taiwan. Should he go for it?

Given his wealth – an estimated $7.8 billion – and stature in Taiwan, some comparisons to US President Donald Trump will be inevitable. There are distinct differences in upbringing and temperament, however. Gou is a self-made man, having launched Hon Hai as a components supplier in the early 1970s. He built the company brick by brick, expanding into new markets as opportunities arose, and taking advantage of mainland China’s proximity and low cost-model. When the West started looking for cheaper manufacturing alternatives, he was ready.

He has generally been media-shy throughout his career. It was only after Foxconn came under scrutiny as workers started jumping off its roofs that NGOs began putting pressure on Apple, Foxconn’s largest customer, and Western media took note. Long articles in The New York Times, Wall Street Journal and Forbes followed.

It has been reported Gou wants to bring a business- and China-friendly approach to Taiwan. That would in some ways run counter to the current president Tsai Ing-wen, which has given Beijing a colder shoulder. Her administration is coming under criticism for stagnant wages among Taiwan’s middle class, however, opening the door for a challenger.

But is Gou the guy? Whether his domineering approach will be welcome even in Asian cultures today is unclear. In the wake of the Enron collapse, in 2007 the WSJ quoted him as saying, “Even for those of us who lived through Enron, it’s hard not to come away disgusted. I always tell employees: ‘The group’s benefit is more important than your personal benefit.’ ” At the time, a typical mid-level assembly-line worker in Taiwan earned about $230 a month, including overtime pay, while Gou was a multibillionaire.

Neither is the inherent conflict-of-interest with China, where Foxconn has the majority of its manufacturing capacity and business interests and employs hundreds of thousands of residents. Taiwan’s self-styled independence stature could be in question were Gou come to office. How would he priorities decisions that could mean risking his financial standing?

Citing divine inspiration, Gou told media that he seeks “peace, stability, economy and future.” Those are worthy goals. Given his track record as an employer and his financial dependence on China, how he will achieve them deserves scrutiny.

Productivity is King in All Types of Manufacturing Processes

Folks,

It’s been way too long, let’s look in on Patty and the boys…..

It was 5:30AM and Patty’s alarm went off. She was unusually tired today because of a PTA meeting last night. She had become much more interested in the school her twin sons went to when she found out that the school was no longer teaching cursive writing. She was too late for that battle, but had heard that the school was not going to teach long division. Another mother told her that the reason was that long division was too hard and it could be done with a calculator. When Patty heard this she “went through the roof.” Fortunately, when Patty attended the PTA meeting, she and the other parents were assured that long division was still being taught.

Patty’s sons would learn cursive, however, as both her mother and her husband’s mother would teach the boys during baby-sitting sessions – and once a week the boys would read one of the 100+ letters to home that their great grandfather wrote to their great grandmother during World War II. All written in cursive of course!

After her morning jog and workout Patty was in her office at Ivy U by 7:30AM. She turned on her laptop and saw an email from Mike Madigan, her former employer’s CEO. It read:

Dear Professor Coleman,

One of my golfing buddies owns a small jewelry firm, Galahad Jewelry in Providence, RI. One of the units in the company produces silver charms for charm bracelets. This unit is not performing well financially. After chatting with him I sensed that productivity is low, inventory is out of control, and the processes are not lean.

Could you visit his factory and perform an audit? Maybe Pete can go with you – just make sure he behaves.

The note finished with contact information for the company.

Not only was Pete willing to go, but Rob also had a colleague in nearby Brown University that he wanted to visit. A few days later our trio was heading south to Providence in Rob’s Buick.

“You guys don’t know squat about making charms for charm bracelets. Do you really think you can help them?” Rob teased.

“Hey, we’ve got the great Professor Coleman here. She can solve any problem! — Seriously, we’ve discuss this before, most manufacturing processes are similar. I won’t be surprised if we can help them a lot,” Pete answered.

They stayed in a hotel near the Galahad facility the night before the audit. They arrived at the facility the next morning and met with the site superintendent, Don Smithson. After exchanging pleasantries, Patty and Rob toured the manufacturing, inventory storage, shipping, and administrative areas. By then it was lunchtime. Pete had stayed behind to watch the manufacturing line and collect productivity data. During a late lunch, they requested some additional production and cost data from Smithson. They then requested that Smithson give them two hours to develop a summary of their findings.

After preforming all of the necessary calculations, Patty and her team prepared a Powerpoint presentation. Smithson had gathered a few of the process engineers and the manager of production Ervin “Bud” Clark. Clark was an intimidating man with sharp features and, it appeared, a quick temper.

