News
Several leading solder suppliers Circuits Assembly spoke with shared insights on the causes for the price spikes - and how to plan for future volatility. Most fingered - surprise - China's consumption, coupled with refining bottlenecks, as the main culprits. While several factors are at play, most vendors agree with Kester vice president of marketing and business development Dave Torp, who cites "basic market supply/demand relationships." Excess supply in the late 1990s and early 2000s depressed prices, causing suppliers to close mines. (While not outright casting the world's tin suppliers as a cartel, vendors note it's a "relatively tight-knit group.") Since 2000, China, which produces at least half the world's tin, has shifted from a major exporter to a net importer, and that nation's energy crisis has dampened its smelting output. Other forces are the tech comeback and higher tin content in new solders, which are "definitely creating more of a demand," says Rick Black, president of AIM Inc.
Black warns that the ongoing metals inventory purge by the Defense National Stockpile Center (DLA) could exhaust certain tin stockpiles within two years. But, he says, "When the price goes up, so does investment in infrastructure. More metal will be pulled out of the ground." Indeed, few believe tin supplies will suffer from the transition to lead-free, because supply will increase to meet the anticipated demand. "It's a gradual move," says Henkel Electronics president Pat Trippel. "[I]t could be a different story if everyone switches to lead-free in a short period, but we don't expect that to happen."
What that doesn't mean, however, is that lead-free solders will cost the same as tin-lead ones. Says Cookson Electronics Assembly Materials president David Zerfoss: "We've put millions [of dollars] into research for lead-free capable materials and there's a price tag for that and the products themselves are inherently much more expensive." Bar solder contains a higher tin content than pastes, leaving some suppliers more exposed to tin pricing volatility. Zerfoss notes the shift from 63-37 to 90-plus% tin means the same joint will require less solder by 20% by weight to make, but the alloy composition by the weight of the bar will be 34% more. Bottom line: More consumption of tin and silver. Quips Zerfoss: "You cannot sell lead-free at the same price. Lead-free ain't free." Koki director of European support Gordon Clark says the "massive" research and development costs incurred by suppliers of lead-free solders have to be passed on "but in our current economic climate [it] is hard for them to swallow."
Buyers should follow Metals Week or London Metals Exchange futures, vendors advise, to anticipate sharp changes in prices of tin or other metals used in solder. Hard-core watchers can monitor speculative fund managers who play the tin market, as fund movements often have big impacts on market swings, explains Torp. Still, "you don't really know where [spot market pricing] will go," acknowledges Zerfoss. Kester and Koki see continued pressure on tin supply throughout 2005. Says Aim's Black: "I don't think [pricing] will go back anytime soon. There's definitely a shortage of supply right now."
For now, Cookson seems to be the only major firm to publicly warn of possible surcharges. Henkel, Trippel says, "hasn't decided exactly how we're going to handle it. Our customers are aware of the situation. It's something we all face." Henkel is renegotiating some contracts, he says. Clark sees parallels to the transportation industry's reaction to higher oil prices. "Some form of surcharge seems a viable option in order to protect margins, and would be best adopted as an industry norm and should be standardized via the IPC Solder Value Council," he says. Kester claims "constant communications" with customers on pricing and delivery. Black feels many customers are behind the curve. "There's a mindset among many purchasing agents that all incoming merchandise costs must be reduced each year. People kept thinking the price should keep coming down, and ... when prices started to increase, they felt hoodwinked."
Tin is just one of several raw materials hit by price hikes. There have been "significant increases" in prices of isopropyl alcohol, a component in many fluxes. Indium prices have risen from $50 per kilogram to $800. Solder vendors are at the mercy of their suppliers. "The only thing [solder vendors] can control is the cost of manufacturing," not the prices from the mines, Black says. "Typically wire and bar solders move with the market. Paste is different because the metal component as a percentage is a much smaller percentage of its value."
"The major factor is industry wide excess inventory," chief executive Mike Bradley told analysts on the company's quarterly conference call. "Inventory levels have risen and triggered broad curtailment in test capacity spending."
The company will take $3.1 million restructuring charge as it tries to pare $20 million from its quarterly overheard. The company shaved 169 jobs during the third quarter and into the fourth.
