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Changing the Future
October 30, 2008 |Estimated reading time: 9 minutes
If you know what the future will bring, you can change it. That was the theme of Herbert Meyer's keynote address as he kicked off the IPC Executive Market Technology Forum at the Gaylord Palms Hotel in Orlando, Florida.
Meyer outlined three global trends that he believes will affect our industry. Population shifts (including significant decreases in EU nations and China), an emerging global middle class and war.
Population shifts are critical because such shifts have a direct impact on macroeconomics. For example, as EU nations continue to experience declining populations, they will both produce and consume less, according to Meyer. Likewise, if a country like India continues to increase in population, it will be a market force to be reckoned with.
Religion also has an effect on population. "The EU is considered a post-Judeo-Christian society," Meyer observed. In Meyer's estimation, this leads to more secular behavior, more attention to personal pleasure and less desire "to die for a cause." Contrast that with religious extremists who will die for their cause, and you can see that population trends do deserve our attention-as does Meyer's focus on war. He characterized the Iraq war as one where the U.S. and its allies are actually protecting oil shipping routes, especially as Putin's Russia gains greater power within OPEC.
The bottom line for executives in the audience: If you have a better understanding of what the future holds, you can act. Meyer recommended an offensive, rather than defensive, approach to attacking our own business issues.
Next, Dr. Paul Goodman of ERA Technology discussed environmental megatrends. His first observation is that we will see more substance restrictions, pointing to REACH regulations percolating in the EU. "REACH does include the possibility of future substance restrictions..." beyond current RoHS legislation. "[It] is going to reach 30,000 substances, as opposed to the EU RoHS, which took two years to identify six substances."
Goodman also said that China RoHS "covers something like 1,800 products" and that Korea RoHS will have similar substance restrictions. Ironically, Japan--largely credited as the birthplace of the greening of our industry as Japanese OEMs sought a marketing edge--has no legislation other than "marking restrictions."
And what is the cost of all this regulation? Goodman said the EU RoHS ban alone is estimated to be "between one and two percent of turnover" for electronics manufacturers. And yet the legislation keeps coming, leading Goodman to observe, "You don't want a restriction that really has no benefit."
One of the substances of most interest to our industry is TBBPA, the flame retardant in FR-4. Goodman said that despite posing no risk to human health or environment, "we are still hearing proposals to ban it.... I don't think TBBPA should be added to the [RoHS] list, but if it is, others will soon follow."
The second industry trend Goodman spotlighted is energy efficiency. It will increasingly be required by legislation, but more importantly, consumer demand is driving it.
Lastly, Goodman said recycling of e-waste must be addressed by the industry. Japan and Taiwan were first in legislating electrical waste recycling, but 26 U.S. states and several Canadian provinces now have e-waste legislation. U.S. federal legislation being considered, said Goodman, and China will "probably will have [WEEE legislation] by the end of the year."
Goodman pointed out differing approaches to paying for e-waste recycling: fees paid to retailers (i.e., California, Japan, Switzerland) versus producers picking up the costs (i.e., EU nations). Export to developing nations is also an issue being addressed. "China is the country with the biggest problem." EU governments found containers of e-waste shipped there under the label of "new machinery."
After lunch, the program shifted into exploration of photovoltaic (PV) industry opportunities for the electronics supply chain. IDTechEx CEO Raghu Das gave a detailed presentation. While many are rushing into solar as if it were the industry's next China, Das stated, "I think there's a key problem: mainly, it's too expensive." He pointed out that venture capitalists have pushed $5 billion into the PV Industry.
More importantly--and fundamentally unsound--is that the PV industry thrives on government subsidies. Germany, Das said, has 52% of the world's installed PV base. The German government promised a buyback fee for the next 20 to 30 years, which created huge domestic demand for PV.
Germany also offered subsidies for PV companies to set up manufacturing in Germany. Industry giant First Solar, for example, had 40% of start-up costs paid when it was wooed to set up shop in Germany. "The market is still held up by subsidies," asserted Das.
Why are electronics companies excited about the PV industry? Das explained that silicon-based PV "leverages off of the back of the supply chain" in electronics-producing regions such as Asia. Plus, amorphous silicon PV, better known as thin film PV, should grow from 6% of total PV production today to around 20% over the next 5 years.
Still, Das said PV technology "isn't quite ripe because the whole thing is held up by subsidies." If you remove the subsidies, it all comes crashing down. Despite this caution, PV production costs will decline. In the next 18 months, Das said, "about 100 silicon fabs are going online" and will create over supply, reducing the price of silicon PV.
