Emerald Group Publishing Limited
Copyright © 2004, Emerald Group Publishing Limited
Intellect's 20th PCIF annual conference Cheltenham, 15 October 2003
Intellect's 20th PCIF annual conference Cheltenham, 15 October 2003
"Focusing on the Future"
Keywords: Intellect, Conferences
It would be fair to say that this conference had less to do with circuits, and rather more to do with links. Motor races have circuits, and golf courses have links. Motor races tend to be over rather quickly, whereas a game of golf is a more leisurely, studied affair. It was very much a leisurely and studied PCIF conference this year, with a diversity of speaker that evidenced the thought and preparation that went into creating the programme. That the programme was aimed at the essential need for management to pay attention to SCM, design, market trends, investment, economics and the environment shows how multi-disciplined modern management needs to be.
Alun Morgan, Corporate Vice-President, Operations and Engineering, Isola AG gave the opening address
In a world of changing markets, the need is to focus on the adaptation of business methods. One of the starker facts was the loss of 2.8 million jobs in the USA as a direct consequence of such a change. There will be many more similar movements, both of demand and employment. Looking towards Europe, he said that the secret now is capability, not capacity. Companies need to have the right products, at the right time, which is why the PCIF had introduced Supply Chain Management as a topic this year. In SCM, companies need, more now than ever, to look at their strategy; they need to look at the perspectives, they need to understand their customer needs, and costs. Good SCM is a framework for good business performance.
Jim Higgins, Group Operations Director, Abacus Group PLC, gave the keynote speech "Crystal Ball or Crystal Clear ... the influence of forecasting on supply chain planning"
Supply chain management is the business of virtual integration; it is to do with sharing knowledge, sharing information, and developing multi-functional relationships. A supply chain relationship cannot survive in a purely sales environment; there is a need to determine the most appropriate stock and customer service levels. You can't be all things to all people, so don't even try. Jim explained that investment in SCM runs into millions of pounds. At Abacus they had four customers on consignment inventory in 2001. By 2003 they had 12, and monthly consignment stock sales had risen from £150 million to £400 million over the same period. Abacus were achieving an 80 per cent success rate on conversion from normal supply to consignment stock, and are the UK leaders in the SCM field. Jim gave plenty of examples of how SCM works at Abacus, and how they are getting it right. A good relationship with suppliers means a smooth ride, and as a company with 83 franchises they have had to encourage multi- contact points, and pursue a tactical engagement process.
In summary, forecasts still have an important part to play, he said, but it is communications that are the key to success; information sharing is paramount, and success lies in co-operation.
A good keynote speech which proves that even well-established good business practice is still valid.
David Kynaston, Senior Vice-President Solectron Corporation, looked at the new shape for electronics manufacturing in the UK
There had been a migration of high volume manufacture abroad, but Intellect was currently leading the fight back in re-jigging our industry. There had been a paradigm shift in the global electronics industry, which presents a number of opportunities for the UK. A highly competitive strategy is essential to enable the UK electronics industry to redefine itself as a global leader amongst the developed countries.
This starts with a strategic review to evaluate the key factors that will impact on the electronics sector globally, identify associated opportunities and challenges for the UK, formulate a vision for the future and agree a roadmap for industry and government to deliver this vision. The first stage is an analysis of the industry, which is being done by means of a questionnaire that is being sent out to all companies in the industry, and by July 2004 the results of the questionnaire will be known.
There will be a Steering Group, drawn from the breadth of the electronics industry, from academia, the trades unions and trades associations as well as Government bodies such as the DTI, Treasury, EPSRC and RDA. An Action Group, comprising the Chairmen of the above sectors, and working groups comprising small groups to work on specific problems and produce recommendations for Government and Industry.
The aim is to make, within the next 3-10 years the electronics sector in the UK stronger than in any other European country. It will be considered a world-class competitor in "a number of sectors"; and will be No. 1 in communications, aerospace and defence.
A bold vision being energetically tackled already by an impressive team, with a strong self-belief, and whose aim is to have a final report ready by July 2004. Anyone involved in the electronics industry in the UK, in whatever respect, would be well-advised to express their commitment and their help to ensure success. Their future may depend upon it.
Quarterly progress reports will be carried in future issues of Circuit World.
