Circuits Assembly blog

Orbotech’s announcement Monday — somehow missed by all the media save one — that it would exit the assembly AOI business comes as little surprise to those who have been paying attention to electronics manufacturing. Though one of the largest players in the electronics AOI market, most of Orbotech’s revenues come from sales of bare board and flat-panel display inspection gear. In fact, its assembly AOI line brought in just 4% — $3.9 million — of the Israel-based company’s sales in the September quarter.

Moreover, it’s hard to recall the last time I saw one of its Symbion SPI or post-reflow lines in an actual factory. While I have seen them in OEM plants, I have not seen them in contract assembly operations. Still, the Symbion SPI is considered to be an excellent machine, very competitive with the leading technology on the market. As such, a buyer is expected to come forward for the lines. We would expect that would happen in fairly short order.

Does this signal the beginning of a shakeout in the highly convoluted AOI market? True, it’s one with literally dozens of competitors, many of which aren’t dedicated to electronics. But I don’t see many others feeling so compelled to give up the space. Teradyne is cutting 5% of its workforce, but it shed its non-core connector and backplane businesses a couple years ago; it’s highly unlikely it would exit the assembly test market too. In 2005, Agilent similarly made the decision to focus on test and measurement, selling off its chip business. YesTech and Dage are now under the Nordson umbrella, a company known for growing businesses. Mirtec is expanding. So is Koh Young. CyberOptics has 2,500 SPI installments worldwide and has recently reported double-digit orders for its AOI machines. They aren’t going to exit.

Unlike 2002-03, what we will see this time around is companies cutting hard and fast on the human side. That’s a shame, but it’s the unfortunate legacy of the last downturn.

The Consumer Electronics Association this week inducted a dozen persons into its Hall of Fame. That brings the total to 121 inventors, engineers and others that organization has inducted since 2000.

Which is great. The Hall is supposed to be the pinnacle of achievement for a select group of dedicated individuals.And the folks who were recently recognized certainly include some big names, like the founder of DirecTV, the lead developer of the Sony PlayStation, and the CEO of Sirius.

But it’s also a shame. You see, the IPC Hall of Fame has inducted 24. In 31 years. Now that’s a Hall worth belonging to. And there’s no getting in on anything so simple as merit. It doesn’t matter if you’ve worked for a big company, or heck, even invented the circuit board or the semiconductor. In fact, the IPC Hall has as many inductees from among its own employees as it does from IBM and — (take your pick) Texas Instruments or DuPont or AT&T — combined. You worked at Intel? Take a seat. Hughes or Boeing or Raytheon? Fugghedaboudit. Outside of the US? Don’t make us laugh!

Clearly, the CEA is engaged in hyperinflation, and we shouldn’t stand for it, not one minute more. The consumer electronics market is supposed to exceed $173 billion this year, CEA touts in its announcement. Silly people. Don’t they know consumer electronics make up only 5% or so of the total electronics market. What an inflated view of the world they must have!

IPC, on the other hand, represents not just consumer electronics manufacturers, but the segments of military/defense, aerospace, automotive, industrial, instrumentation, computers, and telecom, to name a few. In our world, we don’t measure things with a “b,” but with a “t.” As in $1.2 trillion. (Give or take a few “b’s.”)

Speaking of inflation, I can’t wait to see how many folks the Society for Automotive Engineers inducts into its Hall this year. So many, probably, they’ll need to ask Congress for a loan to cover the reception.

I’ve known Sean McShefferty less than a year. I feel like I’ve known him my whole life.

Upon our first meeting, Sean spent a solid 60 minutes – unprompted and uninterrupted – delineating the entire story of his battle with cancer, intertwined with stories of his kids, people he had met, surfing, and various other escapades. That the rest of us were nearly falling off our chairs from red wine and fatigue didn’t matter. He had something to share and he was going to share it.

That was Sean: Always sharing.

The next day, and the next several times I saw him, he apologized for his monologue. That was Sean, too: Considerate, sensitive and sincere.

As my friend (and Sean’s colleague) Tom Forsythe said to me, “Sean lived the saying, ‘A stranger is a friend you’ve never met.’ ” And did he have friends. Sean told me how, while undergoing treatment for stomach cancer, he met another patient. The two struck up a conversation – Sean was a pro at this – about cars, and it turns out the fellow was a collector. He invites Sean to see some of his “toys,” and naturally Sean went along.

