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

Handing Over the Reins

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Great article in this week’s Newsweek by Yale dean Dr. Jeffrey Sonnenfeld recapping the struggle a technology innovator has in ensuring his or her vision lives on after he/she leaves the scene. Key quote:

How do you maintain the DNA that the founders have imprinted into the business? … Time and again, they share a disdain for any distraction about their own mortality. Like monarchs, they often believe they can and should reign as long as they live.

One nit: While this tale of hits and misses among ground-breaking tech companies (Apple, Digital Equipment Corp., IBM, Polaroid) makes for a fascinating trip back through time, Dr. Sonnenfeld doesn’t save much discussion on how to properly prepare your own bench for someday manning the ship.

Good Times, Bad Times

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Major printed circuit board fabricators are beginning to report their quarterly earnings, and the figures give some reason for concern.

By all accounts, 2010 was a banner year for PCBs in all regions. Sales were up 34% year-over-year in Germany through October, 18% in North America through November, and at least 10% overall worldwide. TTM and M-Flex, among others, are reporting record sales. DDi beat the pack to the recovery and has continued to spike.

But while the specialists are doing great, not all is well.

While Multek, a top 5 PCB provider, grew in the low-double digits sequentially, profits are scarcer, with the company saying the unit won’t be breakeven until the end of the current quarter (and that assumes the no dip in orders). Sanmina experienced problems in one of its factories (rumored to be Kuching, Malaysia) that sucked the margin out of what should be one of its more profitable businesses.

And that’s my concern: Even during a period where demand peaked, the largest players are still not consistently profitable. Based on experience, when the market slows, that means more factory closures or continued losses, or both. Another likely response is dropping their drawers on pricing, a move that inevitably ripples through the broader market.

Twenty years (!) in the PCB market has taught me this: If you can’t make a profit in an up market, you can’t make one in a down market.

There’s only one way to resolve this conundrum. The capacity increases have to stop. Let the factories remain full for a few years. Push back on OEMs that constantly demand price reductions with little regard for rising commodity prices and currency fluctuations. Try working together as an industry on this.

Tea Time

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Consultant/gadfly Charlie Barnhart today said his model suggests higher near-term risk for certain sectors of the EMS industry.

“It won’t be a catastrophic, ‘off the cliff’ event, but certain areas are substantially more at risk than others,” he wrote in his weekly blog, singling out military and aerospace for “significant demand dropoff this year.”

Contrast Charlie’s tea leaves with the longer-view held by iSuppli and Global Industry Analysts.

The former is forecasting revenues to rise 8.5% this year, to $347 billion, building on 2010’s ridiculous jump of 33.5%.

The latter asserts the market is much smaller, projecting it to reach $231.4 billion by 2015. That’s roughly $30 billion less than what iSuppli says the market for outsourced electronics was in 2009.

Without insight into iSuppli’s and GIA’s respective methodologies, it’s impossible to know why such a large discrepancy exists. This I will say, however: If I had to bet on which model is right, I’d take Charlie’s.

Idle Speculation

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What is noted corporate raider Carl Icahn up to?
 
With just under 15% of Mentor in his portfolio, Icahn now has turned his attention to an ERP software company called Lawson, of which he has accumulated nearly 11% of its outstanding shares. Does he plan to put the two together somehow?

This Barron’s report suggests at least one market watcher believes the moves aren’t isolated. “He bought at the same time, they’re both software companies and they’re somewhat laggards,” Lon Juricic of StreetInsider.com is quoted as saying. “He’s always known for his activist positions with companies … .”

Well, that seals it, doesn’t it!
 
Everyone and their dog has an ERP company, of course, and while Oracle, SAP, Infor and Microsoft are the domain of the largest enterprises, the door remains open for smaller, niche companies with tools designed for particular markets. But I don’t see that happening here. Manufacturing is just a piece of Lawson’s business; it’s not the whole focus. And almost every company in electronics manufacturing already has some sort of ERP system in place. It’s an expensive proposition to switch. 

And yet, there are some enticing facets to consider.

Lawson, through an acquisition last year, does have cloud computing capability that the industry is trending toward. There is benefit to that capability — see Altium’s recent purchase of Morfik, for example. Also, more EDA vendors are building in purchasing and inventory availability tools to their traditional place and route capabilities. Mentor’s acquisition of Valor aided its ability to track parts from design to placement. Intertwined with a solid ERP system, Mentor could leverage its traditional CAD tools even further.

But there’s the rub, right? At this point, most decent EDA tools talk in some shape or form to the ERP systems. Why reinvent the wheel — and at great risk given this is a (pricey) solution in search of a problem?

I see these moves as singular in nature and unrelated. But it’s still fun to speculate on.

