Who’s Leaving Whom?

According to the New York Times today, the Chinese government is compiling a list of companies and individuals to penalize in response to the US block on Huawei.

The piece ends with these thoughts:

Forcing out American companies from China’s electronics supply chain could have a major impact on Chinese manufacturers. It would also likely hasten strategies by American technology firms to diversify their supply chains away from China.

Yet if Beijing were willing to take that hit, many companies would struggle to immediately replicate production elsewhere. China’s density of component makers and assembly factories is unmatched around the world.

“It’s a really high-risk way to go about it,” said Andrew Polk, a founder of Trivium, a consulting firm in Beijing. “They are effectively forcing companies to choose, and companies will probably choose the U.S.”

Much has been made over whether Western companies will bail on China if it were to put the screws to them on trade. But if China were to retaliate against the US by shutting down access to certain markets or supply chains, is it unrealistic to think any Chinese companies might relocate as well?

Somewhere, Craig Gates is Probably Chuckling

Cemtrex today announced a pending six-for-one (!) reverse stock split of its outstanding common stock. The move comes at the OEM/EMS tries to regain Nasdaq compliance.

Rewind a little and you’ll see over the first two quarters Cemtrex’s revenues have dropped more than 22% and losses are piling up.

Rewind a little more, to April, and Cemtrex’s shareholders were approving a proposal to the number of authorized share shares by 20 million, to a total of 50 million.

Rewind a little more, to 2017, and Cemtrex was making a bid to acquire KeyTronic, despite the latter’s significantly larger size and experience in EMS. There were a total of three “offers” in all, none of which actually involved anything more than a press release.

As KeyTronic batted away the proposals, Cemtrex grew even more bold, asserting in a followup statement that its intended prey could do with better management. “A combination of the two companies will unlock significant shareholder value for both companies, by enabling cost savings, higher earnings per share and a more attractive price to earnings ratio than either company is currently maintaining.”

Eventually KeyTronic grew a bit aggravated with the unwanted attention, calling the suitor “unqualified” as a buyer. “Our initial research shows [Cemtrex] reports approximately $45 million of EMS revenue. In our opinion, this does not qualify [Cemtrex] to make any statements as to how it might operate an EMS business like KeyTronic which is over 10 times [its] current size in terms of revenue.”

The overtures ceased shortly thereafter. By the following January, Cemtrex was consolidating its EMS plants and selling off operations.

Still, even with that episode well in the rearview mirror, I have to think that wherever he is today, KeyTronic CEO Craig Gates must be smiling.

‘Huawei’ E.O. Portends Total Supply Chain Chaos

The headlines have been filled with reports on the pending US ban on domestic companies from conducting business with Huawei.

In submitting the order, President Trump cited cyber-warfare, espionage and threats to US national security as rationale for the ban.

Less noted: The impact on bare board and assemblies procured from China. After all, the executive order “prohibits transactions that involve information and communications technology or services designed, developed, manufactured, or supplied, by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary” as determined by the Commerce Secretary.

So while Huawei is a $100 billion company, larger than IBM, Sony, Hitachi, Panasonic and all but a few other tech firms, the declaration could have tentacles that reach far beyond the Chinese OEM. Even if all the defense industry primes, for instance, buy all their boards onshore (doubtful), many others do not, including the financial markets, and key industries such as nuclear, power, and so on.

Almost every North America-based board today shop brokers boards from Asia, mostly China. Their suppliers are, in turn, generally located in China as well. That includes the vast majority of the laminate industry. Sure enough, we are hearing reports of major laminate makers suspending shipments of key materials, including ones for the US defense primes, because of the executive order.

What’s the alternative? North American board fabricators lack the capability and capacity to take on high-volume production. The EMS industry has the capability, but not the capacity. And that doesn’t begin to address the region-to-region cost differences.

Then there’s Washington. The legislators are simply ignorant when it comes to understanding supply chain issues. The executive order targets companies that could put the US economy at risk. Any logical read of that would see that the telecom industry is only one part of the equation. Wall Street is equally at risk.

