Economic Outlook: Mil/Aero Gaining Altitude and Velocity at Axiom

Estimated reading time: 3 minutes

Oregon-based Axiom Electronics specializes in complex assembly services for aviation, mil/aero, and similar complex high-reliability sectors. In this Q&A, Rob Rowland, director of engineering at Axiom, shares a bullish outlook for 2024 tempered by a few key concerns.

For 2024, how would you describe your economic outlook for the industry and your company's business outlook? What are you optimistic about? What are you worried about?

Overall, things are looking better for the electronics industry and, in general, companies are optimistic that 2024 will be a good year. The outlook for our company heading into 2024 is good. Like many companies, our business was flat during the pandemic, so we are pleased to see things heading in a positive direction. Material availability continues to be our main worry. It is better now than it was during the pandemic, but the mil/aero supply chain has not fully recovered. Inflation and interest rates are also a concern.

What’s your perspective on buying capital equipment with cash vs. financing?

Managing cash is always important. With rising interest rates, financing isn’t as attractive as it once was. It also depends on the cost of the equipment. For example, if it’s less than $10,000 we would lean toward paying cash. If it’s more than $10,000, we would lean toward financing.

Is inventory management and/or supply chain tying up capital you would otherwise use for capital investments?

Yes, inventory does tie up capital and this was an issue even before the pandemic. Some programs have component lead times of nine to 12 months, and even longer in some cases. While we are waiting for these long lead time parts, a key question is, “Do I buy the shorter lead time parts now while they are available or do I wait six months and hope they are still available when I really need them?” Of course, buying sooner ties up capital. This issue will always be a concern for some mil/aero programs with long lead times.

Is the CHIPS Act trickling down to you yet?

We are pleased to see more investment in component manufacturing capability/capacity in U.S. factories, but it will be a few years before it trickles down to our company. In the long run, the CHIPS Act will be a good thing for our domestic industry.

What concerns you most in your growth plans: capabilities, capacity, or competition?

Our biggest concern for 2024 will continue to be material availability. Some of our programs use very unique components that have long lead times, so after we receive a purchase order, we may be in a holding pattern for up to a year. We continued to invest in our capability (people, ERP systems, equipment, etc.) during the pandemic so we are ready for upcoming assembly and test challenges.

How does “going green” factor into your business plan? Is it a cost of doing business or a selling point? Is this something you’re investing in?

It’s a cost of doing business, a selling point, and an investment in our future. There are many ways to be green and reduce our impact on the environment. For many years, we have endeavored to recycle as much as we can (paper, cardboard, etc.). We also recycle plastic packaging material (empty reels, matrix trays, bags) and solder waste (solder paste, dross). We aqueous clean all our boards after soldering so we use a lot of water. We have post treatment capability to clean the water so it’s very clean when it goes down the drain.

Which process technologies hold the most opportunity for growth in the industry in 2024?

For our company, it’s 3D AOI (automated optical inspection) and selective conformal coating. Last year, we invested in 3D AOI machines because they can measure solder joints and other critical factors. Most of our business requires IPC Class 3 workmanship, and in some cases the IPC Space Addendum, so the requirements are tight. Along with visual inspection, this capability enhances our ability to monitor our manufacturing processes and verify the assembled product meets the quality requirements. We invested in selective conformal coating equipment to eliminate the time-consuming task of masking boards. This will reduce our cycle time and increase our throughput.

This article originally appeared in the Economic Outlook section of the December 2023 issue of SMT007 Magazine.