EL SEGUNDO, CA, Oct. 1 -- Contract electronics manufacturing and ODM work will surge in China in the coming years, according to new research conducted by iSuppli Corp.
Compounded annual growth will top 21% between 2003 and 2008 for each of the two sectors, the firm found. EMS revenue in China is predicted to reach $45.5 billion in 2008, while ODM sales are forecast to hit $108 billion.
iSuppli predicted Chinese OEMs will begin to outsource production during the next five years. The firm also anticipates domestic Chinese EMS companies will more aggressively seek overseas customers.
As offshore outsourcing evolves from low value/low exposure projects to increasingly complex global projects involving core competencies, the cost and exposure of inadequate attention to security will increase significantly, Gartner Group said.
Gartner urges early dialog to address security and due diligence throughout the outsourcing life cycle. Although security issues will lengthen the sales cycles of global delivery, it will not stop enterprises from adopting global sourcing models.
Gartner presented its view on the real issues related to security, privacy and IP/confidentiality when going offshore at its IT Security Summit in London. "The security exposure that both clients and service providers have to deal with, as global sourcing becomes more strategic and complex, increases by orders of magnitude," said Partha Iyengar, research vice president, Gartner India. "Service providers are unable to provide standard security solutions because regulations, legislation and consequently risk vary vastly between industries and geographies."
Gartner said there is also tremendous hype and a lack of understanding of the issues surrounding security. The most significant security issues revolve around the protection of data in one manner or another. There are, however, other issues that are not well understood, vague and based on emotion rather than fact. "One of the most frequently voiced concerns is related to call centers where consumers are alarmed when dealing with people with unfamiliar accents in unknown or foreign locations," said Iyengar. "This understandably raises questions around people's personal data, but may nevertheless not present a real risk."
"Service providers and users need to look jointly at risk and work together to create an information protection framework to identify and spell out each of the concerns, determine their validity and make educated decisions about the risk they may or may not pose," said Iyengar. "Companies also need to be more transparent and inform customers of the security steps they take when going global to alleviate fears and avoid hype."
Asset Protection Issues
Understanding the relationship between business, security, IP and privacy is essential for enterprises in effectively managing business risks associated with corporate and individual privacy. Security deals with data, people and technology, privacy deals with data confidentiality and customers records, while IP concerns patents, copyrights and trade secrets.
"There is a significant 'cost of security', and it is not cost-effective to provide the same level of security to every aspect of a companies offshore exposure. Companies therefore need to understand which records and data they need to protect and why, and how much they should spend on this security," said Iyengar. "The most sensitive data can be found in personal, financial, medial, tax, employment and company financials records. Certain companies and vertical industries will have to classify data or determine the requirements for sharing data on project by project basis."
Iyengar highlighted that global delivery also includes a growing number of lines of service or application areas. These include applications development, IT infrastructure, contact centers and back-office BPO. Each of these could have vastly different requirements and exposure in terms of 'information protection' requirements and need to be understood and dealt with differently.
Evolving Regulations
The pace of new regulations is increasing for all industries and governments. The focus that countries have on privacy and data regulations is diverse and will evolve by country. "While the U.S. and Canada have strong regulations for personal data protection in the public sector and no comprehensive legislation for the private sector, the European Union, Japan and Brazil have data protection and privacy codes for the private sector," says Iyengar.
"Regulations will constrain or put additional requirements on the relationship between clients and service providers. At a minimum this could increase the cost of providing the services, and in the worst case it could prevent some work from being sent offshore. Enterprises need to understand all the nuances around these regulations to put an effective strategy in place."
Country risk status: How strong are the country's laws around security, including the existence of standards around this. Equally (or more) important, what is the track record of the country and its people in the adherence/enforcement of these standards and laws.
Privacy protection: Is there an environment and inherent 'culture' that supports and promotes data and personal privacy. Is data security taken seriously and are adequate protection measures in placing in general that are followed. Is there sufficient awareness of the need to protect confidentiality in data?
