Category Archives: Hot Wires

Mike Buetow’s thoughts on the industry

1 Billion Reasons for Disbelief

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Where do they come up with these numbers?

DigiTimes is now reporting that Foxconn will open a pair of R&D centers in Japan at a total cost of $1 billion. Unless Foxconn is planning to break into wafer fabrication — and it’s not — $1 billion is an otherworldly sum. It’s certainly far greater than would be needed for even the most statest state-of-the-art facility. (Not to mention all those Japanese OEMs that are looking to sell their own internal operations on the cheap.)

This comes on the heels of the proclamation that Foxconn plans to ultimately invest $10 billion in a large-volume production center in Indonesia. Again, given that there are only a handful of EMS/ODM companies that even do $10 billion a year in sales, and that the market for SMT manufacturing equipment is less than $2 billion worldwide, these estimates suggest land costs in Serang compare with those of downtown Tokyo. (They don’t, and even an operation the size of Foxconn’s reported vision — a 1,000 hectare [3.86 sq. mile] industrial city — would cost only a relatively affordable $1.1 billion for the raw land.)

Sorry, but either there’s some gamesmanship going on, or someone needs a new currency converter.

 

4 Simple Ergonomic Steps to a More Productive Workplace

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Workplace ergonomics is getting a lot of attention nationwide in response to a sharp increase in incidents of repetitive strain injuries resulting in musculoskeletal disorders, such as carpal tunnel syndrome. Occupational diseases often mean repeated surgery, intractable pain, inability to work, time off for the affected employee and, ultimately, higher costs for the employer. Listed below are four steps a company can take to address this growing problem:

Step 1:Review tasks for risk factors: The first step to correcting problems is to understand the key workplace ergonomic risk factors and review work tasks in your operation to see which ones apply. This can make a tremendous difference, since occupational safety professionals estimate that reducing physical stresses could eliminate as much as half the serious injuries that happen each year.

Step 2: Control risk factors with engineering and administrative controls and personal equipment where it is effective: engineering controls to improve ergonomic risks may include changing the way parts and materials are transported or changing the process to reduce how workers are exposed to risk factors.

Step 3: Understand how to make the work space work ergonomically. With any task, selecting the proper tool is crucial. The key is to understand the work process and employee’s safety needs involved. After identifying the likely risk factors in an operation, develop a safer work environment by carefully selecting the tools and work stations workers will use.

Step 4K Use work station design principles to improve ergonomics. The following strategies typically yield safe work environments: 1) make the work station adjustable 2) locate materials to reduce twisting 3) avoid static loads and fixed work postures 4) set the work surface to the particular task 5) provide adjustable chairs 6) allow workers to alternate between standing and sitting 7) support the limbs 8) use gravity 9) design for proper movements 10) consider computer monitors 11) provide simple dials and displays 12) consider overall environmental conditions.

Predictions for 2013

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It’s been awhile since I used this space to make any predictions about the coming months, but the end of the year is always the logical (if cliched) time to do so.

So here goes:

  • The migration of manufacturing to North America will accelerate, and the mainstream media will begin to report that OEMs are also reestablishing internal production lines.
  • Flextronics will buy at least some of RIM.
  • Robots as substitutes for human labor will be heavily hyped but lightly used.
  • Ousted Altium founder Nick Martin will hook on with a budding cloud-based software company and build a PCB CAD tool.
  • At least two new PCB CAD vendors will emerge.
  • Electronics manufacturing companies will end 2013 with less cash in the bank but brighter prospects for the future.

 

 

 

 

Reasons for Enthusiasm Real

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Even the most pessimistic industry-watchers should be curious at least over the shifting attitudes toward bringing production back to the US.

The New York Times today published an extensive piece looking at the top-down change — from President Obama on down — in the nation’s outlook toward manufacturing. Researchers at MIT and elsewhere are promoting the benefits of keeping makers and thinkers together. “The manufacturing process itself is going through an innovation revolution,” said Stephen Hoover, chief executive of Xerox PARC, noting the emphasis on smaller numbers of highly skilled techs who run sophisticated and heavily automated lines.