Just because Cisco or Juniper or HP or IBM or Dell or Arista don’t have Chinese names doesn’t mean they aren’t as reliant on the China supply chain as Huawei. Same goes for their EMS networks. Intel has six chip fabrication plants and three assembly/test sites. Two are in China. Qualcomm is a minority owner of SMIC, which has nine plants open or planned in China. It also has a JV assembly/test house with Amkor in Shanghai.

Take a look at HP’s supply chain. The OEM is sourcing product from China facilities of Foxconn, Jabil, Flex, Celestica, Inventec, New Kinpo, Wistron, Pegatron, Qisda, and TPV, among others. The workers on the HP lines number in the tens of thousands. That can’t be replaced easily, if at all.

Not just the large shops stand to be squeezed. Besides relying on China for raw materials, many smaller North American fabricators also outsource certain services and otherwise procure other relatively finished goods from there, such as engineering or laser drilling or mass lam boards.

Insofar as consumers are concerned, it’s probably a good thing this isn’t happening during the Christmas ramp. But that date is drawing near. Even without the tariffs, given the looming capacity constraints, prices are bound to spike.

And even if the questions surrounding Huawei are sorted out — a big “if” — the fun won’t stop there. At this writing, the US government is considering action against other Chinese OEMs, including ZTE and Hikvision.

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

SMT Workshop Pre-Test

Folks,

Six months ago …

Patty had just finished an all day workshop on “Common Defects in SMT Assembly and How to Minimize Them.” The workshop seemed to go really well, and many of the 35 or so attendees thanked her for a great learning experience.

After most of the people filed out of the room, two approached her as she was disconnecting and packing her laptop.

“Dr. Coleman, that was a great workshop. But, I do have one question. You used a term all day that I wasn’t familiar with, ‘SAC’,” a 35-year-old process engineer commented to her.

While saying this, he presented his business card that referred to him as a “Senior Process Engineer.”

Patty was trying to recover from this shock, when the second similar looking fellow asked, “And what are ‘OSP’ and ‘eutectic’.”

After explaining these three terms and exchanging a few pleasantries, the two senior process engineers walked out of the room and bade Patty farewell. As the room became empty, Patty settled into a chair.

“How can this be?” she thought. She was stunned that people with enough experience to be called “senior process engineers” would not know these terms.

Today 6 AM …

Patty was jogging back to her house in Woodstock, VT, when she spied a beautiful red fox. Neighbors had reported seeing the fox numerous times. People believed that the fox was nesting. In addition, a black bear had been sighted by everyone in her family over the past few weeks. Add all of this to the family of deer and the rafter of turkeys in her neighborhood and it was quite an experience for Patty, Rob, and their sons.

The fox, however, created a new problem. Patty and Rob had bought their twin sons a Yorkshire puppy, Ellie, about a year ago. At 6 pounds she could be dinner for the fox, so, unfortunately, they could no longer let Ellie out by herself.

Figure 1. Ellie the Yorkie after a big day. Sadly she has to be watched when she goes outside of Patty’s house, due to the local predators.

By 7:30AM Patty was in her office. She was giving a workshop in two weeks at a local chapter meeting in Boston and decided to create a pre-test to give to the attendees so that she could assess their current knowledge. Patty planned on having the students grade each other’s exams and on working the exam in as a leaning experience at the start of the workshop. By assessing the results of the pre-test, she wanted to make sure she didn’t use acronyms they don’t understand, and to also explain topics that the students might not be familiar with. As she was working on the questions for the pre-test, Pete walked in.

“Hey, Professor C, how goes it?” Pete asked.

“I’m preparing a pre-test for the workshop I’m giving in a few weeks,” Patty replied nonchalantly.

“I remember you talking about doing it a month or so ago. Seems like a good idea to me,” Pete responded.

“I’m ,glad you approve,” Patty said wryly. “I just finished it. Do you want to take a look at it?” she continued.

Patty printed out a few copies and handed one to Pete. They both looked at it for a few minutes, in silence.

Finally, Pete commented sheepishly, “Aaa, Patty your joking, right?”

“Why do you say that?” Patty asked, a little annoyed.

“It’s just too easy. Everyone will get 100% and you won’t get any information,” Pete opined.

Patty then reminded Pete of her experience 6 months ago.

“OK. Maybe you have a point. But, I still think it’s too easy,” Pete concluded.

