WKK's Hamed El-Abd on the Current State of China

Estimated reading time: 15 minutes

El-Abd: Yes. We designed and built the automation equipment. Our customers that were visiting the machine and seeing it for the first time were so impressed. We had a client this morning say, "Boy if I had known you had that I would have invested in it.” Because he bought something that was 10 times the price to do what he wanted to do for what we were doing there.

Matties: The other thing I noticed in your booth was a direct imaging system. Tell me a little bit about that.

El-Abd: That's a new system and of course there's a lot of direct imaging on the market, and there's the DMD mirrors. There are the lasers, and then there are the LEDs. We’re working with a Canadian company to bring in this brand new technology. It's cutting edge, and the technology is different from everything else. It's going to be faster than everybody else's technology and more cost effective. It’s extremely inexpensive to operate. When you consider any machine needs to plug into a 3-phase, this thing will plug in 700 watts like you're using a hair dryer.

Matties: What sort of speed are you talking about for prints like that?

El-Abd: 300 panels per side in about 12 seconds. We've already tested it running at that speed. We can consistently do 20-micron line and space and we can go down to 15 easily. We've done 15 now, but we're going to stick to the 20-micron area for now.

Matties: There is obviously a large demand for direct imaging.

El-Abd: Yes. The market for direct imaging machines in China is just about 500 machines a year. We think that once we launch the machine in a few more weeks we will be a major player in this field. That's what we've been looking for. For sure, we will be a major player.

Matties: I think that 12 seconds is about equal to others, though there may only be one at that level at this point.

El-Abd: We think there are one or two, but the point is, from a customer perspective, you have to look at the whole package—cost of ownership, reliability of your actual imaging, how good is it, how good are the line walls and things like that. I think that when customers see what we have compared to others, the decision will be easy to make.

Matties: It's not just speed, it is also quality and results. Is there anything we should talk about that we're not covering yet?

El-Abd: I think the most important subject that is on everybody's mind today is: How fast and how much can you automate? I'm a broken record. I talk about it all the time because the bottom line is that the cost of business is too expensive in China today. The only way to remedy that is to automate. That's really the main subject. Of course, what worries me today is that so many companies here offer the same thing. It's like if I asked you, "How many car companies are there in China today making cars?" There are over 100. You can't sustain that. I think that over the next 8–10 years it’s going to shrink down to 20 companies. Plus the foreign companies. You can't have 100 Chinese car companies.

Matties: I didn't realize there were that many.

El-Abd: Most people don't.

Matties: I've also heard that there are a number of board facilities closing down in China, as well.

El-Abd: We see that too, because they can't compete. And you have a lot of the big boys that have multiple factories and then they're moth-balling a couple of their factories and running one or two because the demand coming from America and from Europe has really slowed down. When that demand comes back up, they can just turn on the factories.

Matties: Is there a used equipment market that's emerging here because of that? How does that blend into what you're doing?

El-Abd: Believe it or not, you can buy used equipment on Taobao. I was shocked when I first heard that because who the hell would go to Taobao to buy a pick-and-place machine or something. How do you know what you're getting? You don't understand what you're getting. You don't see it. You just buy it off the Internet.

Matties: Along these lines, 5–6 years ago, maybe a little longer, you were talking about the ability of the Chinese to manufacture equipment being world class. I think at that point you had an imaging unit that was really a showcase of what could be possible. Now what I'm hearing and seeing is Chinese equipment is being exported to places like the United States.

El-Abd: I think that Americans don't really understand Chinese equipment yet, and the Chinese, if they have a fault, it’s that they don't know how to market their equipment and they don't know how to take care of the equipment in the field. They need to understand that if you're going to go into the U.S. or European markets, you're going to have to have a service system so that engineers can repair, install and take care of the equipment. They don't understand that yet.

Matties: I see a lot of them just now going in and finding a distributor there and letting them handle it, but the appetite for Chinese equipment in America is growing. I saw Americans here sitting right where you are saying, "I want a Chinese etcher or a wet process."

El-Abd: Because a few years ago they couldn't compete and today they can. I don't know if you were aware, but General Motors is now exporting their Chinese-made Buicks to the United States for the first time. I talked about that like 8–9 years ago. The Americans said, "Are you crazy? No way in hell is that ever going to happen." And now? Now it's happening. The Chinese made car is as good if not better than the United States made car. It's a fraction of the price.

Matties: You probably know more about this than me, but it seems like the posturing between China and America has more tension than ever.

El-Abd: I think that on the outside there is tension but on the inside, everybody knows you can't really allow the tension to get out of control, like it has between Turkey and Russia. You can't let that get out of control. I think that China and the United States both know that they need each other and they must work together on all areas.

Matties: Military included.

El-Abd: Military included, and you cannot go and create serious tensions, not even in the South China Sea or anything because there's too much at risk. What would China do if the United States shut down their economic lifeline? It's a two-way street. You can't do that. We need each other. Plus, not to mention the amount of money that the Chinese are holding in U.S. banks. You're talking about a trillion dollars. Are they ready to take a hit like that? No. There's too much at stake. It's not going to happen.

Matties: You mentioned Whelen earlier, the lights-out factory. They’ve built a model saying that we can have manufacturing in America to compete against the Chinese or anywhere in the world.

El-Abd: My prediction is within 10 years, that's going to be the model for all manufacturing worldwide because you will have factories in China that will be the same. You'll have factories in America and in Europe all producing for the local markets and keeping these enormous transportation problems as low as possible.

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