Simon Philips, Supply Chain Director, Celestica. outsourcing your supply chain – risk and opportunities
Simon gave us some definitions on SCM, the key one perhaps being that outsourcing is the process of transferring the existing business activity to a third party. But how has it developed? Key factors include the failure of conglomerates in the 1970s to deliver shareholder value, the popularisation of transaction cost analysis and an imperative to look at core competence. (Simon was tactful enough not to say that poor shareholder returns were largely due to management incompetence, but we knew what he meant.) There is a growing trend to outsourcing, more are thinking about it and engaging in it, but there is a lot of room for improvement. In the 700 billion dollar electronics business, only 100 billion is being outsourced. Short-termism is often the root cause.
The risks include loss of control, quality impact, loss of flexibility, increased cost, people morale, loss of vertical integration (i.e. loss of influence over vendors), customer service and understanding, potential cultural incompatibility, and an inability to integrate effectively.
There were reasons for failures, too, of which one was – "few firms have a robust methodology which sensitises them to the risks'', and many companies look at it as a short-term ideal. But a simplistic one.
However, the opportunities such as financial flexibility, giving optimum use of capital and changing fixed costs to variable costs were attractive. They include purchasing leverage, affecting cost, supply in a constrained environment, and asset management, as well as flexibility in manufacturing, i.e. increased flexibility without additional fixed cost. In a time of economic uncertainty, it is good to keep costs variable, reduce product life cycles and keep up with the speed of technology changes.
Tony Dent – Senior Partner, iprias Ltd Good design – the key to success in electronics
Effectively, Tony Dent talked about electronics in the real world. In 2003, the average household in the USA has, excluding cars and computers, around 40 microprocessors in it. This is forecast to rise to 4,000 microprocessors by 2020. We carry around with us a whole load of computing equipment, and from the designers point of view it is worth noting that whilst it takes about 2.5 years to design a mobile phone, it only takes 6 months to introduce it. Not much is made, he said, that ain't got electronics in it. Everything has to be designed, and happily the UK has strong design industry, but we do not do a good job at managing design, for example it was discovered that 61 percent of ASIC design was wrong-first-time; so why are not things being done well?
Everything has to be designed, but there are some popular misconceptions.
Design is easy – untrue. It is hard and getting harder as products become more complex.
Design is a black art and cannot be managed – also untrue. Design management is a skill that needs to be learned.
Design delays are usually caused by designers – delays are almost always caused by missing or poor specifications or uncontrolled change.
Managing design is an exercise in obtaining clear specifications, considering the size of what is required, and choosing a good sub-contractor. Design is a process, not a solitary step, said Tony.
This was a succinct and clear presentation from someone who knows all about design in the semiconductor business, and makes it clear that the lessons learnt there apply almost anywhere.
The inimitable Walt Custer presented his Business Outlook on the Global Electronics Industry ...
and as usual there were people hanging in his every word. The world production of rigid and flex PCB had dropped from $42.5 billion in 2000 to $33.2 billion by 2002. In his historical review, Walt said that the recovery now under way began in July, and the world is in recovery stage right now. The year 2002 was the worst year we had, but the business cycle chart showed that in 2003 the market was up 6 per cent globally for electronic equipment.
As usual, there was a series of informative slides that showed the position in each electronics industry sector, and with some details about specific companies. Specific notes indicated that the strong Euro was not helping European companies compete for the huge China cellphone, market. Wireless communications are now IN. The PC market is now growing, filling many Asian factories. Dell is currently the world's largest producer in PCB markets. In 2002, the rigid PCB market globally was worth $28 billion. Ibiden and CMK were in the top four Japanese companies, and Japan is still the largest player in Asia.
European PCB production in 2002 was $3.9 million, with Germany the biggest and the UK lying in third place. In the USA, the PCB market dropped by 53 per cent in the last 12 months, but companies such as Nelco are seeing up turn, so too is ESI, The Law of Jungle will prevail, said Walt, only the stronger companies will survive. The European PCB market should rise by 3-4 per cent over the next 12 months.
The Global Economic Outlook and Issues for the Electronics Sector – Mark Smyth, Economist, The Royal Bank of Scotland
Mark took us through the UK economy, the US Economy, the Eurozone, and then on to Global Trade and the Technology Sector.
The UK economy is supported by consumer wealth from a strong housing market. There is rising employment in the Government sector, but this is public sector employment, as any reader of The Guardian would know. In the UK, it was the business sector which had borne the brunt of the global slowdown, and seen a collapse of technology and over-indebtedness, as well as a cutting back on investment. There was increased competition on a global scale. In many sectors, there had been excess capacity, such as telecoms that were suffering from over-investment.