Earlier this week, Mike McNamara told listeners at an investment conference that higher (and unabating) labor costs in Southeast Asia is making the decision process over where to put its plants “more interesting.” The Flextronics chief executive said he could see production coming back to the US. “[O]ver time, as [labor]  costs continue to go up, you’ll probably see more things get pushed back in the USA,” McNamara said.

Even Foxconn is showing some appeal (for a change) for its push toward automating its factories. Maybe Jim Raby’s vision for true lights-out manufacturing will finally be realized?

A decade ago, at Wall Street’s urging, companies followed the herd to China. Not enough thought was given to the ramifications of chasing lower labor costs, and my guess is that we will be feeling the pain of these short-sighted decisions for some time to come.

But given the prospects for higher levels of automation and a more balanced approach to regionalization, it’s been years since the industry was so exciting.

Looking for Good Engineers?

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Hi all,

I don’t typically do this, but I know two great engineers who very recently became available.

One’s (Dallas area) a test hardware engineer with 15 years’ experience at two major semiconductor companies; the other (Tampa area) has extensive operations and management experience with OEMs and EMS companies. I would strongly recommend either person for a variety of roles. Please let me know if you’d like more information.

The Unsung IBM

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As CEO Tim Cook shakes up the Apple management team and struggles to keep Apple at the top of the hyper-competitive electronics heap, I am reminded of the last time Apple saw such a fundamental challenge to its mojo.

It was the John Sculley era, when the former Pepsi exec was tapped to add some juice to the lagging MacIntosh maker. Sales rose tenfold during his five-year reign, but the tension rose between the Apple board, Sculley  and ex CEO Steve Jobs, and both ultimately were given their walking papers.

That was some 20 years ago, and while the PC wars on the Left Coast were taking their toll on Apple, a similar story was emerging in upstate New York. There, IBM, long the king of the DOS-based computer equipment world, was being overrun by competitors like HP, Compaq, Dell and Digital Equipment and had seen its stock slide more than $100 to the low $40s. Some were going so far as to predict the end was near.

About that time, the editor of the magazine I worked for visited IBM and came back with this warning: “IBM remains a manufacturer of the top rank,” a firm response to those who believed that Big Blue was about to fade to black. And sure enough, IBM overcame its own product hurdles and regained its crown.

Not that many notice. While others make news for either their stunning profits (Apple, Samsung) or stunning slides (Dell, HP), IBM has gone about its business in the professional, button-down way that its founder Thomas Watson would both recognize and approve of. While others may grab the headlines, IBM is still the bluest of the blue chips, a company that others should spend more time understanding and emulating. Through management changes and computer fads (mainframe to PC to the cloud), IBM has shown an unprecedented ability to adjust and stay relevant.

I’m not sure whether Apple under Tim Cook can duplicate the success of Steve Jobs. That’s like following Babe Ruth, the quintessential game changer, and no person should have to do that. But I do know that no matter where Apple is in 20 years, IBM will still be at the top of the computing pile.

Have a Happy Thanksgiving

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UP Media will be closed the next couple of days in honor of the Thanksgiving holiday While you will still see a few updates to the Circuits Assembly and PCD&F websites during that time, we will not publish the  PCB UPdate newsletter on Friday.

We’d like to take this moment to thank all our loyal readers and (for those to whom this applies) wish you a happy — and safe — Thanksgiving.

EMS Q3: Cloudy, with a Chance of Pitfalls

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Checking our pool of 30 or so publicly traded EMS companies that have thus far reported third-quarter earnings, we see an industry that is decidedly mixed.

Exactly half of those in our pool reported net income rose over last year. And 16 said sales are higher.

Of the Tier 1s, Foxconn and Jabil said sales were up, and Foxconn and Flextronics saw higher profits. Celestica and Sanmina-SCI saw revenues fall while Plexus’ and Benchmark’s rose. However, all but Sanmina took profit hits.

Confused yet?

