Monthly Archives: December 2020

And Then There Were 2

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Isola and Rogers.

That’s what’s left of the US-owned laminate companies today after Taiwan’s Elite Material Co. announced plans to acquire Arlon EMD.

Yes, consolidation has been in the making for years. And with Isola owned by private equity group (Cerberus Capital Management), it’s anyone’s guess as to how stable that number is.

In reality, it was only a matter of time. The US share of global PCB revenues fell from north of 40% in 1984, to about 30% in 1998, to less than 8% in the recession of 2008. It now stands at roughly 4%. Naturally, the supply base is going to migrate to where the revenue is.

Time was, the US was home to several leading names in laminates: Polyclad (now owned by Isola), Westinghouse (acquired by Allied-Signal in 1992), GE (licensed to Cookson, now sold by Isola), Norplex Oak (sold by Allied Signal to Isola parent Ruetgers in 1999, then everntually shuttered), Taconic (bought by AGC), Nelco (ditto), among others. For its part, Arlon was acquired by Rogers in 2014, which then sold part of it to a private equity group the next year. That unit became Arlon EMD, which Elite is buying.

This is not to say there aren’t domestic sources of materials, of course. There are plenty: Ventec and Shengyi are among those that have expanded in the US in the past few years. A startup called Thintronics, with experienced laminate folks like Tarun Amla at the helm, has potential, but is likely years away from impact. There remain domestic flex circuit suppliers too, including DuPont and Sheldahl.

But the vast majority of multilayer and high-performance specialty material suppliers are held by offshore companies. As the US seeks to build back its manufacturing base, it needs to remember how critical the supplier infrastructure is to a successful industry.

Trouble in India

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The riots at a Wistron plant in Narasapura could have lingering effects long after the damage is cleaned up.

India has been touted as the “next China,” a label local trade groups and business executives have relentlessly promoted. Besides being the only countries with a population exceeding 1 billion, however, the similarities are perhaps too many for today’s climate.

Even so, despite Prime Minister Modi’s best efforts to convert the nation into an autocracy driven by a Hindu ruling class, India is fighting a current that China avoided during its rise to manufacturing power, and that flow is getting stronger.

Yes, Nokia and Apple suppliers like Foxconn continue to make plans to expand in the country. But the broader supply base still isn’t there, and, perhaps burnt out from their China experience, expats aren’t relocating by the thousands to help the locals set up and manage companies. The semiconductor industry has changed over the past 20 years. New foundry costs are still rising, and the number of players has shrunk. Putting multi-billion dollar plants in India that replicate older technologies while still finding the resources to compete on the leading-edge might be a longshot, at best.

Nor has India provided the incentives China did to relocate. Instead, it has taken a tack similar to Brazil’s: Steep import taxes that while aimed at China, might actually discourage others from migrating there. Already, India and the US have taken economic swipes at each other, with the US dumping India from its preferred buyer program that allowed zero tariffs exports to the US, and India hiking tariffs on product coming from the US. The EU Parliament is taking an equally dim view of the former British colony’s trade and humanitarian approaches.

Indeed, Modi’s approach to alienating and, some argue, encouraging violence toward India’s religious and ethnic minorities puts Western OEMs in a difficult spot. Already under the gun for their massive investments in China, which have helped prop up that country’s autocratic leadership and create an international powerhouse that is now flexing its economic and military muscle all over Southeast Asia, business leaders might be loathe to plow more assets into yet another unpredictable regime. With governments, including the United States, slapping restrictions on Chinese companies for their alleged treatment of Muslim minorities, it won’t be easy to win any PR battles over why India is somehow an exception.

And the pollution coming out of India might be on a par with China’s — or even worse — hardly an attraction for today’s green marketing campaigns.

It remains to be seen, but I think episodes like Wistron’s will delay the push to the “next China.”

A Not-So Public Affair

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Jiangsu Xiehe Electronic started trading today on the Shanghai Stock Exchange. The company makes flex circuits and performs SMT. That should be a big deal, since PCB manufacturers going public has become a rarity.

This is not your father’s printed circuit industry. IPOs are a novelty in our industry these days.

Moreover, almost all the IPOs of fabricators or EMS companies in the past 10 years have been in Asia.

This year, Covid be damned, Sihui Fushi Electronic Technology went public in July on the Shenzhen Exchange, and TLB is scheduled to be listed this month in Korea.

Insofar as I know, that’s it.

Last year was no better. Cal-Comp raised some capital by listing a subsidiary in the Philippines. Ventec went public in Taiwan.

Stretching back over the past decade, there are a few nuggets. But just a few.

Shennan Circuits (2017 IPO) and Zowee Technologies (2010) are public on the Shenzhen Exchange, and OK Industries (2017) is traded in Japan. And Dixon Technologies debuted in 2017 on the India Exchange.

Over in the UK, fabricator Trackwise Designs had an IPO in the UK a couple years ago. And NCAB went public in Sweden.

As private equity firms continue to consolidate fabricators and (mostly) EMS companies, as New Water Capital did with Veris and Saline Lectronics this week, the question becomes, what is their end-game? Will they amass enough revenue through M&A to make a public offering viable? Or will they try to button it up and sell to another PE firm — or perhaps an even larger manufacturer?

And is the era of the publicly traded circuit board manufacturer winding down?