-
- News
- Books
Featured Books
- smt007 Magazine
Latest Issues
Current IssueBox Build
One trend is to add box build and final assembly to your product offering. In this issue, we explore the opportunities and risks of adding system assembly to your service portfolio.
IPC APEX EXPO 2024 Pre-show
This month’s issue devotes its pages to a comprehensive preview of the IPC APEX EXPO 2024 event. Whether your role is technical or business, if you're new-to-the-industry or seasoned veteran, you'll find value throughout this program.
Boost Your Sales
Every part of your business can be evaluated as a process, including your sales funnel. Optimizing your selling process requires a coordinated effort between marketing and sales. In this issue, industry experts in marketing and sales offer their best advice on how to boost your sales efforts.
- Articles
- Columns
Search Console
- Links
- Events
||| MENU - smt007 Magazine
The Pulse of SMT in North America
December 31, 1969 |Estimated reading time: 7 minutes
By Gail Flower and Michelle M. Boisvert, SMT
To plan your destination, you must first assess where you are. Therefore, SMT has gathered data on where the surface mount equipment, materials, and EMS/ODM markets are, and where they are headed. High-volume board production is occurring outside of North America. The migration of electronics assembly to areas of low-cost labor China, India, Hungary, and most recently Vietnam continues. North America represents a region boasting more low-volume/high-mix electronics assembly, with the exception of Brazil and parts of Mexico where labor costs remain low and higher volumes abide.
Most growth is elsewhere. Between 2006 and 2011, for instance, iSuppli forecasts that Vietnam's contract manufacturing will have a compound annual growth rate (CAGR) of 121.9%. Thailand is projected at 8.7% growth, Malaysia at 7.1%, and Singapore at 6.9%. Considering the industry lows of 2001, the electronics market became healthy and stable once again in 2006. Worldwide, the market continues to improve. However, if IPC's North American PCB book-to-bill is used to describe that market, stability not growth could represent the pulse of the electronics assembly market.
Global EMS/ODM markets should grow at a rate of 11.6% until 2010, but the North American segment will only see 6% of this.1 North American EMS/ODMs netted $49.6 million in 2005, with Mexico holding on to $13.4 million. In 2010, North America is predicted to reach $66.3 million, with Mexico growing $13.8 million in revenue, for a total of $27.2 million. During this time, Asia had $85.million in 2005 and is predicted to reach $186.7 million, $105 million in China.
Hot SpotsThe North American OEM market for automotive electronic products is expected to rise 6.7% yearly through 2008 to $33.3 billion exceeding overall industry growth. Due to its level of light vehicle production, the U.S. will continue to dominate North American automotive electronics demand; however, the growth of the Mexican automotive electronics market will be stronger than in the U.S. Potential for growth stems from advanced electronics such as active tire-pressure-monitoring systems, which are U.S.-government mandated. The increased introduction of hybrid-electric automobiles that rely on electronics for power, control, and safety integration enables growth in the automotive sector.
Frost & Sullivan identified the North American electronics medical device market as healthy, growing from $3.79 billion in 2006 to an estimated $8.9 billion in 2013. Less of this market is likely to go overseas due to certifications, liabilities, Food & Drug Administration (FDA) guidelines, and the protected nature of these high-profit-margin products. The medical market is a niche segment of overall electronics assembly, encompassing 3%. However, this is a portion of EMS that most likely will remain in North America.2 Other markets most served by North American companies include communications, industrial electronics, instrumentation, and government.3
In 2006, manufacturing for military/government markets held 15% of markets served, up from 10%. While the Americas will maintain its grasp on the military electronics manufacturing market through 2010, that region does lose share in other markets, such as medical and industrial, from 2005?2010.4
Overall, small (under $20 million in sales) EMS firms in North America saw a 10% increase in revenue in 2005. Large companies (over $100 million in sales), however, decreased by $5 million in that time. Offshore relocation may be the culprit. The good news is that Asia does not encompass all low-cost manufacturing regions. In North America, Mexico the precursor to China in low-cost manufacturing outsourcing is expected to see a 15.2% CAGR through 2010. Reasons such as intellectual property (IP) protection, logistics, quality concerns, and import/export taxes have been given for this move back to manufacturing in Mexico.
SMT EquipmentWhen it comes to SMT equipment, North America maintains a significant portion of the global pie. For instance, North America consumes 12.9% of the world market for pick-and-place equipment at present, with 89% of that solely in the U.S. Most placement equipment producers agree that the number of units sold in 2007 is down slightly from 2006. One industry expert estimated that the entire market for pick-and-place is $350 million; however, few units, such as those from Contact Systems and Universal Instruments, actually are manufactured in the U.S.
Industry experts agree that the picture for cleaning equipment in the electronics industry is different. The market is smaller, with an estimated $10 million in North America and $30 million worldwide. The U.S. has become the largest supplier of cleaning equipment. Companies such as Austin American Technologies, Speedline Technologies, and Aqueous Technologies have held their own in a niche area by offering the right equipment for a changing, lead-free, environmentally friendly, materials-conscious market.