Patty started the meeting by reviewing the strengths of the operation. The facility was so clean it could only be described as spotless. The production workers appeared to have very good attitudes and the quality of the resulting charms they produced was excellent. Bud Clark beamed as Patty was sharing this information. Then she reviewed the “Opportunities for Improvement” (OFI’s).

‘The greatest OFI is the line uptime. From the data you gave us, and from what we gathered today, we calculated that your uptime is 30%,” Patty began.

At this, Clark turned red in the face and demanded,” What do you mean by uptime Dr. Coleman?”

“Simply the amount of time the line is running during an 8-hour shift,” Patty responded.

Clark was now shaking with fury, “This is the greatest insult I have ever experienced, my lines are running almost 100% of the time. Smithson, let’s kick these Ivy Tower intellects out of here, they’re wasting our time!” he grumbled.

Smithson calmed Clark down and then said to Patty, “Thirty percent seems very low, how did you calculate it?” he asked.

“We did it two ways. Rob and I took the production metrics you gave us and calculated uptime, Pete also monitored the line and took readings, both methods yielded about 30%,” Patty responded.

At this Bud Clark exploded, “My lines run nearly 100% of the time. I can’t be convinced otherwise,” he fumed.

“Dr. Coleman, can you share some of the details relating to how you calculated 30%?” Smithson asked reasonably.

“Of course. Pete monitored the lines from the start of the shift through lunch. The time was from 8AM to 1PM.” Patty stated.

“Well, it shows right off the bat that you don’t know our schedule,” Clark fumed, “lunch is over at 12:30.” He was so riled that his face was red and he was shaking.

“That’s true Patty” said, “I’ll let Pete explain.”

“Technically the lunch period starts at 12 noon, but the workers shut their machines down at 11:48AM today. The lunch period is supposed to end at 12:30PM, but the workers did not get back to their stations until almost 12:45PM. It then took them until 12:55PM to get the machines running. So the 30 minute lunch period was actually 1 hour and 5 minutes,” Pete explained.

“Boy, what an eye opener,” Smithson said.

 Bud Clark seemed numb, but then he chimed in, “There’s no way that extra lunch time gives us only 30% uptime,” he snarled.

“True,” said Pete, “but the 15 minute break at 10:00AM was really 35 minutes.”

Now Smithson was getting agitated at Clark.

“Bud, what is going on?” Smithson said.

Patty felt it was time to interject some calming comments.

“To be honest, this type of situation is what we see in most audits,” Patty said sympathetically.

“Let’s let Pete finish,” Clark said glumly.

“Works starts at 8AM, but the team really didn’t begin making parts until almost 8:30AM,” Pete went on. In addition, set-ups for new jobs are performed on most machines two to four times per day. In theory they take 15 minutes, in practice more like 45 minutes,” Pete went on.

“So with all of this downtime our uptime is only about 30%?” Smithson groaned.

“Yes,” Pete responded.

Patty then showed how the production data for the last 3 months support the 30% uptime number.

“The good news is that if you can increase productivity by only 10%, your profits will more than double,” Patty added cheerfully.

“I find that hard to believe,” Clark said with an agitated voice and a red face.

“Me too”, said Smithson, “ if I increase productivity by 10%, I only have 10% more parts to sell, so profits will go up only 10%.”

“That would be true if you had no fixed costs, your fixed costs are high. Every additional part you sell brings in more revenue, but costs less to make because your fixed cost per part is lower,” Patty explained.

“I developed an equation the shows this,” she went on.

“In this equation nimproved  is the number of charms produced in a day after process improvement – let’s say that is 10% more than the current amount. We’ll use nold  as the current amount per day. Pu is the price you sell the charm for and Cu is the material cost. CostFixed represent the fixed costs,” she explained.

“I plotted a graph of profit versus productivity increase from the cost and production metrics you gave us. Note that current profits are at about $160,000/yr. With just a 10% increase in productivity the profits go to about $360,000/yr,” Patty continued.

Figure. Patty’s Graph of Profit Increase vs  Productivity Increase.

Both Smithson and Clark sat in their chairs dumbfounded. “If we can’t improve productivity by 10% we should be fired,” Clark humbly replied.

Discussion then ensued on how to improve productivity, much of it focused on how to minimize or eliminate turning the machines off. Both Smithson and Clark became energized by this discussion and also expressed their gratitude to Patty, Rob, and Pete.

“Did you notice anything else beyond production that could help us reduce costs?” Smithson asked.                                                                                                            

“You could save quite a bit by better inventory control,” Rob responded.

