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EPTE Newsletter from Japan - Teardown & Cost Analysis

Topics of the Week

Teardown & Cost Analysis

In today's consumer electronic industry, teardown analysis for new products is very common.  Many industrial media and market research companies purchase items with the sole purpose of tearing them apart to scrutinize their components and complexities.  When a new electronic product is rolled out, tear down reports for those products are available in industrial magazines within a couple weeks.  Some reports also provide cost analysis for the new products so manufacturer's margins can be determined.   Once Apple's iPhone hit the street during June, several teardown reports with cost analysis were available a couple of weeks later.

Since DNK Research specializes in the engineering of high density electronic packaging and printed circuits, I find it frustrating when the teardown reports  briefly mention the printed circuit boards and assembling; especially flexible circuitries.  Most of the reports exclude information about the circuit boards within the electronic products.  The photos available in the report show the main circuit boards because most of the components are mounted on them; however, the reports do not analyze the construction or the technologies used for the circuit boards.

Usually, cost analysis for circuit boards is excluded, and if they are mentioned, the will briefly talk about rigid circuit boards.  The teardown reports frequently ignore the existence of the flexible circuits.  Even though I cannot see the flexible circuits in the photos, my educated guess tells me they are present because of specific connectors used and the way the devices are wired.

The primary topic in a teardown report is semiconductor devices and their suppliers; passive components and interconnection devices (such as connectors) are secondary.  Sometimes the report will provide the list price for components and comment on the manufacturer's profitability for their new item.

I am skeptical about the accuracy of the cost analysis.  Normally, list prices for components (the figure used in the analysis report) are much higher than what assemblers actually pay for them, and the costs for circuit boards are significant compared to other components. This is especially true for flexible circuits; some of the critical parts in portable electronics such as cellular phones and digital cameras.  Not only are the costs significantly higher, but you must also account for electronic packaging technologies.  In an effort to reduce purchasing costs, manufacturing buyers spend a lot of time negotiating prices for the expensive flexible circuits.

Since rigid circuit boards and flexible circuits are custom made for each mode of electronic product, and there is no list price for the interconnecting parts, it's a difficult task for an outsider to estimate manufacturing cost for electronic products. Other variables plugged into the cost equation that are difficult to determine are assembling costs and other additional manufacturing costs.  Indirect costs such as plant, equipment, home office and other divisions such as central institutes muddy the water even more to provide an accurate cost analysis.

How about delivery and other services?  We must account for them... somehow; these consumer products have to get to the market.  Usually, retail prices for consumer products are determined by doubling the cost to the retailer.  Before you think that big box electronic store is cleaning up, their labor costs are more than the manufacturers.

In summary, it's very difficult for an outside entity to calculate the dead net cost of an electronic item.  The teardown report still has value relative to determining which components are used, and the vendors who supplied them.  It is also valuable to compare costs between the products and manufacturers.  However, the reports are misleading to readers where costs and pricing are addressed. 

Dominique Numakura, DKN Research (dnumakura@dknresearch.com)

Headlines of the week

(Please contact haverhill@dknreseach.comfor further information of the news.)

1.      Chisso (Major chemical company in Japan) 8/27

Has developed a new polyimide base liquid as the printing ink of ink jet printers for the insulation layers of the printable electronics.

2.      Toray (Major organic material supplier in Japan)  8/27

Has increased the manufacturing capacity of photo-imageable liquid polyimide resin "Phhotonese" to 150 tons per year.

3.      SK Electronics (Photo mask supplier in Japan) 8/29

Will invest 14 billion yens to build a new plant of photo masks in Ibaraki Prefecture for manufacturing process of LCD devices.

4.      Fujikura (Major flex circuit and optical fiber supplier in Japan) 8/29

Has developed a new cooling system with heat piping for the advanced graphic chips. The new system will be shipped to AMD.

5.      SMK (Major connector manufacturer in Japan) 8/29

Has developed a new PLC module for the low cost internet connection in the buildings.

6.      Matsushita Electric Industry (Major electronics company in Japan) 8/29

Has developed a new source driver IC for LCD TV.  The chips of the driver are provided by COF package on a taped substrate.

7.      Nissei Jushi (Plastic material supplier in Japan) 8/28

Will start the injection processing of the carbon nano tube material at JoEtsu Plant in September as the first project of nano-business.

8.      Hitachi Chemical (Major PWB & material supplier in Japan) 8/29

Has developed a new concept of tube circuits "Micro Arts" for analytical equipment. Micron size small tubes are routed on a plastic sheet.

9.      Seiko Epson (Major electronics company in Japan) 8/29

Has developed a new COG (Chip on Glass) process for the driver ICs of small size LCD devices using NCF (Non conductive Film).

10.  Sharp (Major electronics company in Japan) 8/28

Has hold the opening ceremony for the new plant of LCD panels and TVs in Poland.

11.  LG Electronics (Major electronics company in Korea) /29

Has developed a new flexible OLED panel with TFT type oxide semiconductor for the driver circuits.

12.  Mitsubishi Gas Chemical (Major electronics material supplier in Japan) 8/30

Has stated the volume production of the transparent polyimide film utilizing a pilot plant of the PI resins for the optical applications.

13.  Samsung Electronics (Major electronics company in Korea) 8/30

Has developed a 14.3" size high resolution electronic paper (180ppi) utilizing the technology of a-Si TFT arrays.

Interesting literatures about the packaging industry

Articles of DKN Research

1. "2006 Global Material Projection for Flex Circuit" DKN Research, October, 2006. http://www.dknresearch.com/Products.html

2. "Introduction for the Printed Circuit Boards of Car Electronics, Flexible Circuits", (Japanese only), Dominique Numakura, Nikkan Kogyo Shinbun, June, 2006, 2400 yens.

3.New "The latest electronics package, Part XXX, Cellular Phones", Dominique Numakura, Electronics Packaging Technology, September, 2007 

4."Five Year Projection of the Global Flexible Circuit Market" Robert Turunen, Dominique Numakura and James J. Hickman, The Board Authority, Volume 7, August, 2006

5.New "Flexible Circuit Materials", (Japanese only) Dominique Numakura, Denshi Zairyo, April, 2007

6. "Leading Edge Material and Application of Polyimide (Materials for the Advance Flexible Circuits)", Dominique Numakura, CMC publication, August, 2006

7.  "Business Trends and Technology Trends of the HDI Flexible Circuits -

Roadmap for the Ultra High-Density Advanced Flexible Circuits", Dominique Numakura, KPCA, October 31, 2006

From the Major Industry Magazines

1. "Using Physics of Failure to identify Root Cause of Printed Board Failure", Craig Hillman, CircuiTree, August, 2007.

2. "The Real Lesson of the Xbox Failures", Mike Buetow, Circuits Assembly, August, 2007.

3. "Printing Miniaturized Components", Clive Ashmore and Jeff Schake, SMT, August, 2007

4. "BGA Escape/Routing Patterns for Fine-Pitch Devices", Syed Wasif Ali, Printed Circuit Design & Manufacturing, July, 2007.

5. "Optimizing the Wire Bond Process", Paul Reid, Advanced Packaging, July, 2007

7. "Under the Hood, How'd They Do That?", presented by EE Times and Techonline, May 2007