Caveat Lector
Portrait photo of a smiling Mike Buetow
mike
buetow
editor-
in-chief
EMS Past is Prologue
I

‘m often asked what I think the electronics manufacturing company of the future will look like. I know this: It will be different than it looks today.

Why am I so confident? In part because today’s firms don’t look like they did when I entered the industry in 1991 (yikes!). Back then, dominant players were the bluebloods like IBM, Digital Equipment and Hewlett-Packard (you may know them as HP). These were all-in-one firms. They designed chips, fabbed boards, built assemblies, and shipped their own products.

Then someone got the bright idea that “merchant” (the terme de ce jour, as opposed to captive, meaning in-house) manufacturing businesses could unlock value by spreading costs of production across many customers and ensuring close(r)-to-steady-state operations. In reality, that never quite happened, but the mass outsourcing that took hold has never ceded ground.

There’s a saying in journalism that you should follow the money. As I note in our annual CIRCUITS ASSEMBLY Top 50 listing of the largest EMS companies, which starts on page 36, we track more than 115 publicly traded EMS companies. And that’s even after some really large ones like TPV and Shenzhen HyteraEMS have gone private in recent years. While private equity is in the game today in a major way, we’ve seen this play out before. In the late 1990s and early 2000s, fabricators and EMS companies were the hottest dates at the prom. Then midnight struck in the form of the dot-com bust. Billions in valuation went poof. So did the PE guys. They are back with a vengeance, but it won’t be forever.

In the meantime, my hope is some of the current influx of capital gets appropriated for actual capital expenditures and process improvement, not just rebranding and marketing.

Some folks I speak with wonder whether EMS companies should shed any legacy bare board fabrication operations. I feel the opposite. In my view, there are two major non-commodity pieces to the central nervous system of any electronics product: the design and the bare board. Coupled with the very real supply-chain issues we periodically face, assemblers should look long and hard at how they might gain control over those segments. Flex, Sanmina and now Benchmark are among the Top 50 EMS companies that have in-house printed circuit board operations.

Likewise, I see no reason fabricators couldn’t tack on assembly, and in some cases they are. Some major fabricators, like Kinwong, have more than 200 SMT lines, and the largest chip-on-flex assemblers, like Zhen Ding and Nippon Mektron, are prominent members of the CIRCUITS ASSEMBLY Top 50. Many smaller flex operations offer assembly, and rigid players continue to join the party.

Others, including Jabil and Kitron, are diving into additive manufacturing. The advantages are obvious: It speeds prototyping, expands the available material sets, and enables all sorts of interesting stress and failure analyses. I fully expect to see widespread adoption of 3-D printers at every tier of the ODM/EMS segment, and likely within the fabricator segment too.

It’s true many EMS companies have to make do with tight margins, yet some (generally privately held) EMS companies generate operating margins well into the high teens. Well-run fabrication operations can do the same or better. There’s not just a service or supply-chain control opportunity, but real financial potential as well.

I don’t expect OEMs or ODMs to suddenly hoover up all the small-run and prototype shops like rebel ships into the Death Star, but there’s clearly room for larger ODM/EMS companies – and not just those in the CIRCUITS ASSEMBLY Top 50 – to expand their product offering reach. If and when they do – and I think eventually they will – it’s a small step to offering their own branded products. Once that last barrier is breached, tomorrow could look a lot like yesterday.

Mike Buetow
P.S. By the time you read this, Printed Circuit University, our online education platform, featuring tutorials on a range of printed circuit design, fabrication and assembly matters, will be live. Take a look at printedcircuituniversity.com. You may recognize many of the presenters from our PCB East and PCB West conferences. Registration for the latter, which takes place in October at the Santa Clara Convention Center, is now open at pcbwest.com. Check out the program beginning on page 19.