“I’m off the hook on this one Smithson,” Clark teased.

“I own inventory control,” Smithson agreed, “what did you find?”

“Well you have way more inventory than you need. We especially noted a block of silver as big as a microwave oven in your store room. We calculated its value at about $500K. I asked some people who have been with the company for over 15 years and they say it was there when they started,” Rob explained.

“The block is so big and heavy, we could never figure out how to work with it so we just put off dealing with it. Weeks became months and months stretched into years,” Smithson sadly replied.

“In addition, the shipping department, although neat, had multiple shipping cartons of the same box size that were partially used. People also commented that they sometimes had to hunt for items for production or shipping,” Rob went on.

Smithson sat in his chair looking glum.

“Dell estimated that the cost of one week’s inventory is about 1% of the value of the inventory, you have about 30 weeks of inventory. We estimate that your inventory carrying charges are greater than your profits,” Rob explained.

“I always wanted to assure we never ran out of material,” Smithson added a bit defensively.

“A worthy goal, but you can almost certainly accomplish that with five, or at most 10 weeks of inventory,” Rob replied.

The group then began discussing to how to reduce inventory and outlined a plan. Our trio agreed to come back in six weeks and access progress in both productivity and inventory control.

On the car ride back to Ivy University, Rob sensed that Patty and Pete were a little pensive.

“Hey you two, what’s up?” Rob asked.

“It seems like déjà vu all over again,” Pete chuckled.

Patty agreed, “The first productivity problem the Professor helped us with at ACME was so similar to this it’s so surprising.”

“That was the first of our many adventures together with the Professor, too many years ago now,” Pete added.

Patty agreed and Rob noted a little catch in her voice ….

Cheers,

Dr. Ron

Actions Count More than Words

China is a country that should be viewed through its actions, not its words.

It’s important to keep that in mind when considering the news today from the Associated Press, which is reporting China will cease its practice of forcing multinational companies wishing to do business there to share their IP.

If this turns out to be true — and the China legislature ratifies the law — one of the big
trade hurdles between the US and China will be eclipsed.

As usual, the devil’s in the details, and this case is no different. Per the AP, the new rule simply bars “government authorities” from making demands of foreign firms. So if, for instance, the steep duties China places on imports remain in place, an MNC will almost have to partner with a domestic company.

And that’s the rub. As the AP reports: “[T]he central government routinely says it has little control over commercial agreements between Chinese and foreign firms.”

So for most firms, the Catch-22 will remain.

China has a history of saying one thing and doing another. Sometimes it does so brazenly — such a ignoring WTO trade practices or currency interference. Other times it is on the sly, such as when it says it doesn’t believe in meddling in other nations’ affairs all while it’s meddling in other nations’ affairs.

Take China at its actions, not its words.

The Inevitability Of Software-Defined Manufacturing

From 2003 to 2006, I worked at a contract manufacturing company as a robotics engineer. I was the first software engineer hired by the company, an opportunistic hire by a visionary CEO who saw the importance of automation in manufacturing. The CEO wanted to reduce downtime in manufacturing, improve quality, and empower the folks on the factory floor to be more efficient.

That period of my career was a fascinating experience. I was coming from a Fortune 500 energy company, where I had been a database programmer working with many highly capable engineers on scaling large data models. In that environment, continuous improvement through software automation wasn’t aspirational, it was our explicit mission. I took the role in manufacturing because I wanted the opportunity to define and deploy a software roadmap from scratch. I learned a lot during that time. As successful as the company was, software didn’t really exist inside the company, aside from an arcane enterprise resource planning (ERP) system that was poorly supported and badly used. I did everything from programming robots by hacking into them (APIs in manufacturing equipment didn’t really exist at the time, and still don’t), to developing web-based workflow software, to educating employees on how to use not only the tools I built, but software such as Microsoft Excel. Along the way, I discovered these existential truths, so to speak, as they applied to manufacturing as a whole:

  • Everyone saw the benefits of automation and wanted to automate as much as they could
  • Very few people understood the role software played in automation, even at the highest levels of the company

Fast-forward 16 years and much to my astonishment, manufacturing as a whole has not progressed. In learning about Bright Machines and our opportunity space, I encountered a lot of the same problems I faced 16 years ago. In manufacturing, the bulk of inspection remains largely manual. Instead of data being collected across the factory to be analyzed, it is mostly hostage to a particular machine, or worse, not collected at all. The concept of transforming data across the factory floor into actionable information that enables building higher quality products faster is at best an ambition. From designing a product to setting up a job, there is very little automation throughout the process of building physical products. In fact, setup and deployment take weeks, sometimes months, leading to significant product delays. That’s just the beginning of the list of problems with manufacturing today. It’s a very long list indeed.