Skip This Book

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I’ve had a chance to peruse a copy of the PCB 101 Handbook recently self-published by Dan Beaulieu and Bob Tarzwell.
I sort of wish I hadn’t bothered. 
The book (not to be confused with the Printed Circuit Board Basics book that my company has published through the years) is littered with grammatical errors and typos, which make it harder to read than it should. But it took me until the second paragraph of Chapter 1 to locate the first blatant error. 
Here’s what the authors claim:

Some historians give Paul Eisler of the United Kingdom era 1943, the first patented of a method of etching the conductive pattern, or circuits, on a layer of copper foil bonded to a glass-reinforced, non-conductive Bakelite base.

Wrong on so many counts. Dr. Eisler was an Austrian citizen working in the UK. Moreover, the first patents describing “printed wire” were issued in 1903 to German Albert Hansen. Hansen’s idea, as explained here by Ken Gilleo, described a construction consisting of flat metal conductors on paraffin-coated paper; in short, the first flex circuit. A decade later, Arthur Berry filed a patent for an etched metal circuit. Even before the turn of the century, many photolithography concepts were described and used; future inventors borrowed liberally from those ideas when it came time to apply metal to a non-conductive substrate.
Throughout the first few chapters (which is all I could bear to read before reaching for massive doses of Tylenol), Messrs. Beaulieu and Tarzwell appear to borrow liberally from Printed Circuit Board Basics. Normally  I would find their IP theft offensive, but their spelling and grammar is so atrocious, it dulls the senses. It’s almost as if they ran our book through a misspell check.
I could go on, but I won’t. Save your time and money. Read Gilleo’s work (it’s free), peruse your old copies of Printed Circuit Board Basics, or grab Clyde Coombs’ Printed Circuit Handbook. All are infinitely superior resources.

Predictions, Revisited

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In mid July, I made five predictions for the second half of this year.

Here’s how I fared:

Prediction 1. All of 2009’s 10 largest EMS companies – Foxconn, Flextronics, Jabil, Celestica Sanmina, Cal-Comp, Elcoteq, Venture, Benchmark and Plexus – will be intact at year end, and with the exception of Elcoteq, will finish 2010 in the same order. Outcome: Fourth quarter sales remain to be reported, but given their outlooks, I nailed it.
Prediction 2. One of the mid-tier publicly traded EMS companies will be acquired, however. Outcome: Nope. After the Sanmina-SCI bought Breconridge (announced in late April), things became awfully quiet, especially given the amount of cash many top tier EMS players have on hand. I’m guessing concerns over end-market visibility coupled with tight external financing are keeping the major players on the sidelines.
Prediction 3. Component availability issues will not ease until mid 2011. Outcome: TBD, but parts are becoming somewhat easier — but not easy — to get.
Prediction 4. Foxconn’s many employee problems will blow over as the media tires of the story. Outcome: Got this right.
Prediction 5. “Computer-aided innovation” will become the big buzzword in software. Outcome: Wrong.
So for those scoring at home, that’s two right, two wrong, and one partial.

Mexico’s Other Victims

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Mexico’s recovery in electronics manufacturing is being tested by widespread violence among warring drug cartels.

Electrolux, for one, has opted to locate a $190 million appliance factory in Memphis, TN, after being turned off by the shootings and other skirmishes taking place daily in many Mexican states, the Wall Street Journal reports today.

Electrolux, which has a large campus in Juarez, must have been influenced by the rapidly climbing death tolls: some 11,000 citizens have been murdered as part of the drug wars this year alone. Many more have been beaten up or kidnapped.

On the surface, the insanity hasn’t appeared to suppress investment from the EMS side: Victron and Federal Electronics, among others, have opened plants south of the border this year. But overall US investment, while up over 2008 levels, is down versus 2006-08.

As OEMs take a conservative route and opt for safer environs, will their supply chains follow? If so, the recent gains Mexico has made against China might be lost — this time for good.

Conflating a Conflict

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Following up on Monday’s item, this kind of report is what scares me.

Companies failing to responsibly source minerals essential for manufacture of electronic goods

According to the slightly more responsible Globe and Mail, which has actually seen the unpublished report, its authors rapped the knuckles of several OEMs not for sourcing from the Congo but for failing to have (in its opinion) proper audit and traceability measures in place.

Putting aside for the moment that tin has no DNA, the eagerness with which media that is not well informed on the nuances might well jump to the conclusion that everyone and their dog is buying metal from the war-ravaged DRC. Comments from US Congressmen asserting that “everyone who has a cellphone has a piece of the action,” as just as ill-informed and damaging.

Given that the Congo supplies a minute amount of the world’s tin and other minerals used in electronics, the concerns, though well-intentioned, are overblown.

The Solder Products Value Council, ITRI and other trade groups should consider bringing this to the attention of legislators around the world.