The collection of vintage autos and rare sports cars was amazing. As Sean admired them, the man made Sean a deal: take anyone he liked and drive it for a couple weeks. Then bring it back. No questions asked. Just have fun. (He did.)

Sean had a knack for inspiring that kind of blind trust from those he met. His sincerity carried him a long, long way. As a cancer survivor myself, I admire those who have faced down what can be a wholly debilitating disease with dignity and strength. Sean never publicly complained about his bad luck. In fact, I suspect he never looked at the hand he was dealt as bad luck at all. It was just one of God’s challenges, and he was going to face it. I didn’t even know he was sick again.

I’m sorry Sean is gone. I’m sorry for his family, for his colleagues at Kyzen and in the industry, and for his friends. But I’m also sorry for all those strangers who never had the chance to become his friends.

(Kyzen is requesting those who have “classic” pictures of Sean to forward them to the company for inclusion in the retrospective. Digital copies may be sent to SeansKids@kyzen.com; prints photos can be sent to the company’s Nashville address (attention SeanPhoto) for scanning and will be returned. Questions regarding the education fund may be submitted to SeansKids@kyzen.com.)

Not so long ago, New England was derisively referred to as the Rust Belt,* as manufacturers migrated for the warm climes and relaxed business environment of the Southwestern United States.

That term slipped away as the region rebounded, however, and electronics assembly during the past five years showed surprising resilience. According to our research, the area produced at least $1.2 billion worth of EMS work last year, with Jabil, Sanmina-SCI, NuVisions (now OnCore), Plexus, Benchmark, Mack Technologies, ACT Electronics, Cirtronics and scores of others smaller firms dotting the landscape.

Times are changing, however, and with them many of the local mainstays are either disappearing or in deep decline.

As we’ve been reporting, Plexus (Ayers, MA) and ACT (Hudson, MA) have recently announced they are closing their doors. Titan closed its EMS plant (Neo EMS) in Vermont, the former Nexus Nano. One local publicly held EMS company is said to be down to one customer. Another large, publicly traded firm has a lease coming due on what’s said to be a sweetheart deal, and speculation holds the lessor will not renew it, which may lead to that site closing or relocating. Other factories have leaned heavily on military and defense contracts during the past eight years — monies that may well begin to dry up under a new Washington administration. Others, including EPM (Manchester, NH) and Flextronics (the former Solectron Fine Pitch site in Wilmington, MA), have already bailed. In New York this year, the electronics manufacturing sector has lost 5.1% of its jobs year-over-year; Connecticut 1.3%. (Endicott Interconnect Technologies, located in Endicott, NY, is a clear outlier. The former IBM manufacturing arm continues on a years-long runup.)

New England, specifically the greater Boston area, is the third highest recipient of investment capital. The region is a veritable innovation think tank, with leading institutions such as Harvard, MIT, Yale, Brown, Dartmouth and others, not to mention dozens of blue chip OEMs, Raytheon, EMC, Textron and of course, IBM, among them. There is no shortage of intellectual capital here, and it’s unlikely all that brain power would suddenly migrate elsewhere.

Cycles come and go, it’s true, and regions fall in and out of favor. It would behoove contract assemblers to keep in mind that in a business where relationships still matter, the best way to keep them from rusting from disuse is to stay in contact, and that means staying local.

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*I realize some definitions of “Rust Belt” include certain mid-Atlantic and Midwestern states. For the purposes of this column, I’m focusing on upstate New York, Massachussets, Connecticut, Rhode Island, Vermont, New Hampshire and Maine.

Nathan Myhrvold is smarter than me, but he still doesn’t get it. Or perhaps just doesn’t want to.

Myhrvold, the former CTO at Microsoft, gained a doctorate in theoretical and mathematical physics by the time he was 23, and has nearly 50 patents to his name. And, as the Wall Street Journal details today, through his company, Intellectual Ventures, he holds an additional 20,000-plus patents and patent applications covering everything from lasers to computer chips.

That’s not the problem.

Intellectual Ventures, it seems, collects large sums — between $200 million to $400 million a pop from everyone from Verizon to Cisco — in return for licenses (and an equity stake in the firm), says WSJ sources.

That’s not the problem, either.

The problem is, he thinks his actions are justified. He calls this “invention capitalism,” and claims the practice of extracting exorbitant royalty and licensing fees is built on the same business model as such companies as IBM and Texas Instruments.