"The program going forward will be made up of a lot of very detailed changes across the business of semi test and significant changes outside of semi test," said chief financial officer Greg Beecher.
For the quarter ended Oct. 3, Teradyne reported net income of $41.1 million on sales of $457.8 million. Teradyne lost $53.5 million on sales of $329.2 million last year.
The slump came in net orders, which were off 49% sequentially and 16% year-on-year, at $284 million. Gross margins slipped to 41.2% from 43% sequentially and are expected to drop another four points in the January quarter.
Teradyne guided for Q4 sales of $360 million to $380 million and earnings of breakeven to a slight profit.
Bohemia, N.Y. ¾ V.J. Electronix Inc., an x-ray inspection technology and rework systems provider, has opened a new office in Buford, GA. With the new addition, the company now has six U.S. facilities, including those in Bohemia, NY; Dayton, OH; Shirley, MA; Poway, CA; and East Haven, CT.
The Georgia office is located at 1735 Enterprise Dr., Buford, GA 30518.
The results beat a year-ago net loss of $100.1 million, including one-time charges, on sales of $3.5 billion.
For the quarter the company took $34 million in restructuring charges and other non-operational tax adjustments. The cash conversion cycle contracted by two days to 16 days. Inventory turns improved to 10.9 turns from 10.5 sequentially.
Flextronics matched analysts' profits expectations, excluding one-time items, although it fell short of consensus projected revenue of $4.21 billion.
Part of the shortfall owes to inventory reduction at OEMs, analysts say. "There was an inventory build in the communications infrastructure market and that inventory correction is taking place," said analyst Chris Whitmore of Deutsche Bank. Sales from handsets declined about 11% sequentially and offset strong sales for CPU/office equipment and consumer electronics. Revenue from HP increased nearly 50%, DB said in a research note.
Flextronics guided for third-quarter earnings per share before items of 18 to 21 cents on revenue of $4.1 billion to $4.4 billion. For its fiscal fourth quarter, Flextronics expects earnings per share excluding items of 15 to 18 cents on revenue of $3.8 billion to $4.2 billion. Analysts' revenue estimates are higher for each quarter. However, Flextronics, which is taking over Nortel Networks' manufacturing operations, said revenue from that acquisition will not add to overall sales as quickly as once thought.
Chief executive Michael Marks said on a conference call that the December quarter may not be as strong as initially expected but the Mach quarter outlook remains solid. "It's not like we're seeing some big downturn because the March numbers look pretty solid," he said.
Flextronics did suggest that demand has slowed for consumer and communications gear. "This may be a result of some inventory reductions or it could be nothing more than some caution based on oil prices, the election and so on," Marks said. "In either case, we see that as not that big a deal, at least for Flextronics."
CAMBRIDGE, MA, Oct. 26 -- Broadband Internet access is soaring in the U.S., according to the latest data from Forrester Research.
The number of households with Internet access is forecast to grow from 68 million in 2003 to 83.7 million by 2008, a 23% clip. Yet the number of households with broadband will jump 226% during the same timeframe, from 19.5 million to 63.6 million.
By 2008, households with broadband will make up 76% of all wired homes, Forrester says, up from 29% last year.
TEMPE, AZ, Oct. 25 -- EMS company Three-Five Systems has linked its electronic purchase order transaction system to Future Electronics, a major distributor, the firms said today. The move is aimed at improving communication between the companies and shortening order processing time.
The two companies are interfacing via RosettaNet standard Partner Interface Process, a specialized system-to-system XML-based format.
RosettaNet is a non-profit consortium of more than 500 technology organizations working to create, implement, and promote open e-business standards and services.
RosettaNet's PIP also allows for future automation of other higher-level business-to-business processes, such as invoicing and payment.
By extending programming support to the Z8 Encore and eZ80Acclaim flash MCU families, ZiLog devices are now supported by programming equipment common to large volume programming houses, effectively decreasing the time from design win to volume ramp up, the company said in a press statement.
The new ZiLog support software can be downloaded directly to existing BP Microsystems programmers at www.bpmicro.com.
