Weiner's World: A Challenge: Looking Forward to 2016 and Beyond

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Editor’s note: This blog was originally published in January 2016 at www.weiner-intl.comand is being reprinted here with special permission from the author

Are you ready for rapid changes in global manufacturing shifts? Are you prepared to seize opportunities arising from new innovations? Are you part of the current mega-merger trend running through the entire interconnect supply chain? Are larger customers and prospects by-passing you because they are uncertain of your future and sustainability? What are your plans for the future? Have you modified your goals (markets, financial, business, products, services)? Is your factory and its equipment aging and outmoded? Have your suppliers vanished? Has the technical support once provided to you diminished or disappeared? What are your plans to compensate for changes in your supply chain? Are you having difficulties in gaining the attention of prospects for your innovations because you are too small or too new? What type of support (supplier, customer, trade association) do you think that you need to grow? What ideas do you have for the future?

Will Taiwan's election of Tsai Ing-wen as its first female president reverse the tone (and cross straits investments and trade) set by the recent handshake between Taiwan's former President Ma and China's President Xi in Singapore last month? Tsai's pro-independence party also gained its first majority in the national legislature, rejecting the China-friendly party that has ruled Taiwan for eight years. Tsai promised to reverse Taiwan's technical sector downward value trajectory of the last nine months. Taiwan's electronic exports have been declining since February and its GNP contracted partly due to woes in the electronics sector. 

Small and medium-sized companies are critical parts of the electronic supply chain in China, too!

China's Ministry of Industry and Technology will set up a $30 billion fund in partnership with Ping An Bank to support the country's electronic supply chain. This follows the recent factory closings of a number of small- and medium-sized enterprises that supplied major OEMs such as Huawei and ZTE. This new fund appears similar to the one established two years ago to increase the size and technology level of the country's IC industry. The latter has been used to buy foreign chip companies and invest in foreign semiconductor technology.

Philip Carmichael, president of IPC in China, will lead a Chinese delegation of 45 to the IPC APEX EXPO in Las Vegas in March. It will be composed of 60% assembly (SMT) people, 20% printed circuit fabricators, and 20% equipment and material suppliers.

Gartner forecasts a decline in global purchases of semiconductor equipment in 2016 of 4.7%, to $59.3 billion, before rebounding to $63.6 billion in 2017 and $69.2 billion in 2018. Capital equipment spending in 2014 was $64.6 billion and $62.3 billion in 2015.

More than 540 companies exhibited at SEMICON Korea in Seoul. South Korea is expected to spend more than $8 billion for front end fabrication equipment this year making it the second-largest fab market in the world. Materials’ purchases are expected to top another $7 billion in 2016.

The following may be of help.

Are you an independent board fabricator that feels overwhelmed by the industry consolidations? Do you need a new approach to improve your competitiveness? Do you need a way to better access large potential accounts? How can you gain visibility for your unique capabilities? How can you find working partnerships to develop new products? How can a smaller company wade through the tremendous maze to gain government contracts?

What is the single most important thing you need to help your business succeed in 2016? How can a trade association help fill these needs? How can an IPC membership help you face the challenges of 2016 and beyond?

Come to IPC’s Town Hall Meeting at the IPC APEX EXPO show in Las Vegas in March 2016 and find out. Ask your questions. Tell IPC what they can do to help you succeed. Contact Tracy Riggan or Sanjay Huprikar if you have further questions about this special event, or click here for more details. 

Consider this: There was a time when companies in the U.S. comprised a significant part of the world's production. The members of its domestic supply chain spread their technologies throughout Asia and Europe by seeking out and responding to distributor organizations. Now that the PCB center of gravity (both fabricators and suppliers) has shifted to the Far East, it may be the time for those still building and assembling boards in America to reverse roles in their supply chain structures to remain relevant.

Do not count on reshoring to help you! A recent report, the A.T. Kearney U.S. Reshoring Index, shows that in 2015 it declined in the U.S. for the fourth year in a row.

The German PCB manufacturer GGP Schaltungen GmbH applied on January 4 for insolvency proceedings to begin. On January 7, Thomas Peters, CEO of GGP said, "GGP continues to produce and deliver without restrictions and our customers and suppliers have already assured us of their full support." A company spokesman stated, "The very extensive (and inevitable) investments into the modernization of our machine park have ultimately led to debt service, which we were unable to generate against the low-margin competition in Asia."

The EIPC will be holding a workshop on Metallization & Surface Finishes at the Frauenhofer location in Berlin on February 17. Paul Waldner of Multiline International Europe will chair the workshop as well as make a presentation on additive as well as semi-additive processes in behalf of eSurface.

Intersolar Europe 2016, the world's leading exhibition for the solar industry and EU PVSEC, the world's largest conference in the field of photovoltaics, will be held at the same time and in the same location as Intersolar Europe in Munich in June, 2016.

EZchip Semiconductor agreed to a roughly $800 million offer by fellow Israeli chip designer Mellanox Technologies, marking one of the biggest deals signed in recent years in which both parties were Israelis. That is nearly double the Israeli-only M&A $476 million annual average of the past 10 years.

Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest foundry, will increase its capital expenditure this year to $9–10 billion. The company expects to complete process and product qualification for 10 nm chips during the first quarter this year, and is on schedule to start production at the 7 nm node in 2017. Chairman Morris Chang said it’s likely that revenue growth for the overall semiconductor industry will fall in a range of 2–3% for the next five years. TSMC plans to start production of 5 nm chips sometime in 2019, about two years after it launches the 7 nm products. The company will likely use extreme ultraviolet (EUV) lithography to make 5 nm chips and is installing third generation of EUV equipment to do so.

Megamergers continue to surge in spite of a shaky market.

Johnson Controls is reported to be in advanced talks to merge with Tyco International. The deal that could be valued at high as $20 billion signals that recent market volatility won't derail a surge in takeover activity. The new company will make Tyco's location in Cork, Ireland its legal and global business headquarters. The inversion will save $150 million in taxes annually as Ireland's corporate tax rate is 19% while the U.S.'s is 28%.

Foxconn, which assembles most of the world’s iPhones, is reported to have offered about $5.3 billion to buy the troubled Sharp Corporation. Japanese officials have expressed concern about letting Sharp and its advanced display panel technology come under foreign control. Foxconn’s high offer is said to be designed to make the deal economic and not political. Meanwhile, the company, also known as Hon Hai, will lay off 320 people at a TV plant and 480 more at a mobile phone plant in Brazil. The latter makes cell phones for Sony Mobile, which is experiencing low demand for its products.

Haier Group, the world's biggest home appliance maker, is buying General Electric's appliance business for $5.4 billion. GE has been well-known in the major appliance business for more than a century. This was the third Chinese multi-billion-dollar foreign acquisition announced in January.

Send us your comments. Share your thoughts. Perhaps together we can find some new solutions and opportunities.

Gene Weiner is president of Weiner International Associates. To contact Gene, click here.