-
- 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
Electronics Manufacturing Trends in the U.S.
December 31, 1969 |Estimated reading time: 5 minutes
By Gary Tanel
Each of us has a perspective on where we think the country is going regarding electronics manufacturing. Recently, I posed that question to 700 EMS executives across the country. Below are the general thoughts and some specific comments as the EMS industry looks to the second half of 2007.
Clearly, the commercial high-volume manufacturing market has gone to Asia specifically China, Singapore, Malaysia, and Vietnam with some of the mid-volume manufacturing going to Mexico. That is common knowledge. What is not are the engineering positions and competencies that we have lost. In America, we like to believe that we have exclusive rights to creativity and innovation. One only needs to look at companies like Sony to see otherwise. Foreign students are flooding to U.S. technical universities and taking the knowledge home with them. We are losing our American human capital edge our engineers.
Joseph Fjelstad, CEO and founder of SiliconPipe Inc., comments, "Loss of manufacturing may lead, ultimately, to the loss of the competitive edge that the U.S. has enjoyed in innovation. This is because manufacturing innovation typically thrives best in proximity to manufacturing, where challenges present opportunities for improvement in a way that research laboratories cannot duplicate. Though the U.S. has a long history of creativity, it does not have a lock on creativity. If the trend continues, and the U.S. divests itself of more significant amounts of manufacturing (beyond prototype and small production runs), risk to the security of the country is something that will need to be considered by political and business leaders."
Tier I EMS companies are driving the price and profits of electronics manufacturing down for everyone. Profit margins are so small in volume manufacturing that one miscalculation can have a significant impact on bottom-line profits in consumer electronics. No other industry has seen such an increase in performance and a decrease in the price of its products.
What's Here?The margins and America's competencies are in niche markets. Ron Lasky, Dartmouth College professor and senior technologist at Indium Corp., says "Contrary to conventional wisdom, the U.S. has a vibrant electronics manufacturing market. The manufacturing is mostly in high-value-add processes like IC manufacture, medical, or military assembly. According to Prismark, 34% of all ICs are manufactured in the Americas. So, the good news is that the bad news is wrong. We make things where money is to be made, we don't make things where there is no money to be made, i.e. consumer electronics." John Myers, Kaye/Bassman International Corp., adds, "Tier II and III EMS companies are growing steadily, but we are finding a shortage of good engineering talent in the U.S. due to engineers having left the industry in the early 2000s."
Intimacy with consumers for the design and development of new products remains the niche of American OEMs. "American EMS providers must become gate keepers to leverage knowledge for managing offshore resources," says Jim Kingman, CEO of InnerStep.
Capital Market PerspectiveRaymond P. Carpenter, vice president, Southwest Securities, Inc., comments, "The last two years continued to be the private, regional Tier II and III EMS providers' propensity to take a regional approach to expanding nationally, through acquisitions, into incremental high-growth areas of the U.S. That is, many of these newly acquired entities remain regionally focused on the customer, and are not fully integrated with the acquirer. Furthermore, these acquirers are primarily fixated on investments that bring low-volume, high-mix customers in industries that provide the best opportunity for superior returns on capital and that remain under-penetrated. These opportunities include military and aerospace, medical, and industrial market segments. These target industries are viewed by many as defensible niche areas of growth and profitability that will remain out of the hands of China and other low-cost regions because of two inherent traits: the necessity to be close in proximity to the customer and the high complexity involved in manufacturing." Carpenter continues discussing the benefits of this strategy. "First, the newly acquired entity remains very close to the customer, both in proximity and relationship, providing for more personalized and dynamic service. Second, although in many instances the acquirer and target are managed separately, they may take advantage of economies of scale related to combined purchasing power of components. Finally, improved diversification of the customer base and the ability to leverage new and existing relationships offers both lower-risk profiles and top-line growth opportunities. We have witnessed this acquisition trend proliferate and become a successful growth and profit engine for many acquisitive private Tier II and III EMS providers."
Over the past few years, our technologies have been consumed in finding technical solutions to government regulations, while trying to maintain some level of reliability. "The biggest trend I see is the greening of products and manufacturing processes to comply with the growing number of legislative directives," says Harvey Stone, managing director of The GoodBye Chain Group.
"The U.S. has 5% of the world's population, yet we consume 4045% of the goods and services provided, notes David Mahmood, chairman of Allegiance Capital Corporation. "There has been more change to our lives in the last 20 years than in the previous 100 years. Those companies that anticipate the direction of the global market will make money." The landscape continues to change and evolve as the rest of the world shares in the global market exchange.
"As individuals, we must be responsible to keep our personal skills first-rate. The days of life-long employment at a place such as IBM are over," adds Lasky. "However, if you are creative and continuously improving yourself, there have never been more opportunities than now in the U.S."
ConclusionAmerica has significant challenges ahead regarding its position in the world market of electronics. I remain hopeful that our creativity and resourcefulness will open areas of growth and international competitiveness. SMT
Gary A. Tanel is an SMT Editorial Advisory Board member, SMTA Dallas chapter president, and vice president of EMS acquisitions for Allegiance Capital Corporation. He may be contacted at (972) 385-9102, ext. 248; e-mail: GTanel@AllCapCorp.com.