Author Archives: Mike

About Mike

Mike Buetow is president of the Printed Circuit Engineering Association (pcea.net). He previously was editor-in-chief of Circuits Assembly magazine, the leading publication for electronics manufacturing, and PCD&F, the leading publication for printed circuit design and fabrication. He spent 21 years as vice president and editorial director of UP Media Group, for which he oversaw all editorial and production aspects. He has more than 30 years' experience in the electronics industry, including six years at IPC, an electronics trade association, at which he was a technical projects manager and communications director. He has also held editorial positions at SMT Magazine, community newspapers and in book publishing. He is a graduate of the University of Illinois. Follow Mike on Twitter: @mikebuetow

Apple: OEM Again?

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We tend to think of Apple the company as a design innovator and a great marketer. What we don’t think of Apple as is a manufacturer.

We should.

Per its 10-K, Apple ran up a tab of some $4.6 billion in capital expenditures in 2011, of which no less than $4 billion was for manufacturing and tooling. Keep in mind that this is a company that has no manufacturing facilities.

Apple went from a traditional OEM to a design/marketing company to one that owns everything from chip design to effectively owning the plants that build its products. It’s an OEM again.

So sure, Apple and Foxconn are tied at the hip. But the 10-K gives us a better glimpse as to why: Apple owns the lines. It’s one thing to move a program. It’s another to replace a factory, especially one with a hundred thousand workers.

Apple is the most valuable company in the world. It dominates its supply chain like no other. Sooner or later, the rest of the industry will copy its methods. The OEM as manufacturer will be back in vogue.

Litigation: The Next Killer Ap?

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Apple v. Samsung.

Cisco v. Tivo.

The EU v. Intel.

The lawsuits are piling up as tech heavies line up against each other and, in some cases, nations or even larger economic blocs.

If you are a market share leader, fending off (or filing) lawsuits is routine.

Apple claimed a victory in the US, where courts have banned Samsung’s Nexus smartphone and Galaxy Tab 10.1 after Apple complained of patent infringement. But Apple’s record on (in?) its home court hasn’t extended abroad. British courts have ruled HTC’s mobile devices did not infringe four of Apple’s touchscreen patents, China courts found for a nearly bankrupt company that claimed ownership of the iPad trademark, and Italian regulators have opened hearings over the company’s failure to meet domestic warranty laws.

As companies sue and countersue over technology that becomes ever more complicated, not only are the courts tied up by the endless legal maneuvering, but company engineers get dragged into the fray as well.

So too, it should be mentioned, do governments. But while the US debates measures that would ramp its anti-counterfeiting laws, Europe is taking the opposite approach. The European Parliament yesterday overwhelmingly rejected adoption of the Anti-Counterfeiting Trade Agreement, siding with critics who claimed the bill put too much power in the hands of bureaucrats. “With companies trying to gain any advantage within a fiercely competitive landscape, an increasingly litigious environment seems to be becoming a reality most companies need to get comfortable with going forward,” opined Sherri Scribner, a senior analyst with Deutsche Bank.

Still, as tech companies rely as much on the courts as the computer to wage their market share wars, one wonders: Will the next generation of engineers be pressed into battle to design products … or defend them?

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Behind the Sigrity Deal

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Cadence’s acquisition of Sigrity, announced yesterday, is a big deal for reasons beyond the technology being acquired.

Sure, it’s great for Cadence to gets its hands on Sigrity’s power and signal integrity tools.

But what this move also underscores is something of a recommitment by Cadence to its printed circuit board software. You’d have to go back years to find the last time Cadence completed a significant deal in the PCB space (I’m not including, of course, the failed 2008 “attempt” to purchase Mentor, which eventually cost then CEO Michael Fister his job.)

Cadence’s PCB revenue jumped in 2011, growing by our estimates roughly 23% year-over-year. That makes it by far the fastest-growing player in the PCB EDA space. How long has it been since they could say that?

Coupled with its aggressive support of the IPC-2581 data transfer format, Cadence is showing a newfound vigor toward protecting and even extending its circuit board design position. Mentor remains a much larger competitor in PCB sales, but there are signs of a shift taking place.

Avnet: Software Distributor?

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Companies stand still at their peril. So pay close attention to today’s announcement by component distributor Avnet about its acquisition of Magirus Group.

Make that component and software distributor Avent.

For Magirus not only has an attractive footprint in Europe and the Middle East, but its product line centers on software and systems for storage, cloud computing, security,  and information life-cycle management.

So in addition to adding more than half-a-billion dollars in revenue to the top line, Avnet extends its linecard into a very hot growth area.

Companies stand still at their peril.

Laminate Libraries?

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I was chatting today with Manny Marcano, the relentless force behind EMA Design Automation. He mentioned the company’s webinar tomorrow on library creation and management has several hundred designers registered.

“It is amazing to me that library creation and management is still a big challenge for CAD guys,” he noted. Given the advancements in software, he should be right, but the new parts keep coming even faster.

It did get me thinking, however: when will we see CAD tools begin to incorporate laminate data in the way they currently have the parts libraries? There are so many flavors of laminate these days, it’s nearly impossible to keep up. Yet the material choice plays a huge role in the manufacturability and performance of the finished product.

Thoughts?

Supply Chain Shakeup is Here at Last

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We’ve often wondered whether the roughly 25 years of serious electronics outsourcing has been deleterious for OEMs. Certainly OEMs that have come to rely heavily on contract manufacturers now lack much of the know-how that comes with in-house product build. That’s a subtle change, and one that’s hard to measure directly.