The Extraterritorial Income (ETI) Act tax regime repealed Friday gave U.S. companies tax breaks on manufacturing income earned overseas. ETI was repealed by the passage of the dubiously named American Jobs Creation Act, which offers a 9%, phased-in deduction for domestic manufacturing income. Also included are a temporary tax break for repatriated income, reforms of various foreign tax credit rules and a number of other tax cuts targeted at businesses and individuals.
Yet the Associated Press today reported a warning from EU Trade Commissioner Pascal Lamy that sanctions -- which added up to more than $300 million in 2004 -- could potentially return next year if the WTO confirms EU "doubts" about the new law. "Legally speaking, we will suspend the sanctions and we will keep our options open," Lamy said.
A spokesman for the U.S. trade representative's office told the AP the U.S. is now in compliance with WTO rules.
An IPC spokesman said that while the ETI had little effect on most domestic manufacturers, its repeal could have sparked higher taxes had the American Jobs Creation Act not been passed. "The bulk of domestic manufacturers don't export and so they weren't affected, but they would have received a tax increase," John Kania, director of IPC government relations, told Circuits Assembly. Come January 2005, those companies will receive a tax deduction on a portion of their manufacturing income.
Not everyone agrees that the new U.S. law is legal, however. The EU trade commissioner is petitioning the WTO for another ruling to determine whether the new law fully complies with global trade rules. A ruling is expected within 90 days.
"There is the possibility of (renewed) sanctions," Lamy told the AP. "We'll see what WTO says."
Celeritek's defense electronics business designs andmanufactures gallium arsenide-based RF and microwave components and subassemblies for electronics warfare, radar and other military applications. Teledyne intends to relocate the business from Santa Clara, CA, and consolidate it with Teledyne Microwave in Mountain View, CA.
The division had sales of $19.7 million for its fiscal year ended March 31. Teledyne expects this acquisition to be neutral to earnings in 2004.
Ashburn, VA - Zestron, Kester, Heller Industries, Trek Industries and cleaning expert Dr. William Kenyon are hosting a one-day workshop in Tampa. Topics include cleaning, lead-free and its potential long-term risks. The workshop will take place Nov. 9, at the Embassy Suites Hotel - Airport/Westshore in Tampa.
Attendees can learn essentials on material technologies and understand the actual impact of lead-free on subsequent process steps such as cleaning or the climatic reliability of electronic assemblies.
To register, visit http://www.zestron.com/leadfree_tampa/home.htm.
For more information, contact Danny Chaplow: (703) 589-1198 ext. 110.
The microprocessor market will hit nearly $30 billion, 90% of it coming from devices for computing systems, according to IC Insights in its monthly report.
Moreover, flash sales will reach $15.6 billion by year-end. up 33%,
following a 51% gain in 2003. DSPs is expected to grow 26%, to $7.7
billion, the firm said.
C-MAC designs and manufactures electronics products, typically for harsh environments. It has design and manufacturing facilities in the U.K., France, Belgium and Canada, where it performs thick-film printing on ceramic and other substrates, and builds surface mount and other advanced assemblies.
The new C-MAC board includes Duncan Ralph, chief executive; Andrew Gray and David Stanton of Francisco Partners, and Ajay Shah of Shah Capital Partners.
ESD Assn Offers Webinar to Demystify Standard
If you are interested in developing an ESD program that meets the criteria of ANSI/ESD S20.20, the ESD Association is offering an online course to help. Ron Gibson, chairman of the ESDA Standards Committee and co-author of the ANSI/ESD S20.20, will facilitate the program scheduled for Nov. 17, 2004, at 1 p.m., EDT.
The 60-minute presentation will include an explanation of criteria required for an S20.20 compliant facility; discussion of issues including grounding, packaging, training and documentation; and a brief question and answer session. Cost is $95.
For more information, contact (315) 339-6937; info@esda.org.
Press Releases
- NEDME 2025 Draws Strong Northwest Crowd, Builds on Tradition of Regional Collaboration
- Cofactr Democratizes their Complete Procure-to-Ship Automation Service at a Pivotal Moment for US, Unlocking Support for Agile Hardware Manufacturers in America—with No Upfront Costs
- Semi-Kinetics Adds 2nd Pemtron X-Ray Inspection and Component Counting Capabilities as Part of California Expansion
- The Training Connection Continues to Grow with Addition of Veteran IPC Trainer Bill Graver