This means crystalline silicon PV will be around for a while, even as thin film and other technologies grow. East Asia, for example, is using flat panel LCD technology to develop relevant PV processes. "But [competing PV technologies are] still a long way from having an impact on silicon," Das stated. But as these technologies do forge niches, they will start to "erode market share.... Silicon got cheaper faster than most people expected. We do believe there is a place for all these technologies," but they will increase market share slowly, and eventually at silicon PV's expense.
Another technology to watch that isn't currently being discussed is printed photovoltaics, Das asserted. "Most of the companies see that as an endgame," which means a boon to the growing printed electronics sector in general.
OMG's Michael Carano continued the PV discussion, focusing on PV materials and processing similarities that are similar to printed circuit board manufacture.
Carano observed thin film PV applicationss are "growing at a strong rate." He mentioned companies like First Solar that are developing thin film technology even though they have a silicon wafer-based PV business. "There was a concern...when silicon went up over the $40 spot price" causing companies like First Solar to investigate other technologies. Those prices have come down now, but that has not slowed the thin film PV manufacturing trend.
PCB chemical companies can develop PV processes, Carano said, including everything from cleaning the raw silicon wafer, etch steps, plating, screen printing and so forth. One interesting observation is the amount of heat required to create a PV panel--900°C. Carano quipped, "You're talking about a green technology, but you're consuming a heck of a lot of energy to heat this thing up."
As he summed up the plating process for PV, Carano said "It's basically a circuit board, without holes." Another plus that points to the circuit board industry, rather than the semiconductor industry, as a perfect PV player: no cleanroom environment is required. "It's more like a circuit board facility," Carano remarked. "It's a wet process, things that we are used to."
Can fabricators get into this game? Carano thinks so, based on the similarity of manufacturing processes, but he cautioned, "I wouldn't recommend you do it in your current facility. I do know of two [fabricators] in Taiwan that are doing it, but they are doing it in separate facilities."
Still, it's not going to be easy to get into the photovoltaic industry. "We vetted this thing out six or seven years ago," Carano stated. Yet even though it might take time for our industry to get into the PV business, Carano insisted, "There are potentially opportunities for everybody."
Fred Johnson of Schmid gave the equipment side of the PV equation. Schmid has worked with a number of suppliers, including Rohm and Haas Electronic Materials, to create full turnkey solutions for photovoltaic makers. This from a company that grew up automating circuit board processes.
"Schmid is primarily involved in turnkey processes," said Johnson. He said these installations cost "a lot. Really, a lot." Johnson showed that just the silicon processing alone is a $300 million investment, the wafer line is $190 million average investment, the cell production line is another $80 million. Added to that, Johnson said, "is the 20 megawatt capacity of your line for module assembly is another $25 million. It's a huge capital investment. It's a big, big, big, big capital investment."
Fresh off the realization that the photovoltaic industry will be more of a long-term strategy than a short-term panacea, attendees were treated to a look inside Sanmina's current business. Dr. Sundar Kamath of Sanmina examined what is making his company optimistic about its future.
First, Dr. Kamath asserted there is still plenty of room for EMS growth globally when one considers how much is electronics production is still captive. "A large chunk is still captive and within the OEMs....From an outsourcing perspective, we have a lot of potential to continue to grow. One message is the EMS industry will continue to grow, but the challenge is ...the margins."
Before Western readers get too excited, Dr. Kamath asserted that "most of the growth will be coming from emerging economies." Yet even with predominant industry growth in Asia, Dr. Kamath believes the U.S. EMS industry will still grow from a $51 billion to $65 billion industry. "The business will still be sustained in the higher cost regions." He used his own company as a model, pointing out that Sanmina at one time had 18 Bay Area facilities and observing that past success "was a formula to be profitable in one of the highest cost regions."
High-cost regions, Dr. Kamath explained, are still used as gateways for product development, and then very quickly the product is moved to low-cost areas. For Sanmina, that means Mexico, Hungary and soon Chennai, India, where the company is building a complete fabrication and assembly campus.
Dr. Kamath continued his presentation with a look at manufacturing issues, such as signal integrity, materials characterization, embedded passives and a new embedded ESD process--all of which are being addressed by Sanmina. "We've invested quite a bit in characterization. Much needs to be understood when you're dealing with more complex materials sets."
Sanmina sees growth coming in sectors like communications, medical electronics and defense/aerospace. All these areas are bolstered by a need for EMS logistics and repair services.
Prismark's Phil Plonski closed the day with a talk about Industrial Electronics. His company has worked with IPC and produced a study detailing what the sector is, and how industry companies can create strong niches within this very diverse sector.
Overall, this was a solid first day of market meetings. Tomorrow's agenda includes a Market Outlook talk by venerable industry forecaster Walt Custer. Make sure to check out I-Connect007's exclusive video coverage of this presentation early next week.