But I’m getting at something more concrete. Indeed, is it possible the broad-based philosophy to “outsource everything” has not only led to a loss of manufacturing development but also actually cost more than had OEMs maintained their internal production capabilities?

Some OEMs are finding out. The ODM model, not so long ago the envy of the contract manufacturing world because of its higher margins, is being torn apart. Customers are pushing for additional services and in the process driving up internal ODM costs.

The flooding in Thailand, the earthquake and subsequent tsunami in Japan, the unrest in the Tunisia – all these unpredictable events are forcing OEMs to look ever more closely at their ever-more-fragile supply chains. The decimation of the disk drive market in Thailand last fall really woke everyone up.

Now, industry leading mid-market OEMs have already begun restructuring their supply chains, disengaging and reworking their manufacturing agreements with ODMs, and reconsidering regionalization builds (aka reshoring). This is a multi-step process that will take several years, says Charlie Barnhart, but it also is “a very definitive trend.”

Barnhart made his comments the Outsourcing Navigator Council meeting May 30 at Teradyne in suburban Boston. (I was fortunate to be invited to moderate a panel on EMS after-market service trends; more on that later.) Barnhart is a bit of an industry gadfly, but he’s provocative and willing to buck the conventional wisdom when his data (and his gut) tell him so. If he’s right, expect upheaval, and expect it soon.

We can’t say we haven’t been expecting this.

After the Product Build

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Some very interesting developments in after-market services these days.

One major player, Celestica, has been expanding its AMS for the past several years as it seeks higher margins. Higher-value services now represent roughly 5% of the company’s revenue, according to Deutsche Bank. (AMS in this case consists of everything from logistics to in and out of warranty repair.)

Skip Boothby, Celestica’s director of Global Services (which includes AMS), says they see two primary trends:

1.  Postponement regional configure to order: Celestica sees order fill rates falling because the decision (forecast) is made too early in the product life cycle. The response is that the product is built to the lowest common denominator and shipped to a lower cost region where it is then built to order.

2. Direct order fulfillment: Here, Celestica sees product being built in a low cost region and shipped direct to the customer within a couple days. An example is Apple building PCs at Foxconn in China. The opportunity for the EMS is to add the transportation element which, if it can master, adds a new profit center.

Boothby says Celestica is trying to execute a “control tower” strategy whereby they oversee everything from rework/repair to logistics/reverse logistics to warranty and field service. He said their transportation management service is “very profitable” (but didn’t put a number on it).

They currently sell these services a la carte. They have considered developing a licensing arrangement or other pricing models. They want to make it affordable for startups and companies where their client relationship is in the “low millions.” This is just starting to be rolled out. The average AMS account is $7 million, all of which is value-added (labor, not materials). Most customers are not existing PCBA manufacturing customers. Most AMS work is one-off.

Boothby’s comments came during the Outsourcing Navigator Council meeting, produced by Charlie Barnhart Associates and hosted at Teradyne. If you’ve never attended one of these meetings (they host one or two a year), they really are very valuable, and draw a good cross-section of supply chain executives. I’ll have more on this shortly.

 

Missing CAD

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Am I the only one concerned that on the recent analysts call with Mentor Graphics, not once were the company’s printed circuit board design tools mentioned?

The conversation, both from the company and the analysts, revolved solely around the company’s semiconductor design and emulation product lines.

If analysts are focused only on the semi side, then that’s how they will value the company. And the company will orient its internal efforts to align with the analysts.

This bears watching.

A ‘Hall’ of a Man

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We are thrilled to announce the launch (opening?) of the PCD&F Hall of Fame for PCB Design.

Actually, that’s a misstatement: It’s not called the PCD&F Hall of Fame. It’s the Dieter Bergman Hall of Fame. We are naming it for the longtime technical director of the IPC, and perhaps the leading advocate over the 40 years for the printed circuit board designer. Dieter has led the efforts for a number of design standards, including those for bare board layout, land patterns, data transfer and other critical aspects. More important, he was a vital cog in getting designers the recognition they deserve within their companies, helping to launch and promote the Designer Certification program, and teaching hundreds of workshops around the world.

I recall — it was around 1995 — working the IPC booth at the PCB Design West trade show. I came to man the booth one morning, and noticed some of the standards we left in it the night before were missing. I groused about the sticky fingers that apparently were attending the show. Dieter shook his head. “These designers,” he said, “they are just so thirsty for knowledge.” It didn’t matter if they walked off with some materials without paying; they did so because they wanted to be better at their jobs, and that made it OK.

Dieter’s unwavering loyalty and respect for the profession really opened my eyes. He was right then, and he’s still right now.

CAD tools make design easier and faster, but good design is not button-pushing. Rather, it’s understanding the tradeoffs of materials properties and electrical continuity and speed and manufacturability, and getting the right mix in the most expeditious timeframe possible. A former designer himself, Dieter understood this and has always been willing to speak up to help. It’s an honor to name the Hall after him.

Malaysia v. China

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Don’t laugh: When it comes to manufacturing competitiveness, the divide between the two nations is not so wide.

Flextronics, Celestica, Plexus, Beyonics and other major EMS companies are heavily invested in Malaysia. Plexus’ largest factories are there, and the company has expanded of late. Flextronics has 11 factories alone in the country. Four of Beyonics’ six plants are there.

As Flextronics’ VP of supply chain Mark Shandley explains in this article today, customers like Malaysia for its lower and less complicated tax structure, the superior IP protection, and competitive labor rates (although Malaysia, like China, is experiencing large hikes). Sharp differences in attrition are noted as well.