Growth Opportunities for Rework and Repair Equipment

Estimated reading time: 7 minutes

According to several market trends, the SMT rework and repair market is on track to continue growing through 2007.

By Raman Monga

Rework and repair no longer is viewed as a non-value-added proposition in the electronics manufacturing industry. Increasingly, it is becoming an integral part of OEMs' and electronics manufacturing services (EMS) providers' service offerings. The high value associated with today's electronics assemblies is significant enough to warrant the purchase of rework equipment. Rework and repair equipment allows electronic assemblers to save valuable electronic components and semiconductors instead of throwing them away when there is a fault found during production. Additionally, the development of precise SMT rework and repair equipment is leading to greater acceptance in the electronics assembly industry.

SMT rework and repair equipment primarily comprises two major technologies manual SMT rework and repair equipment and semiautomatic machines.

Traditional manual SMT rework and repair equipment market comprises soldering/desoldering workstations and handheld tools. Although manual equipment is the dominant segment in the rework and repair market, it has been losing market share to the semiautomatic rework and repair equipment market. The manual process is labor-intensive and finding skilled labor is a major challenge for several assemblers, thus pushing them away from manual equipment. The manual process also is much slower than semiautomatic rework and repair, which limits its use in high-volume electronics assembly markets.

The growth opportunities in the semiautomatic market are expected to be good between 2002 and 2007, as assemblers look for faster machines that can help increase their production yields. Another benefit to using semiautomatic rework and repair equipment is that it offers higher placement accuracy, along with greater flexibility to rework different types of components and electronic advanced packages.

The semiautomatic rework and repair equipment market can be further segmented into high- and low-end equipment. What differentiates these two products is the level of automation, placement accuracy and process control. Between the two markets, the low-end rework equipment market is projected to experience a higher growth rate because it is less expensive and the lower rate of return on investment is difficult to justify when purchasing high-end equipment.

The rework and repair equipment market is undergoing enormous technological changes. As electronic assemblers continue adopting increased integration levels, the tolerance on assemblies is becoming tighter. New packaging technologies are requiring rework and repair as precise as the original manufacturing process itself. The industry also has been innovative in developing rework and repair equipment for complex packages, such as ball grid arrays (BGA), flip chips and chip scale packages (CSP). Advanced packages are gaining popularity because they offer higher input/output (I/O) counts per unit area and smaller footprint than conventional packages. Because advanced packages are leadless, electronic assemblers can reduce overall product size. It is expected that the telecommunications industry will be the driving force for the advanced packaging market, especially for CSPs. Rework and repair equipment manufacturers that cannot develop products that effectively rework advanced packages will see this as a barrier to entry in the telecommunications and EMS industries.

Despite a sluggish U.S. economy, the EMS industry is propelling demand for SMT rework and repair equipment. OEMs continue outsourcing to EMS providers to realize manufacturing cost savings, avoid capital equipment cost and improve time to market. In a bid to become more competitive and gain larger contracts, EMS providers are expanding their services to include warranty and repair services. Repair and warranty services are becoming an increasing part of EMS providers and they require more rework and repair equipment than in the past. The EMS industry provides a lot of growth opportunities for rework and repair equipment manufacturers that target this market. It is anticipated that the EMS industry will continue growing over the next five years and continue expanding their warranty and repair services.

A technology trend that is providing growth opportunities for equipment manufacturers is the integration of optical, or X-ray inspection, into rework and repair equipment. Rework and repair equipment that integrates X-ray is needed to inspect BGA packages that cannot be inspected with optical inspection methods because the solder balls are located under the device. Rework and repair equipment manufacturers that provide integrated inspection, rework and repair equipment can charge a premium for their products and increase profit margins. It is anticipated that this product mix also will continue providing growth opportunities over the next five years.

Rework flexibility is a key consideration that can and should be a major driver in the selection process. When rework is performed, it is critical to ensure the process is successful and no damage or unnecessary thermal stress is applied to the assembly. As manufacturing processes and component packaging technology change, there always will be a need for rework equipment that is reliable, repeatable and portable. Rework equipment must be flexible and adaptable to meet the challenges of today's rework and repair environment. It is critical for rework equipment manufacturers to continue upgrading their product offering and stay current with today's production needs and packaging innovations. The manufacturers that will be successful in the future will be informed of market conditions and take advantage of the key growth opportunities that are present in the marketplace for rework and repair equipment.

Geographic TrendsThe market share for North America in the SMT rework and repair equipment market was 36.6 percent in 2000. It is anticipated that the North American market will increase its market share to 37.7 percent by 2007. The North American market primarily is driven by the EMS industry with a high focus on quality and reliability. Advanced package use, such as BGAs, microBGAs, flip chips and CSPs, is anticipated to help fuel growth for new rework and repair equipment sales. Another trend in North America that is expected to help push sales is increased electronics manufacturing in Mexico. It is expected that new sales will continue rising once economic conditions improve.

Less electronics assembly is being done in Europe because of high labor costs. However, Eastern Europe is starting to see an increase in assembly because of its cheap labor poll compared to Western Europe. Several in the electronics industry have been predicting that Eastern Europe will be the next hot market for SMT equipment manufacturers; however, demand has not risen as expected. It is projected that demand will continue rising in Eastern Europe. Therefore, the European market share of the total world market is expected to decline to 18.5 percent in 2007.

Asia is expected to provide solid growth opportunities for SMT rework and repair equipment manufacturers because assemblers from other locations continue relocating manufacturing facilities to Asia. With China's admittance to the World Trade Organization (WTO), growth opportunities are expected to increase further. The increased complexity of electronics is expected to force manufacturers in this region to invest in more expensive top-of-the-line equipment. New high-technology applications that rely on advanced packages will fuel growth in this region. High growth in Asia Pacific is expected to bring the region's market share up to 40.6 percent in 2007.

The revenues generated in the rest of world (ROW) region are minimal. Those impacting the SMT rework and repair equipment market the most are South America and the Middle East. Countries such as Brazil and Israel are increasing their size of the electronics industry. Israel and Saudi Arabia are expected to be the primary regions in the Middle East driving sales as more computing and telecommunications applications are sold in this region. It is expected that several ROW countries will develop electronics applications that are to be used in their own countries, thereby increasing demand for SMT rework and repair equipment in the ROW. The ROWs' market share of the total market is expected to remain stable over the forecast period.

ConclusionTotal revenues for the world SMT rework and repair equipment market were $286.5 million in 2000. The rework and repair manufacturers that will be successful in the future will target EMS providers that are expanding their warranty and repair services. These companies will provide the best growth opportunities in the future. SMT rework and repair manufacturers also will have to focus more heavily on the Asian markets as this region continues growing in the electronics manufacturing industry. China will provide several growth opportunities for equipment manufacturers that can target that market effectively. Not only will companies need to target key markets, but also focus on their core.

Raman Monga may be contacted at Frost & Sullivan, 7750 IH 10 W, Suite 910, San Antonio, TX 70229; (210) 247-2487; E-mail: Rmonga@frost.com.