Rogers will buy Arlon, merging two leading suppliers of high-frequency laminate materials, and perhaps further complicating the supply chain for some of the smaller fabricators that lack the purchasing power of the major players, not to mention consolidating the RF/microwave product supply base for the US Defense Department. Given its shoulder shrug of TTM’s Chinese ownership, will the DoD even bat an eye over this, or will it be concerned enough to throw a wrench in the deal?
On the assembly side, ASM purchased DEK, which had been readied for sale since late 2011. The acquisition gives ASM top-of-the-line print-to-placement equipment offerings and positions it to compete with the major Japanese players such as Panasonic, Yamaha, Juki and Fuji.
Nordson acquired Dima Group, stretching its traditional dispensing and, later, AOI and test focus into SMT placement. Will Nordson keep the pick-and-place lines, or package that unit up and sell it?
And just yesterday Kulicke and Soffa made a deal to buy Assembleon for $98 million in cash. While Assembleon had been expected to be acquired since Philips first put it on the block several years ago, K&S’s entry into the printed circuit board equipment space was unforeseen. Does it plan to continue to roll up other companies (Speedline?) and build a worthy competitor to ASM?
Most of the major deals that took place in 2014 happened on the supplier side. Does that presage a similar consolidation on the manufacturing end in 2015? Will some of the units long-rumored to be in play (Multek, Hitachi) finally be consummated? Will EMS, which took a breather in 2014 after major deals involving Natel (Epic), Benchmark (Suntron, CTS) the year before, catch a new spark?
While I’m pleased to see IPC is taking a stand in urging the US State Department to take a harder line when it comes to the potential export printed circuit board design data, it must have been cause for no small amount of angst in Bannockburn over whether IPC should be involved at all.
To bring readers up to speed, IPC seeks to make clear that ITAR covers PCB designs intended for defense equipment.
While it seems patently obvious that PCB data should be on the ITAR list, it puts IPC in the semi-awkward position. The largest PCB supplier to the US DoD is TTM Technologies, with about $170 million in defense sales through the first three quarters of last year. TTM’s largest shareholder is a Chinese national. And TTM’s COO is on the IPC board of directors.
So does IPC support the continued DoD drive for COTS products, keeping with the Perry Initiative of 1994, which some cite as the beginning of the end for the US PCB industry?* (COTS in effect forces prices to their lowest common denominator, which gives certain offshore suppliers a leg up on their US competitors.) Does it seek to aid the competitiveness of a major member? Or does it put the interest of the multinational members that want the lowest prices, regardless of the potential security risks? What about the potential risk to the US PCB infrastructure? Which of these priorities should take precedence?
Smartphones are forecast to continue their lightspeed growth pace.
I am of the mindset that what we are seeing is a return to cyclicality after roughly two years of recession followed by a year-plus of bottled-up demand. Clearly there’s some market turbulence ahead, especially when we take the macro vectors into account. Some of the end-markets need a boost: Now that Windows 7 has taken over, PCs are stagnant, with new tablet demand offset by rather humdrum desktop/laptop interest coupled with some migration to smartphones. Nokia and RIM are skidding, and Apple can’t make up for everyone’s lack of flair. Autos are a big-ticket item and many consumers today need stronger feelings of job security before taking on new debt.
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.
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.
There is a rumor — and I strongly emphasize “rumor” — going around that claims the US Department of Defense sent a strongly worded letter to the State Department in opposition to the TTM’s pending acquisition of Meadville Group’s printed circuit board operations.
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.)
DDi today proposed acquiring Coretec, a move that would close the gap between the California-based DDi and its quickturn rival, TTM Technologies.
It also marks the second potential M&A deal between “brand-name” board fabricators in the past four weeks. Earlier this month, Viasystems announced a pending acquisition of Merix.
Unlike the Via-Merix deal, while the impact wouldn’t be big in terms of the worldwide PWB fabricator rankings — likely boosting DDi from the low 60s to the top 50s in terms of size — it could change the pricing model for many board shops. DDi and Coretec have both invested heavily in HDI capability and have complementary markets (defense, telecom, quickturn/prototypes). It also would give the merged company a footprint in each of the continental US time zones. DDi had fiscal 2008 revenues of $190 million, while Coretec closed the year at C$81 million.
It strikes me that Coretec’s announcement late Friday that it would seek a cash infusion through the sale of 10 million shares of common stock was all the opening DDi needed to pull the trigger, especially given the relatively low market capitalization of Coretec.
This would be DDi’s first acquisition since its purchase of Sovereign Circuits in October 2006. DDi, of course, often made headlines in the last 1990s and 2000 as it bought company after company, building a PWB operation that once ranked among the top 20 worldwide. Simultaneously, Viasystems was doing much the same, only for both companies to hit the skids during the 2001-03 tech recession.
Today’s announcement makes sense, given the relatively cheap price DDi would have to pay to get Coretec. Whereas today’s headlines have certain echoes of 2000, it’s highly unlikely the risk of fallout is anywhere close.