The Royal Bank of Scotland sees a steady increase in growth over the next 2 years, with growth in investment as conditions improve. They are beginning to see rebalancing in the economy, although the housing sector is still strong. There has been a major swing in the business sector, and here there are positive signs. A low interest rate in the UK helps manufacturing, but business investment is vital for a balanced economy. The next 2 years are crucial.
In the US they went from an annual growth rate of over 5 per cent to less than market conditions are still uncertain.
The Eurozone had seen a large downturn over the last 2 years, and was now in recession with two quarters of negative growth. Economies are restricted by over-regulation, and there now hangs the spectre of deflation in Germany. Deflation is a big worry to policy makers across the Eurozone. External demand will come, says Mark, but competitiveness has been eroded, such that Euro firms cannot compete against US firms, and at the cheaper end against Asia. Business confidence is presently extremely low, and there is weak domestic confidence. There may be a very gradual pick up over the next 2 years, with demand coming from both the UK and the USA.
As for global trade, there had been the sharpest slow down in 20 years. Large differentials in labour costs benefit China, but China will be an importer as well as an exporter and British companies do need to export more to China. ICT demand is picking up, gradually, but his view was that a high quality knowledge based UK economy would be very good indeed.
One could only hope that the same presentation had been given sometime recently to the occupants of Nos 10 and 11, Downing Street, London.
Dr Philip Hargrave is the Chief Scientist at Europe, Middle East and Africa for Nortel Networks, and he looked at advances in radio technology for communications on the move
Dr Hargarve looked at the ideas that will help drive the next generation networks. There was cusp between 2G and 3G which has been a service discontinuity. Bandwidths are getting higher, to allow for doing things on the move. Wireless local area networks complement mobile cellular telephones, and integration with mobility networks would provide mobility, common services and billing for WLAN users. The challenge is how to move forward the truly mobile service. Mobility distinguishes wireless from any other access medium, however it does not come without a penalty. The technology challenge is RF capacity and coverage. Future wireless systems must enable higher bandwidth applications and maximise coverage and availability of broadband multimedia services.
Future evolution means that new technologies are being developed to push the performance barriers for future mobile wireless access. Dr Hargrave described the UMTS Downlink system, and explained how it works. He took a look at adaptive modulation and coding, the need to adapt modulation coding to improve throughput where you can. High speed downlink packet access (HSDPA) was described, with a look at key enablers of HSDPA in UMTS, and the objectives which represents a major step forward to support high speed applications. Multiple input multiple output (MIMO) is Currently in a LAN configuration, apparently. The next generation of networks, whilst awesome in their technical complexity, will consist of an optical packet backbone linked to both broadband mobile and fixed access, with rich content. Demand has it so.
Dr Chris Hunt is the Principal Research Scientist at NPL, and he talked about complying with WEEE and RoHS, and the manufacturing issues
The volume of legislation that impacts upon the electronics industry is of some magnificence, and Dr Hunt went to great lengths to remind those present of the daunting scale and scope of the application. His totally comprehensive paper covered all aspects of where the legislation will fall, what is needed to comply, what metals are affected and in what application, also where exemptions apply. There is a massive amount of help available, with the DTI Web site: www.dti.gov.uk/sustainability being a good start.
Lead-free is a popular theme, and all singers will need to be word perfect by 2006 for circuit board assembly. Component manufacturers have had longer to rehearse, it seems. Here too there are plenty of voice coaches available, Chris looked at all the alternative finishes, and also at the impact that some of them would have on things such as LED cases, SM polyester capacitors, and the marking stability on components. Of concern to all is the factor of reliability – in solder joints, laminate and components. Tin silver copper (SAC) alloys will be more reliable in low strain environments yes, but there are still many questions to be answered. For those who wish to progress further, visit www.npl.co.uk/ei and all will be made clear. Dr Hunt did, in the time he had, to good effect.
A thoroughly good conference, a parabolic shift from the days in which topics included etching solution control or a consideration of a tool programme for optimal drilling efficiency. Now that the PCIF comes under the Intellect umbrella, a much broader-based programme is being realised, a programme of relevance in an irresolute market. Those who attended emerged as wiser managers, rather better armed to fight on, but knowing that they now have Intellect fighting alongside on a wide and patriotic front.