But that’s not what the Framers had in mind when they wrote the Constitution. Those wise men wrote the federal government’s first and foremost piece of legislation in a way to ensure ideas stemming from the sciences and arts were protected — but only for a limited time — and so as to encourage innovation for the common good. Ideas beget ideas. Getting those ideas into the public domain expedites innovation. Collecting patents for the sake of extracting tremendous fees runs counter to that noble concept.
Nathan Myhrvold should go back to school. This time, he should study American history, and specifically, the story of the Framers. There’s a lot he could learn.

The Wall Street Journal today says in China the “annual flow of 10 million workers from countryside to city has suppressed wage growth.”

But in his newsletter today, my friend Dominique Numakura of DKN Research argues the opposite, pointing to recent evidence of more state-mandated wage hikes in China. A Japanese manufacturer in Guangdong Province claims receipt of a government letter raising the minimum monthly wage 20% to 900 RMB. “The Guangdong government announced plans to double worker’s incomes in five years, and the wage increase in July signals the first step in the overall plan,” Numakura writes, adding that Shanghai announced a 14% increase in the minimum wage beginning last April (overall, the minimum wage in Shanghai is up more than 27% over the past year).

As you might expect, between higher wages and currency inflation, China is getting more expensive. Numakura points to data suggesting more than 150 Taiwanese operations in Shenzhen – or roughly 8% of the area’s factories – closed during the first half of 2008 because of the increasing labor cost.

The Journal doesn’t dispute this, but it minimizes the effect. “[O]nly a narrow slice of workers is covered by this move and the minimum wage is still quite low relative to average wages. A new labor law mandates that employers provide pension and insurance contributions, pay laid-off workers a month’s wages for every year worked, and that they provide an overtime premium of 50% on weekdays and 100% on weekends. However, as with many Chinese laws, enforcement remains very much in question.”

Remember, what China supplies is … low cost labor. The service and technology available in the nation’s factories are easily duplicated – or bettered – elsewhere. Without low wages, China Inc. is just China. The question is, does China Inc. get that?

 

 

As the EC reviews RoHS, where’s the scientific data to support updates?

The European Commission is set to review the RoHS Directive before the end of the year. One of the changes on the table is the addition of part or all of WEEE’s Categories 8 and 9, which include the medical electronics sector as well as monitoring devices.

Circuits Assembly recently spoke to Ken Stanvick, an expert on RoHS – now having been in effect for more than two years – and one of three cofounders of Design Chain Associates (www.designchainassociates.com).

When asked when and if medical electronics would be affected by the regulation, he laughed. “If I had the answers, I’d give you the lottery numbers,” he said.

But then he proceeded to give some solid answers – and raised a few questions of his own. A number of options are under review, Stanvick said. “I suspect the time frame for which way they are leaning will be the latter part of this year or the beginning of next year.” For Category 8 (medical) and Category 9 (monitoring), “the intention is to include them. It’s more a matter of when than if.” One possibility, according to Stanvick, is the continued exclusion of the categories, an option he deems unlikely. Second, the EC may exclude them, but encourage ecodesign. That, however, doesn’t seem feasible. “No one trusts the industry to do it on their own,” he noted. Third, and most likely, is to include parts of the categories. At the earliest, medical and monitoring electronics could be included in RoHS by 2012, according to Stanvick. “My concern is that they don’t have any real good/bad examples of reliability issues with the use of Pb-free solders out there, so it’s hard to convince people who are reviewing the exemptions. Where are the scientific data to prove this is any more or less reliable than what is currently included?” he asked. “The counterargument to [rapid inclusion of Categories 8 and 9] will be that companies should have, in fact, looked at it in 1993 when the whole discussion started to take place.” He believes the EC thinks firms have already had time to prepare. 2012 will provide time for state laws to catch up, but is a conservative estimate. “2014 is one of the options recommended, but the manufacturers look at 2012 as a reasonable deadline.”

For the medical segment, Stanvick is confident “what may be excluded in the category of medical will be implanted devices because they are encased” and already controlled by the FDA. But, for example, for heart monitors – and other non-implantable products – insufficient reliability information exists, so they could be included. We’d be “hard pressed to continue Category 8 as a blanket statement.” They will “include some or exclude some; they may continue material exemptions associated as products.”

He knows many medical electronics companies looking at and even doing Pb-free designs. “They are hedging their bets. There is really no fear because there is good information out there.”