When we compare manufacturing to other industries that have not only embraced technology, but pushed its boundaries to innovate and succeed, we can’t help but wonder why this key economic pillar remains stuck in time. I posit that this is for several reasons. Manufacturing is a demand-driven industry with low margins. For most manufacturing companies, it has simply been easier to throw humans at any given problem, knowing that labor costs can be scaled up and down based on demand. At first blush, the calculation seems rational. Investing in sophisticated hardware powered by equally sophisticated software at an industrial scale carries a lot of expense, not only in upfront costs, but maintenance, ongoing upgrades, support, and so on. Then, there’s the problem of time. Customers want things manufactured quickly. Who has time to invest in equipment set up, calibrating machines, setting up networks, securing the data, etc.? Human workers, on the other hand, can be deployed on an as needed basis.

Except that things really don’t work this way anymore. Humans, rightfully so, decided they are no longer willing to work in arduous and monotonous jobs, leading to reports of “voluntary turnover rates exceeding 300%” in some parts of the world. That is an astonishing statistic. The cycle of innovation in industry has evolved and sped up so much that having the ability to not only deliver product in near-real time, but perform meaningful reactive as well as predictive data analysis is an absolute must in order to operate efficiently in manufacturing. The increasing sophistication of the products being developed require the precision of machine automation and the power of not only software, but artificial intelligence, for higher product quality and predictability.

Which brings us to today. Manufacturing is crippled by these pain points, but ill equipped to solve them, for the same two fundamental reasons I encountered 16 years ago: manufacturing companies certainly understand the value of automation but have not historically utilized software to implement automation. Manufacturing companies are, after all, not software companies. And until now, the lack of demand for software-defined manufacturing has led to few external companies that are actually positioned to deliver holistic software solutions that act as both immediate relief as well as business accelerators to manufacturing companies. Thus, we are at a critical inflection point where manufacturing as an industry is not only ripe for disruption, it is virtually begging to be disrupted in order to save itself.

So what does disruption look like in this space? In fact, what is software-defined manufacturing, really?  Is it artificially intelligent robots? Is it data platforms with state of the art business intelligence? Is it cloud-based platforms, remote deployment and troubleshooting, machine-learning driven analytics? These things definitely comprise the concept, but Software-Defined Manufacturing is really just the beginning.

Software-Defined Manufacturing will happen simply because it has to – it is the immediate cure to manufacturing’s already existing pain points. The true disruption in manufacturing will involve not disrupting manufacturing per se, but actually disrupting the very idea of software-defined manufacturing itself. And it will happen by industrializing all the technologies that make up software-defined manufacturing, deploying them as a scalable platform and delivering them to customers in a service-based model that grows and modulates with the needs of the business. True disruption is extending software-defined manufacturing to a hardware/software ecosystem, with minimal to nonexistent single points of failure, where multiple components work harmoniously with the single purpose of enabling fast, high quality delivery at lower cost; where data is assembled, collected and turned into predictive analytics, and artificial intelligence is effectively used to solve repetitive human tasks.

When will this happen? At Bright Machines, the call to innovation has been answered, and the transformation in manufacturing has already begun. For us, software-defined manufacturing is just the beginning, the building blocks of delivering an ecosystem of products that will not only disrupt but redefine an entire industry. It’s an extraordinary challenge and truly a generational opportunity. And it’s Day One of our own journey to change the world.

— Nick Ciubotariu, SVP software engineering, Bright Machines

‘Flex Ability’

There aren’t many women in charge of major EMS companies today. Indeed, a quick look at the CIRCUITS ASSEMBLY Top 50 shows there are none.

Women are among the leadership teams at some top companies. Creation Technologies, for instance, has a female CFO and chief culture and people officer (read: HR). But no woman has occupied the top spot at a major EMS since Gayla Delly suddenly and unceremoniously left Benchmark in fall 2016.

Which makes it all the more exciting to see Flex naming Revathi Advaithi chief executive of the EMS company. Advaithi, 51, has impeccable credentials. She is an engineer with an MBA, and was wooed to Flex from Eaton Corp., where she headed the
largest division of the $20-billion company.


Flex has all sorts of incentive to go after a rising star like Advaithi. Its big bet on the consumer market with Nike cratered, and the company’s stock went with it. The stock price dropped about 46% in the past year, much worse than the industry average (8% loss). Flex has wound down its Nike manufacturing operations in Guadalajara, taking at least a $30 million hit.