Government interception risks: Issues like government interception of sensitive confidential information as well as guidelines for the use of or access to effective encryption algorithms in the country (some countries are restricted in this) are important.
IP risks: Across IT and many other industries, protection of IP is taking center-stage. Given the vast diversity in laws and regulations around this issue globally, one cannot assume that all countries provide the same level of protection, both from the perspective of existence of laws to their actual enforcement.
Employee/labor laws: How employer / employee friendly are the laws in each of these countries, and what are the ramifications from a labor perspective of doing business here.
Contractual/legal risks: Any non-conformance/breaches on any of these issues could end up in a contract dispute in a court of law. In some countries, justice is delayed to such an extent that it is truly denied. Understanding the risks of contractual and legal system maturity and speed (or lack thereof), can allow greater diligence during the contracting process.
"Generally, the maturity of legal frameworks, regulations and business approach mean that countries considered to be 'developed countries', such as Ireland, Canada and New Zealand provide a more secure environment," said Iyengar. "However, the trade-off is that companies will not be able to make the same cost savings as for example India or Russia. Recognising that the risk versus cost trade-off will increasingly drive sourcing location decisions, India is aggressively addressing issues around security."
Gartner's recommendations include:
- Tackle security issues very directly and early in the sourcing strategy development phase. Then review throughout the life of the outsourcing deal through evaluation and selection, contract development and sourcing management.
- Develop a detailed dialog with your service provider and ensure you understand their approach and track record in delivering robust security. Do not cede overall control and responsibility for management of security onto the provider. This control should remain in-house, including responsibility of some of the auditing mechanisms.
- Work with the service provider to create and deliver an information protection framework to identify and spell out each of the concerns, determine their validity and make educated decisions about the risk they may or may not pose, and how much should be spent on mitigating that particular risk.
Universal Slashes Placement Equipment Prices
Binghamton, NY -- Universal Instruments has announced a worldwide, across the board price reduction for its high-speed chip and flexible fine pitch equipment platforms, effective immediately.
According to a press release, the company hopes the global price consistency will simplify the purchasing process for multinational customers.
New prices for the platforms include:
Genesis FFP, a twin beam modular chip placer combined with high-speed FFP capability, from $239k to $259k;
Genesis HSC with twin beams and two Lightning heads for speeds up to 54,000cph for $299k;
AdVantis FFP, a single-beam chip placer with FFP capability, for $125k;
AdVantis HSC with a Lightning head for speeds up to 30,000cph for $150k.
Universal credits its policy of driving out costs from its processes -- including mandates to design out cost during product development cycles, supply chain optimization with global sourcing and a broadened manufacturing base - for its ability to offer the new pricing scheme.
SAN JOSE, Oct. 4 -- EDA revenue rose 4% in the June quarter versus one year ago, reaching $993 million, the EDA Consortium said today. The rise wasn't enough to convince one chief executive of a leading EDA company that the industry was performing up to par, however.
"Despite very modest growth in the EDA industry, there are no indications of overall strength," Wally Rhines, chairman of the EDA Consortium and chairman and CEO of Mentor Graphics, in a statement. "Growth in services versus last year is positive but the sequential decline is not."
For the quarter, computer-aided engineering revenues were $474 million, up 4% year-on-year. License and maintenance grew 2% year-on-year. Services was up 11% to $70 million. IC physical design and verification sales fell $3 million, to $282 million.
PCB and MCM layout revenues were $84 million, down 1% from Q2 2003.
The semiconductor intellectual property (SIP) revenue rose 28%, to $84 million. The sector was helped by greater SIP participation in EDAC's data collection.
Revenues in North America and Europe increased 4% each, to $523 million and $180 million, respectively. Japan was down 5%, to $176 million. Rest-of-world, which includes China and India, was up 19%, to $115 million.
The sector employed 20,000 in Q2, up 6% vs. a year ago and a new high since EDAC began tracking employment data four years ago.