The addition of these categories is only one part of the overall RoHS review. The commission is looking at additional materials separately. They are reviewing existing exemptions (required to be reviewed by 2010).

But again, he added, “based on state holder feedback, there is a lack of scientific evidence. There are Pb-free solders in millions of products and billions of solder joints, and bad news in this country travels fast. If there were a secret liability problem that a company ran into, we would have heard about it.”

Asked about reinforcement for compliance, Stanvick said, “In the US, the attitude is to catch someone not in compliance and make it a headline. In Europe, they want to test products coming in and work with the manufacturers of the products. As long as you are cooperative, they’re not going to put you up as a poster child for RoHS enforcement.”

Europe’s approach has its positives and negatives. It’s a “nice way to do business. However, the downside is it makes people more bold who aren’t making the investment.”

As RoHS stands, product categories are not well defined and there is no consistent interpretation beyond the specific items in the categories, according to Stanvick. One member state may include a product, but another state may say it’s outside the scope. “RoHS is meant to be indicative,” he said. (China, on the other hand, has a specific list of products.) “Interpretation of RoHS leads to frustration with manufacturers,” he concluded.

But this is just another learning curve, he added, just as it was with the transition from SnPb to SAC. And that transition “didn’t sink the industry.”

What is his advice for the medical electronics industry? Right now, they should have a plan for legacy products and how to support them. And with new designs, they should design in a Pb-free system where it makes sense.

Indeed, even with Pb-free components more readily available than leaded today, Stanvick sees the glass as half-full. “I think we are losing tribal knowledge about making leaded joints; if you’re using leaded, you’re the exception.” The lack of higher volume processes using SnPb hastens the knowledge loss.

As an aside, Stanvick mentioned China’s version of RoHS. He said indigenous Chinese companies have somewhat put the regulation on hold, with a don’t-worry-about-it attitude, while the US continues to struggle to be compliant with China’s labeling rules. “I see no rush for their catalog,” he said.

Furthermore, get ready for the next big industry buzz: carbon footprints, or greenhouse gas emissions. “Big questions are coming from significant players,” he emphasized, and “work is being done on this right now.” Companies need to know, “What is the carbon footprint of my product?” This includes harvesting materials from the ground all the way through to recovery and disposable. “This is the next hazardous material, and it’s coming faster than most people think. It’s the next RoHS,” he concluded.

The next “hazardous” substance the industry needs to audit and report on may be carbon – OK, carbon dioxide (humans are 18% carbon). And the next killer app might not be a communications device or a video game but some vehicle for carbon tracking.

Cisco is aiming to cut greenhouse gas emissions by 25% by 2012. Google wants to hit the target this year. Yahoo and Dell might already be there.

It’s only a matter of time, then, before these companies start pushing their suppliers to match their standards. Measures include lower-power electrical systems, solar and wind power for heating and cooling, and employee telecommuting and videoconferencing.

Unfortunately, there aren’t standards on carbon tracking, and the methodologies companies are using to measure and lower their carbon output remain state secrets. This goes beyond the domain of any specific industry trade group, however, so the temptation will be to do nothing at all.

Giving credit where credit is due, Pam Gordon and Tech Forecasters are truly pushing the curve when it comes to saving time, money and carbon.

A few weeks back, the TFI founder led a four-hour workshop for some two dozen executives using videoconferencing, and the savings on airfare alone could have paid for a (used) mid-range videoconference system more than two times over. (Gordon today blogs about the experience.)

As a proponent of Skype (although I admit to not using the video feature as much as I could, thanks to the fact that I work primarily at home and my dress code is, well, let’s just say I forgo the traditional suit and tie), I could give Gordon a virtual “high five.”

At Circuits Assembly, we’ve chosen several paths for cutting costs for readers and advertisers (and for keeping me and my wardrobe away from commercial airlines). We offer digital versions of all our magazines (which include certain enhancements and links not possible in print). And Virtual PCB, our trade show for assembly, design and fab, was so successful on its launch last Spring (2,400 registrants, 1,600 attendees and an average 1 hour 45 minutes spent per visit), we’re doing it again in November, this time teaming with SMTA and others to fill out the technical conference.

We strongly support environmentally friendly policies and behavior, and urge our readers to do the same.

Gary Nevison, director of legislation and environmental affairs at component distributor Newark, says Scandanavian officials are turning up the heat in pursuit of RoHS violations. What have you encountered?