The EMS ‘State of the Union'

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We recently heard President Biden’s State of the Union address, and it got me thinking that perhaps now is a good time to look at our own post-pandemic “state of the union” in the electronics manufacturing services industry. I will describe several key issues that our customers around the world are facing as we move forward into a new normal.

Accelerated High-mix Trend and Part Availability Constraints
One trend that appeared prior to COVID (but has accelerated since) is the increase in the number of unique products being built—the move to higher product mix and variety. Instead of a single product being built in a day, higher mix facilities are building several unique products with smaller production volumes. The line beat rate (Tact time of the line) becomes less important as the number of batches increases, and the changeover time becomes more significant.

The high-mix trend, together with supply chain issues, is driving a need for more agility in production schedules based on part availability. As product mix increases, part availability becomes a constraint to having unlimited agility to move from product to product.

Since companies are no longer able to acquire parts on demand as they did before the pandemic, they are forced to increase inventories and store components for future use. In addition, they are often driven to find alternative component sources, making the approved vendor lists (AVLs) more critical than ever. AVL management will also put additional pressure on communication channels between OEMs and EMS suppliers, as the initial AVL created by the OEM will need to be adjusted in real time based on actual component availability.

I also see further automation around component availability and purchasing as key to overcoming this challenge. There will be a movement toward component portals that deliver real-time data on stock levels and lead times for components rather than relying on manual methods that rely on human intervention. However, this is particularly challenging when it comes to semiconductors where AVLs focus mostly on passive and discrete components. Although simple logic devices can also form part of an AVL, it is the more complex components that are more specific, so less likely to have functional and fit replacements. Even if it is physically the same package, with the same number of pins, different pin outs can be common. It only takes one part to be unavailable to create the situation where the build can't be completed. This has led some OEMs to redesign products to remove dependencies on parts that are proving to be much harder to source. We have talked about design for manufacturing (DFM) for many years, but we may soon see specific designs being constantly adjusted for part availability. This will also contribute to the increase in higher-mix manufacturing.

Reshoring to the U.S.
Another trend is the reshoring of electronics manufacturing to the United States or Mexico and away from China and the Asia Pacific region. Obviously, the labor costs are higher in the U.S. compared to Asia-Pacific, so being able to build products efficiently in the U.S. requires more digitalization and automation. Being able to efficiently create a digital twin of the product once and then using that twin to create the requirements for each machine in the line to reduce duplicate effort will be key to increasing U.S.-based production. With the increases in product mix, being able to efficiently manage the changeovers will also be another critical element of U.S. manufacturing. Deeper partnerships between companies will be necessary to further integrate the different solutions needed to effectively manage higher mixes and their impact on changeovers. In practice this will mean earlier involvement for the EMS company with the OEM and getting more advanced notice of what will be needed. Maybe a footprint has been designed to only accept a single part but adjusting that a little allows another part to be substituted in its place. Now the EMS has a choice of two parts and either one will fit the board.

Further consequences of this reshoring will be the human resource requirements. Finding sufficient people to run a successful electronics assembly business, or any business for that matter, in the current economic climate is highly challenging. However, there are many incentives for companies to consider these paths. The recent U.S. Inflation Reduction Act affected how rebates for electric cars were calculated based on the amount of U.S.-sourced content. Although details are still being defined, expect to see other federal rebates being applied in similar ways to help drive more U.S. manufacturing.

Next year, IPC APEX EXPO moves back to Anaheim after several years in San Diego. My first one of these trade shows was in the mid-90s in Anaheim, so I see it as coming full circle after over 25 years attending the event (missing only that one COVID year). We still have many challenges ahead as we navigate the “new normal” but given our collective capability, I’m sure we will overcome them together.

Mark Laing is a business development manager for Siemens Digital Industries Software.

This article orginally appears in the March 2023 issue of SMT007 Magazine.


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