"I think the great advantage of this material is that it provides a very wide process window, which gives us tremendous flexibility," says Vahid Goudarzi, a distinguished member of the technical staff at Motorola. "From printing to reflow, we really stressed the material and it was able to meet our very rigorous technical requirements."
Multicore LF320 requires a minimum peak reflow of 229°C, about 11°C lower than standard lead-free pastes. (Higher Dt assembly designs can be reflowed in air at up to 260°C.) The difference provides a safety margin when reflowing temperature-sensitive components. According to Henkel, the paste prints at a speed range of 25-100 mms-1 (6"s-1), wets on a range of surface finishes, and has been formulated to provide high resistance to slump and solderballing.
LF320 is classified as a ROMO per J-STD-004 and meets or exceeds Bellcore GR-78-CORE tests for electromigration.
The material has been optimized for reflow in air on a range of PCB assembly applications and reflow profiles may be extended with nitrogen, Henkel said in a press statement.
Good call: Henkel's Chris Korth (left) and Cary Vocelka (right) receive the good news from Vahid Goudarzi of Motorola.
"Expansion into Mexico supports our strategy to deliver globally," Kester vice president of marketing and business development David Torp said in a press statement. Torp noted the years-long migration of assembly operations into China, Mexico and Eastern Europe.
Kester plans additional plants in Suzhou, China, in 2005, and Plauen-Neuensatz, Germany, which has been operational since June.
BOSTON, Sept. 30 -- Some of the greatest technology minds gathered this week in Boston to discuss innovation, yet the talk continually turned to something much more mundane: standards.
Noted luminaries ranging from a senior R&D executive at IBM to the man credited with creating the Worldwide Web agreed that standards and innovation go hand-in-hand, and that more attention needs to be paid to ensuring standards for new technologies are open.
Speaking to an audience of about 500 at the Emerging Technologies conference at MIT, Sir Tim Berners-Lee, the inventor of the Web, said it's "very important" that stakeholders protect the Web from being "tripped up by software patents." And Paul Horn, senior VP of IBM Research, called open standards "critical for speedy innovation at a company, in an ecosystem, in the country."
Horn decried those who seek IP protection, at the cost of slowing innovation. "Success in R&D requires rapid flow of innovation into the marketplace. Time to market is critical." Universities that elbow aside businesses seeking to partner on R&D because of worries over IP rights strain new products, too, he said.
Berners-Lee noted that patent licensing royalties form a barrier for companies that develop new technology. "You could never find out what patent could possibly apply to what technology," he said.
Berners-Lee now directs the World Wide Web Consortium (W3C), an open forum of companies and organizations that develop Web standards. W3C advocates a royalty-free standards policy for patent licensing.
Most of the technology discussion over the two-day event centered on software advancements - and, as in the case of standards, potential hurdles. While there was talk of nanotechnology and outsourcing - with speakers brushing aside concerns over regional job loss as a natural result of bringing lower cost product to market, what the conference didn't cover in depth was potential new manufacturing techniques.
Solectron's Q4 Loss Narrows
10-01-2004
by Mike Buetow
MILPITAS, CA, Sept. 28 -- Solectron Corp. saw its fiscal fourth-quarter loss narrow on a strong increase in sales. The company reported a loss of $2.4 million on sales of $3 billion for the quarter ended Aug. 31.
Last year, the EMS maker reported a loss of $179 million on revenue of $2.44 billion. Excluding items, earnings from continuing operations were 4 cents a share in the latest period, reversing a loss of 6 cents a share, and in line with analysts' expectations and company guidance.
Solectron guided for November quarter earnings, before items, of 4 to 6 cents a share on sales of $2.9 billion to $3.1 billion.
Solectron chief executive Michael Cannon said company strength in the markets for networking equipment and set-top boxes, offset by weakness in computing, storage, wireline infrastructure and third-generation cellphones.
For the year, the company reported a loss of $168.9 million on revenue of $11.6 billion. In the same period last year, it reported a loss of $3.45 million on revenue of $9.83 billion.
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