The cleaning chemistry market is equal to, if not greater than, the equipment market. According to those supplying chemistries for cleaning electronics boards, stencils and assemblies, the North American market ranges from $10 million to $12 million, with an estimate of $25 million worldwide. Though board assembly is migrating to lower-labor-cost areas, in North America there are more high-tech medical, military, and automotive assemblies that have longer product life cycles. North America still maintains the greatest semiconductor market share for chip consumption. Because cleaning is required for the smaller advanced packages made from these ICs, cleaning chemistries must be able to meet the challenge. Therefore, the market for cleaning chemistries is expanding, according to companies such as ZESTRON, Kyzen Corp., and Aqueous Technologies.
The move to lead-free processes has affected growth in reflow equipment sales positively from 2003 through 2006. At present, most suppliers reflect a lull in sales; average selling prices are drifting downward as well. Electronics manufacturers producing lead-free products according to the European Union's (EU's) RoHS legislation may have already purchased new equipment in the 20032006 time windows, and now sales have slowed. The market for reflow equipment is about $200 million, with the U.S. and Europe at parity with approximately 25% each; Asia claims 50% of sales. In North America, the market for selective soldering reflects growth, according to estimations from equipment suppliers in this segment. Sales in the rest of the world, especially Asia, are increasing faster than in North America.
The solder supply market is growing in line with gross domestic product (GDP). Materials suppliers, particularly solder manufacturers, have benefited from recent environmental legislation, including the EU's RoHS Directive, which has partially spurred purchases of lead-free solders. However, adjusted solder alloy compositions containing more tin than tin/lead eutectic solders, as well as silver, are causing pricing pressures for solder manufacturers and suppliers. With costs of tin and silver reaching one-year highs, solder companies adjusted prices on tin-bearing solders. A report from the International Tin Research Institute (ITRI) forecasts that 2007 consumption would outrun raw-tin supply availability. Surcharges are expected to continue throughout 2007.
Additional pressures have caused silver prices to rise in the past 18 months. Increased use of lead-free solder alloys, particularly tin/silver/copper (SAC) formulations, has spurred this price increase. Conversely, manufacturers haven't settled on one "special sauce" alloy composition for lead-free soldering processes. Because of reliability concerns, manufacturers are moving away from SAC 305/405 formulations. Particularly in portable electronic devices that are subjected to the wear-and-tear of everyday life, manufacturers are experimenting with SAC-based solder balls containing lower amounts of silver (0.3% to 2.5%) and dopants in small quantities, to combat intermetallic failures. Such failures occur as a result of drop or shock, as well as impacts often associated with product shipping and handling. Lowering the silver content may increase pliancy of the bulk solder joint by reducing its elastic modulus and intermetallic thickness. Because of this, there still are additional growth areas for companies with competitive lead-free offerings.5
While the current trend in the manufacture of solder materials is to move production out of the U.S., it remains in North America, with a large amount of materials being produced in Mexico. Moving to lower-cost manufacturing regions may offset the historically high metal costs, yet paste prices remain relatively unchanged. Maintaining profitability at a level that allows sufficient research and technical support is a challenge for all solder manufacturers, specifically those based in higher-cost manufacturing regions such as the U.S. Pricing pressures also vary from region to region. Materials with higher productivity, yield, and rework reduction are less valued in low-cost-labor markets. Environmental issues also vary by region; however, the lack of a formal RoHS initiative in the Americas has made the transition to lead-free significantly slower than the rest of the world, contends Mitch Holtzer, global product manager, Cookson Electronics. To experience continued success, North American-based solder suppliers must continue to develop materials that increase yield and throughput, while reducing process variations. SMT
REFERENCES1. Executive Market and Technology Forum, "20052006 Industry Analysis and Forecast of the Worldwide Electronics Manufacturing Services (EMS) Industry," IPC, October 2006.2. Tanel, Gary, "Electronics Manufacturing Trends in the U.S.," SMT, May 2007.3. Chanoff, Matt, "Five-year Forecast, EMS and ODM Manufacturing: Drivers, Market Sectors, Geographies," Technology Forecasters, Inc., Quarterly Forum, Sept. 2006.4. Moloznik, Bruce; Holtzer, Mitch; Dixon, Doug; Berntson, Ross; "Global Impact of Rising Metal Costs," SMT In-Depth: Solder, May 3, 2007.5. Reid, Karen and Wable, Girish; "Benefits of Changing BGA Solder Ball Metallurgy," SMT, August 2007.
Gail Flower, editor-in-chief, SMT, may be contacted at (603) 891-9395; gailf@pennwell.com. Michelle M. Boisvert, managing editor, SMT, may be contacted at (603) 891-9310; mboisvert@pennwell.com.