The mid tier EMS groups were no easier to divine. On the larger side, Nam Tai and IMI had great quarters all around, Kimball saw operating profits and sales climb, and Venture’s sales ticked up too (it hasn’t reported profits yet), but Fabrinet (whose recovery continues) saw both figures slip. Key Tronic was up, CTS was down. Scanfil was up, Note was down. Neways was up, PartnerTech was down.

You get the idea.

The good news is, most companies, especially the larger ones, saw higher revenues in the third quarter than they did in the first. This could be another sign that the traditional seasonality has returned, which would be welcome at least because it makes things a little more predictable.

In listening to the various analyst calls and poring over the quarterly reports, it seems many companies reaped the benefit of existing programs in the September period, while those who didn’t were plagued mostly by new product starts, which are a drag on earnings. The former could hide some deeper some concerns, because all programs eventually come to an end, and if overall launches are on the decline, it could spell trouble down the road. This could be why several EMS companies, which collectively tend to be a bit gunshy bunch anyway, warned that the December quarter might be slower than the last.

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Still Liking Ike

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I’ve noted before my admiration for the late President Dwight Eisenhower and his moderate, fiscally attentive approach to government. And, as so many others have before me, I also appreciate Ike’s willingness to stand up to the military contractors who wanted nothing more than a steady, ample payday.

While much has been made of Ike’s “military-industrial influence” warning, few are aware that those comments came at the end of his presidency; in fact, during his denouement as president, just a few days before leaving office.

In fact, as is so well-documented in Evan Thomas’ book, Ike’s Bluff, Eisenhower spent most of his political career warding off defense contractors, military chiefs and even his own Cabinet members, all of whom were intent on inflating the budget with expensive war toys. Ever the military genius, Eisenhower realized that “small wars lead to big wars,” and that the federal budget could be busted by runaway defense spending.

As he said in his penultimate address, “We annually spend on military security more than the net income of all United States corporations. … Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.”

I am reminded of these wise words today, the morning after the re-election of a US president. For no matter who had won, the president must rein in spending, and that includes the staggering US defense budget, which for fiscal 2013 is more than $600 billion.

Yes, health care, Social Security and other programs need to be pared and reconsidered. And yes, defense is tremendous source of jobs — including the ever-important manufacturing ones — for US citizens. But the current budget is not sustainable, and given that we spend more than the next 14 countries combined, it’s impossible to argue that a reduction would somehow make us less safe and secure.

A moderate like Ike might not be electable in today’s political arena, but we should still heed his words. We need his wisdom now more than ever.

Dover’s Big Exit

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Is it the water?

Just days after Cookson announced it would split in two and spin out its Alpha Metals solder unit, Dover says it too will divest its electronics assembly and test businesses.

Just like that, we are primed to lose two of the longstanding electronics supply chain brand owners. The difference here is, Alpha’s management and ownership will remain, for now, the same, as the stock will be split among Cookson’s former shareholders.

The future of the Dover businesses, on the other hand, is much less clear. Dover hasn’t said whether it will sell the businesses piecemeal, as it did with Universal Instruments and Vitronics-Soltec in 2006. The brands on  the block — DEK, OK International and Everett Charles Technologies among them — probably brought in at least $1 billion in annual revenue prior to 2012’s dropoff, and have traditionally been higher margin performers as well. Not many equipment companies have pockets deep enough to absorb the price Dover will ask. Yet that’s what employees of those businesses must be hoping for right now, as the slash and burn methods of the private equity companies have been excruciating for everyone involved.

We don’t think this was a quick decision brought about by this year’s slump. Sources tell us Dover has been discussing the possible divestiture of these businesses for nearly a year. The guess here is that Dover’s management tired of the endless boom-bust cycles of the electronics industry. It’s hard for an equipment company to meet Dover’s goal of 10% revenue growth and 15% operating margins year in, year out.

We also believe Dover has a buyer on the hook, as some might recall that when Dover announced the impending divestiture of Universal, the deal went through a month later. Who that buyer is (ITW? Nordson?), and at what price, are now the questions.

 

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