Mom and Pop have some decisions to make. They can dump seven to ten million dollars back into their printed circuit board (PCB) shop in order to be competitive for the next five years, or they should retire, play golf, and regale with their tales from the PCB industry.
So was the story from Bryan Fish, national sales manager at Santa Clara, CA-based Streamline Circuits, a gap building shop that has a high mix of low-to-medium volume PCB work. I had the pleasure of meeting Fish at the recently relocated Atlantic Design & Manufacturing show. Held at the Philadelphia Convention Center for the first time after a run at New York City’s Javits Center, the new location offered a change of scenery, or at least a plentiful supply of high-calorie sandwiches and a massive statue based in high Philly fiction.
Fish estimates that only 230 board manufacturers remain within the United States. Of those who remain, he believes that half will be gone in the next five years (if not sooner), because of a lack of reinvestment.
According to Fish, Streamline makes a point to reinvest 10% of its earnings in new equipment technology -- that works out to roughly $5 million per year.
While I’m not one to challenge mom or pop (primarily due to mom’s fixation on wooden spoon discipline and an uncanny ability to throw a phone with sniper precision), I do agree with Fish’s insistence that reinvestment is the key to success in this industry. A drum banged often and loudly; reinvestment enables annual product innovations that can keep companies at (or near) the head of the pack.
The same rings true for service bureaus. While I won’t deny the benefit of tried-and-true legacy machinery that simply gets the job done, Fish notes that much of Streamline’s business comes from customers who have been promised one result from a PCB manufacturer and received another. I’m not saying that every PCB manufacturer needs Orbotech’s Paragon SM-20 high-accuracy, fast throughput laser direct imaging system for imaging solder mask layers (Streamline has four), but it’s a selling point after mom and pop fail to deliver.
The introduction of new technology to the shop floor does have its disadvantages as well. Fish states, “We’re never going to get away from people, but wherever possible, replace people with technology and use humans as the operators.” It’s encouraging to hear that the journeyman has been able to transition into a foreman; however I know the day will come when new tech will attempt to render the foreman obsolete.
Reinvestment is critical, especially as the PCB industry seemingly shrinks. Based on information from IPC, a global electronics association, industry shipments for rigid PCBs and flexible circuits decreased 4.5% in April 2012 compared to April 2011. According to IPC’s April findings from its monthly North America PCB Statistical Program, orders booked also decreased 8.3% from April 2011.
Year-to-date, combined industry shipments were down 6.0% and bookings were up 0.8%. Compared to the previous month, combined industry shipments for April 2012 decreased 10.6% and bookings decreased 13.5%. The combined (rigid and flex) industry book-to-bill ratio in April 2012 decreased slightly, but continued in positive territory at 1.04.
The book-to-bill ratios are calculated by dividing the value of orders booked over the past three months by the value of sales billed during the same period. A ratio of more than 1.00 suggests that current demand is ahead of supply, which is a positive indicator for sales growth over the next two-to-three months.
Too many numbers, I know, but IPC’s director of market research, Sharon Starr, remains optimistic. "April PCB sales and orders in North America continued slightly below last year's levels and reflected normal seasonal patterns," she states in the IPC release. "The good news is that the book-to-bill ratio continued to be positive for the fifth consecutive month. When orders exceed sales, there is potential for sales growth over the next three-to-six months."
Hey, Mom and Pop, listen to Ms. Starr regarding the potential sales growth over the next few months. It’s time to reinvest or, as Fish states, get ready to hit the links.
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