“I’ll tell you what. How about a bet? If the average pre-test grade is above 70%, Rob and I will take you and your new crush, Mary, out to Simon Pearce. If it is 70% or less, you treat us,” Patty teased.

“It’s a bet,” replied Pete quickly.

The Pretest:

  1. What does the letter “S” in SAC stand for?
  2. How much silver is in SAC305?
  3. What is the approximate melting point for SAC305 solder (+/- 4oC)?
  4. Solder paste is approximately how much (by weight) metal (+/- 5%)?
  5. What is not a current common defect in SMT?
    1. Head-in-pillow
    1. Pad cratering
    1. BGA Ball Matting
    1. Graping
  6. Which is a closest to typical stencil thickness?
    1. 5 microns
    1. 20 mils
    1. 5 mils
    1. 20 microns
  7. Which is closest to a typical lead spacing for a plastic quad flat pack (PQFP)?
    1. 0.1mm
    1. 0.1mil
    1. 0.4mm
    1. 0.4mils
  8. Which has finer solder particles, a Type 3 or 4 solder paste?
  9. What does OSP stand for?
  10. Place an arrow at the eutectic point of the tin-lead phase diagram below.

Epilogue (two days after the workshop)

Patty arrived at Ivy U and couldn’t wait to see Pete. She went to his office but he wasn’t there. Finally, she found him in the machine shop helping four students with a project that required some additive manufacturing.

“Hey, Pete! When are you and Mary going to treat us to our dinner?” Patty teased.

“Don’t tell me the average was less than 70%,” Pete grumbled.

“Forty-three point zero eight to be exact,” Patty punctuated.

Figure 2. The Pretest Scores

“Yikes!” Pete exclaimed, rubbing the back of his neck. “I guess you were right.”

“It really helped me to take things slowly and explain all the terms. I think I helped the students much more than usual,” Patty explained.

“Rob and I both agreed, we are ordering the most expensive meal that Simon Pearce has,” Patty joked.

At that Pete let out a deep groan.

Dr. Ron note: All of the events in this post are true. How would you do on the pretest?


Become a Part of Patty and The Professor!

I have enjoyed writing the Patty and the Professor blog for about 10 years now. I’ve written about numerous real-life electronics assembly examples that I have encountered in my career, all disguised, of course.

To continue keeping things real, and to keep my readers involved, I am inviting you to submit an authentic story from your career. That’s right! You’re being invited to submit an idea, story, or experience that can be built into the Patty & The Professor series.

Your experience will help many other electronics assembly practitioners resolve their issues and avoid problems.

So, get your thoughts together, then shoot me an email at rlasky@indium.com. Share the details of your experience or observation. I may ask a few questions to help me comprehend the full story. Then, I will write up the segment and let you read it before posting. You will be credited, of course.

Bonus: You will also receive either a Dartmouth hat or coffee mug (similar to, not exactly like, those pictured below)!

Contact me if you are interested in submitting a story. I look forward to hearing from you!

 Cheers,

 Dr. Ron

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

No Open Vias in or Near Pads

The term “via” probably comes from the Latin word meaning “road.” Therefore, open via would essentially mean “open road.” Open roads here in Oregon sometimes run through open range ranch land. That means that cows have as much right to be on the road as do cars. If you don’t want cows on your PCBs where the BGAs go, don’t leave open vias in the BGA footprint.

Don’t do this:

Here’s what happens:

Your assembled board will likely be missing connection between some of the BGA balls and the board. That’s almost as bad as having a cow step on it.

If you are putting the via in the BGA pad, your only choice is to have the vias filled and plated over at the board fabricator. (Read this post). If you’re putting the vias between the pads, you have two options. You can put solder mask dams on the short trace between the pad and the open via. This will prevent solder paste from migrating. I’ve modified the image below to show what that would look like.

The other, and better, option is to cap the vias with solder mask. This gives a bit of extra protection in case any of the solder mask dams are too thin or chip off. Just make sure you cap these things on the solder side. If you cap them on the back, solder can still spread on the trace and partway into the via. That still puts the electrical and mechanical connection at risk.

Duane Benson
We don’t want cows on PCBs but we have built PCBs that go on cows
The IoC: Internet of Cows

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.