Orbotech’s announcement Monday — somehow missed by all the media save one — that it would exit the assembly AOI business comes as little surprise to those who have been paying attention to electronics manufacturing. Though one of the largest players in the electronics AOI market, most of Orbotech’s revenues come from sales of bare board and flat-panel display inspection gear. In fact, its assembly AOI line brought in just 4% — $3.9 million — of the Israel-based company’s sales in the September quarter.
Moreover, it’s hard to recall the last time I saw one of its Symbion SPI or post-reflow lines in an actual factory. While I have seen them in OEM plants, I have not seen them in contract assembly operations. Still, the Symbion SPI is considered to be an excellent machine, very competitive with the leading technology on the market. As such, a buyer is expected to come forward for the lines. We would expect that would happen in fairly short order.
Does this signal the beginning of a shakeout in the highly convoluted AOI market? True, it’s one with literally dozens of competitors, many of which aren’t dedicated to electronics. But I don’t see many others feeling so compelled to give up the space. Teradyne is cutting 5% of its workforce, but it shed its non-core connector and backplane businesses a couple years ago; it’s highly unlikely it would exit the assembly test market too. In 2005, Agilent similarly made the decision to focus on test and measurement, selling off its chip business. YesTech and Dage are now under the Nordson umbrella, a company known for growing businesses. Mirtec is expanding. So is Koh Young. CyberOptics has 2,500 SPI installments worldwide and has recently reported double-digit orders for its AOI machines. They aren’t going to exit.
Unlike 2002-03, what we will see this time around is companies cutting hard and fast on the human side. That’s a shame, but it’s the unfortunate legacy of the last downturn.