-
- 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
Navigating the Perfect Storm
December 31, 1969 |Estimated reading time: 4 minutes
By Mike Buscher
By now, I'm sure everyone is familiar with the movie "The Perfect Storm," in which three forces of nature combine to create a weather event far greater and more powerful than any in recorded history. As the storm builds, the captain and crew of the Andrea Gail make some decisions that eventually lead to the loss of the ship and the lives of the crew.
Right now, many of us in the electronics industry feel as though we are experiencing our own version of the "perfect storm." Like the one portrayed in the movie, our event seemed to set up quickly and strike with unparalleled force.
What Happened?Over the past three or four years, the economy has been strong and our market has been robust. The SMT industry was facing blue skies, a steady wind and perfect sailing. Technology was racing ahead, with more powerful microprocessors driving greater functionality, and more components than ever being placed on printed circuit boards.
So what happened? I'm sure everyone has an opinion, and I'm certainly no economist, but like the movie, I believe our "perfect storm" was the result of the convergence of at least three events:
- The steady increase in energy prices during 2000
- The actions taken by the Federal Reserve in its never-ending quest to keep the inflation "genie" in the bottle
- Product/technology stagnation.
Looking back over the past 12 to 18 months, we saw significant price increases in virtually every sector of the energy industry. The price increases ate away at disposable income and corporate profits. By year-end, dark clouds were forming on the spending horizon.
During this same period, the Fed began worrying about inflation and the "overheated" economy so they raised interest rates. In addition to pushing up interest rates, Alan Greenspan continually cautioned us on financial fundamentals, potential market volatility and the risks associated with over-valued stocks with a strong inference on the DotComs. As far as the DotComs, what did we care? The functionality and the services they provided made people want to buy more electronics products, and we have to admit, we liked that.
We sat by in anxious anticipation as companies began consolidating to build market share and raise share prices, wondering deep down how they would ever make it work financially or culturally. With the closing of every deal, more production equipment was ordered. Deep down we all wondered who was buying the additional output, yet the market continued climbing, so who were we to question?
By year-end 2000, the waves of technology that we had joyfully ridden for the last three or four years began changing. It seemed the entire industry had been propelled by what I believe was "the golden age of communication." We were racing for increased connectivity and to tap into the Internet and the plethora of services provided by those DotComs. As we entered the fourth quarter of last year, the "seas" of telecommunication really were getting rough. The service providers were in trouble, the infrastructure suppliers knew they were next and the handset manufacturers couldn't give their cell phones away. As 2000 rolled to an end and we all toasted another great year, little did we know that in less than a quarter we'd all be toast.
We were about to face the perfect storm: the economy was cooling; the stock market was beginning to deteriorate, along with consumer confidence; we had more capacity than products to build; the "golden age of communication" was waning; and the folks that created the next technological wave from silicone and software were nowhere to be found. In electronics assembly it doesn't get much worse.
Navigating the StormLooking back, I think we all saw the storm coming. What we didn't see were the speed and fury with which it would hit. So now that we're in it, what do we do?
Like a ship in a storm, a company must prepare to meet the challenge of its environment. The first thing we all did (or still are doing) was "batten down the hatches" and prepare for rough weather. We analyzed all expense levels and abandoned anything that specifically wasn't focused on revenue generation or process/margin improvement. Then we all began to wonder how bad is it going to get and how long is it going to last? I think we can safely answer at least a part of the question it's bad! And I think we also can say rather safely that it's lasting longer than expected. It's also obvious at this point that we're not going to "save our way to prosperity." We've got to do something different.
As an industry, we need to work closer with our clients to get more production out of the equipment-installed base. I see a lot of companies approaching the supply chain trying to "wring" out additional price concessions. No one I know is getting fat on their margins, and the thing we must all face is that we have more capacity to build than we have products to be built, so as an industry it's not doing us any good to beat on each other. This downturn is difficult for us all, but by working together smartly and as partners, we can weather this storm and come out better than we entered.
MIKE BUSCHER, president, may be contacted at Assembléon America Inc., 5110 McGinnis Ferry Rd., Alpharetta, GA 30005; (770) 751-4463; Fax: (770) 751-4439; E-mail: mike.buscher@philips.com.