Why the “rise of the robots” might be a good thing for workers.

Once a year, I like to take a column to look at the trends I’m seeing for the coming year. I think 2020 is going to be fairly good for the electronics manufacturing services (EMS) industry.

The trade war finally appears to be cooling down. Both China and the US have been hurt by it, and I think both sides have reached the point where they realize that not reaching an agreement will cost both of them lucrative manufacturing sectors, since China is seeing production migrate to Southeast Asia, and the US is seeing production move to Mexico. As I write this, the phase 1 deal has yet to be signed. If it does get signed in early-2020 and tariffs begin to lift, that could remove the trade-war-driven drag on the US manufacturing economy. The signing of USMCA will also have some positive effects and hopefully improve the competitiveness of US manufacturing within North America.

That leads to a more interesting trend: unemployment, or lack thereof. Many readers don’t remember what 3.5% unemployment markets look like, because it has been nearly two decades since we were in that range. In the 1990s, what folks would say when we got to that level was everyone who was employable had a job. Manufacturing sector companies face a double whammy this time around – and EMS companies are even more disadvantaged. Why? For the past two decades we’ve been telling youth that manufacturing jobs are 20th century jobs, and their best career option is to get a college degree and work in the service sector. Consequently, hiring labor in a job hunter’s market isn’t a matter of running an ad and watching people line up. It becomes an education effort, with a higher-than-average failure rate when applicants who don’t like the disciplined focus of manufacturing decide to look elsewhere after a few weeks on the job. The reason I say EMS companies are more disadvantaged is because the average American doesn’t know who they are. The products they manufacture carry the names of other companies. In a generation where folks aspire to work at companies like Google or Facebook, branding matters. Additionally, margins in EMS are tighter, so benefits and compensation are less, which means EMS companies must do more than a company with a recognizable brand to capture the interest of potential entry-level employees.

Those dynamics lead to another trend I’m seeing in EMS: training and job enrichment. There is no question greater levels of automation are good from a quality standpoint because it reduces variation. Even smaller EMS operations are starting to invest in Industry 4.0 technologies that give machines more control over SMT line adjustments. And the labor shortages driven by a good employment market are driving a lot of value-stream mapping and continuous improvement efforts designed to reduce the headcount required to do assembly in general. These trends aren’t putting workers on the street. EMS companies are realizing experienced workers are valuable assets and are investing more in training to give them higher skill levels. In some cases, SMT operators are being trained to the level of a process engineer. Test operators are being encouraged to look at test technician career paths. Personnel in other production operations are seeing paths to advancement as well. In all the cases I’ve seen, it is a pay-for-skills arrangement where greater skills translate to better compensation. So, for employees willing to train and evolve into higher responsibility jobs, the rise of the robots may be a good thing.

Finally, I’m seeing a lot of shopping going on in 2020. Regional dynamics and cost structures have changed dramatically over the past two years. Now that materials constraints have eased a little, OEMs are reevaluating whether their current outsourcing strategy works. This is a good time for EMS companies to exhibit at trade shows, advertise and promote in social media for that reason.

I also see a few clouds on the horizon. The trade war has been a drag on an otherwise healthy US economy, and when the brakes come off, I think we could get some surprises. While material constraints have eased significantly as supply and demand have aligned, some of that easing was due to manufacturing slowdowns. Additionally, the 5G rollout in 2020 may add some additional steep demand. So, keep a close eye on materials trends mid-2020. And if the economy really improves, expect jumps in energy and commodity prices, leading to price inflation. All that said, I do expect 2020 to be a year of growth and prosperity for the EMS industry.

Susan Mucha is president of Powell-Mucha Consulting Inc. (powell-muchaconsulting.com), a consulting firm providing strategic planning, training and market positioning support to EMS companies and author of Find It. Book It. Grow It. A Robust Process for Account Acquisition in Electronics Manufacturing Services; smucha@powell-muchaconsulting.com.

• Prev
• Next