Industrial, on the other hand, is a growth market. Based on the most recent quarter, it represents a $6.6 billion a year business for Flex, and is growing in double-digits. Moreover, as an end-market it remains stubbornly captive, with estimates of just 20% EMS penetration. Advaithi could help unlock that potential. Her standing as a director with defense giant BAE, another mostly untapped market by Flex, couldn’t hurt either.

It’s refreshing and overdue to see a woman on top in our industry. According to Fortune, only about 5% of the Fortune 500 companies have female chief executives. Notably, those firms include GM, Lockheed Martin, IBM, Oracle and General Dynamics — all major customers of the electronics industry. If we are serious about opening the door to the next generation of engineers, we need role models with all kinds of backgrounds. When a woman looks for her future in the crystal ball, it’s only right to see a woman looking back.

Foxconn Whiplash

You are to be forgiven if you have whiplash from the multiple changes in direction of Foxconn last week. The world’s largest ODM and EMS company announced it was essentially pulling out of Wisconsin, scaling down its much publicized multi-million square foot campus in favor of a couple of small R&D centers. Then, after pressure from the US government, it quickly reversed course once again, saying the plans were still on.

Wisconsin taxpayers might feel a little like Charlie Brown getting the football yanked out from under him again. Not only does it look ever-less likely Foxconn will create anything close to the 13,000 local jobs it promised, but towns like Mt. Pleasant are already on the hook for hundreds of millions of dollars, the net effect of bonds it issued to pay for the initial construction. And if Foxconn doesn’t deliver, the state must pick up whatever the municipalities cannot pay back.

In any case, when it comes to Foxconn, actions speak way louder than words. Let’s wait to see whether anything actually gets built before commencing with the back-patting.

STI: Small Size, but Big Service

We are thrilled to announce STI Electronics as our EMS Company of the Year for 2018.

CIRCUITS ASSEMBLY selects one company each year for this distinction. In making the determination, we look at profitability and sustained excellence among their peers over a period of years. We also look at the company culture and uniqueness of their business or service model, and assess whether we think it is sustainable over time and across generations of management.

In that regard, the evidence strongly supports STI. It is downright stunning to see the breadth of services the Madison, AL-based company offers, especially given its size (under $25 million). On a daily basis, STI performs traditional SMT, box build, failure analysis (it has a complete lab), cleanroom die bonding, and operator training. And at the end of this month, it will introduce an OEM product it is developing with a third party.

Read CIRCUITS ASSEMBLY’s profile on STI Electronics at circuitsassembly.com and in the February issue of PCD&F/ CIRCUITS ASSEMBLY.

January Issue Highlights

The January issue of of PRINTED CIRCUIT DESIGN & FAB and CIRCUITS ASSEMBLY is now available. Our cover story, from Skyworks, looks at
as-shipped vs. mounted height for BGA and LGA packages.

When a component is surface-mounted to the motherboard, the x- and y- dimensions do not change. Not so for the height. LGA height increases; BGA height decreases. A new study shows how an increase in as-shipped thickness can enable greater electrical performance and reduce quality risk.

This month’s other highlights include:

  • Understanding schematics
  • Using Maxwell’s equations to solve transmission line problems
  • Determining Df and Dk tradeoffs among various laminates
  • Bare board x-ray inspection
  • Busting the myth of PCB design at the college level
  • A profile of EMS firm Green Circuits
  • Ten steps for achieving good DfX
  • The latest happenings among the IPC Designers Council chapters
  • And Peter Bigelow asks if smaller manufacturers outmaneuvering the big ones.

Check it all out here.

Jabil on Tariffs

Jabil chief executive Mark Mondello said what we’ve all been thinking about the US-China trade tariffs.

On a conference call with analysts, Mondello called the issue “a big deal.” He underscored how Jabil could benefit if customers start to move manufacturing from China, as the EMS is well-positioned with factories all over Southeastern Asia, including Malaysia, Vietnam, Singapore and Taiwan — not to mention Mexico and Eastern Europe. And he broke down the potential impacts:

  1. “If the tariff and trade issues get resolved, that’s great.”
  2. “If the trade and tariff issues create some choppy seas and a storm here and there, that’s really good for (Jabil), because … there’s nobody that has our scale that can move product around with the agility and the flexibility that we can and, in fact, we do that all the time.”
  3. “If the trade tariff issues become some nasty hurricane, it’s going to be bad for all.”

Indeed.