In China, A Bet on Tariffs

Several news stories are breaking today about President Trump’s anticipated tariffs on scores of goods from China. On the list of items that will see new import duties is consumer electronics.

The effects of this move have the potential to go far beyond the administration’s stifling of a series of high-profile acquisition attempts, including Singapore-based Broadcom’s attempted not-so-friendly takeover of Qualcomm, or that of a Chinese investment firm’s deal for Lattice Semiconductor. One wonders, if the TTM-Meadville deal were in play today, what the ruling from the feds would have been.

China has successfully reached its goal of the “world’s factory,” but is it good for the US — or the world, for that matter — to have so much critical manufacturing concentrated in one place? I would argue no. Foreign companies get a raw deal trying to access the China market. The rules are set up to favor domestic companies, the government’s reach extends into all levels of private businesses, and the judicial system is weak, at best. As we have noted before, in China, “copyright” means “the right to copy.”

The US is the only economic body, except perhaps the European Union, capable of forcing China’s hand. China will not change on its own.

It would take a better fortune teller than me to predict how this will play out. On principle, some critics are primed to dismiss the administration’s move. But governments interfere in economic systems all the time. The entire US import system is one giant hurdle. So is Europe’s. It says here the risk is worth taking.


TTM: Time to Military?

TTM is taking no chances with its core defense market.

The fabricator, one of the world’s five largest, has added three directors, all of whom have extensive ties to the US military’s procurement arm.

Dr. Jacques S. Gansler, now at the University of Maryland, was recently Under Secretary of Defense for Acquisition, Technology and Logistics at the DoD. Retired Lt. General Ronald W. Iverson is CEO of LGS Innovations, an Alcatel-Lucent subsidiary that serves the US government. And Dr. Dov S. Zakheim is senior vice president of Booz Allen Hamilton, where he heads the firm’s global defense business, and a former Under Secretary of Defense (Comptroller) and DoD CFO.

Aerospace and defense make up an estimated 21% of TTM’s overall sales, down from about 45% in 2009 due to the acquisition of Meadville’s PCB unit, which tilted the overall mix toward networking. Still, short of naming Defense Secretary Robert Gates to its board, TTM’s latest moves should ensure the company remains the leading supplier of circuit boards to the DoD for years to come.

Another Side to TTM Deal

The news today that TTM will acquire Meadville brought back lots of memories for this aging reporter.

I will never forget touring Meadville’s PWB plant outside Shanghai, way back in 2000. Gene Weiner and I were walking down a hallway, when who should appear but Meadville chairman Tom Tang, ready and willing to comment on how Gene and I were messing up his pristine floors (we weren’t). Besides being quick-witted, Tom is an exceptionally bright guy (he’s a University of California alum), and TTM would be wise to ensure he remains part of the management team.

(As an aside, it’s always interesting to note the differences between Hong Kong and Taiwanese shops. The former have wide hallways and windows designed for viewing into the factory, while the latter are by design more space-constrained.)