This month’s interview is an excerpt taken from a round table discussion at Productronica by a very
influential panel of experts to talk about PCBs and the de-risking of the supply chain. They are Mark Goodwin from Ventec. Mike Buetow, Printed Circuit Engineering Association and Gene Weiner from Gene Weiner International.
I think we have a great panel to talk about this topic, let’s start with Mark Goodwin. You’re right at the rock face, working with these laminate raw material suppliers and the people that are trying to grow PCB manufacturing.
Was there not one large announcement a couple of weeks ago about a large PCB manufacturing company opening here in Europe? Which I think was the first announcement in years, quite frankly.
Mark Goodwin: Yeah. And actually we are in conversation with them and they’re
looking really at supply chain, but they want to manufacture their PCBs. They’re already an assembler. They want to manufacture their PCBs in Europe. But they understand that actually for the supply chain, for the materials at the level they want them, the supply chain all still starts in Asia.
They want local support, but they want volume FR-4 materials, and volume FR-4 materials is no longer a European or a western business in any sense whatso- ever. And the raw materials behind it are certainly not a western business. So they’re moving parts of the supply chain back on shore. I personally believe that it’s impossible to move the entire supply chain back on shore. It’s gone, that ship has sailed. And there’s nobody around this table that is going to see that in their working lifetime in this industry, in my opinion. That’s not to say things around the edges won’t come back.
Okay. But, let’s remember that this whole initiative of reshoring and getting a competence in the United States and Europe, is driven by government. And if they’ve got the will to want to make that
happen, they’ve certainly got the resources to make that happen.
Mark Goodwin: You think so?
Well, financial resources, at least, not the human capital. You’re right, the human capital is an issue. But then of course, that’s just a case of going in reverse. So if you remember 20 years ago when we sent everything to Asia in the first place, we sent a lot of Western engineers with it, to go and teach everybody how to implement the systems and support them. In fact, if you go to Eastern Europe, there’s still elements of the “Scottish mafia” there, who were the guys that used to run the Scottish factories back in the day, over 20 years ago. So it’s just going to go in reverse presumably, and you’re going to get some Chinese engineers coming over this way.
Mark Goodwin: Maybe. Do you see that happening right now?
Gene Weiner: Are we training our own engineers? I don’t think so.
There’s a conference coming up next month in Juarez, in northern Mexico. The first two days are in English and Spanish, and the third, day is in Chinese. So I’m guessing there’s enough Chinese engineers out
there that are going to want to go to that conference.
Gene Weiner: Well Mexico is an interesting situation, but first of all, our domains corporate are government. And I believe they’re more corporate than government these days. But in Mexico and Querétaro, which is their aerospace center. Everyone thinks Guadalajara.
Querétaro, about 160 miles from Mexico City with a few million people, five universities and protection of the government army, no cartel problems, highspeed rail to Mexico, is really growing for the EMS part.
And so I was called by a few remaining large American companies, say, what do you think about setting up PCB fabrication in Mexico? I said, I think it’s a great idea.
There are three small shops and you have a huge burgeoning assembly business and aerospace and it should be done. They said, well, what about the water problem? I says, well, there are 17,000 water desalinization units in a dozen or so countries that are running efficiently, and Mexico certainly has the water capability in the Pacific and Atlantic oceans to desalinize and get all the water they need. And some of the new technology, one of which was shown here, waste treatment shows a com- plete recycling, almost total elimination of pollutants from our type of industry. So I think Mexico is another alternative.
Yeah, there was a party of people came from Taiwan a few months ago, actually down to look at southern Mexico, I’m talking about the chip guys, TSMC and these big companies. But they were a bit concerned about the water, but apparently there’s a lot of water in the southern border area of Mexico.
Mike Buetow: So I want to amend something that you said. You mentioned earlier that government is driving the reshoring. I would argue that industry has been driving it and has been driving it for years. Governments reacting to industries, the industry driving it, and also governments reacting to industry reminding itself that we don’t have secure supply chains in these key regions.
That’s correct. This whole thing started out as a bit of a spat between the US and China on a political level. It turned into a de-risking of the supply chain, which is at a corporate industry level.
Gene Weiner: A bit of a spat has turned into a major geopolitical issue for trade and industry around the World.
Mark Goodwin: And I actually wonder, you mentioned about Chinese engineers coming over to reeducate people here, because it’s a political spat, is that going to be allowed to happen? There are already visa issues from people in China trying to travel to this trade show and to trade shows in America.
And that can all change very quickly after the American election next year.
Gene Weiner: Well, that’s a perfect example, TSMC is on time with their new factories and in Japan, they’re going to build a second one beyond what they had committed. They’re a year behind schedule in Arizona and have decided the only way to solve that problem is to staff it with Taiwanese for half of the staff. And so they’ll be shipping people from Taiwan to live and work in Arizona.
Mike Buetow: And then let’s add a couple other layers to this. So if at the problem we’re trying to solve is the de-risking of the supply chain, there is the government regulations as mentioned. In addition to that, whether they’re incentivizing or not, is sometimes the incongruous statements that they’re making or rules that are in place. For example, I want to build a board fabrication site. I’ve got to get all the wastewater treatment permits. I got to get the building permits. I have to get buy-in from the community itself, which isn’t government, but rather do we want this in our backyard because we’ve been told for 35 years that this is poisonous stuff. All the waste handling is a closed loop. So there’s so much that has to go into that before you even start building panel one.
And it takes more than just the federal government to say, “this is what we want to do”. It has to go all the way down to the municipality level. That’s way more complicated. Right now. Government policy doesn’t match government’s goals and they have to get aligned.
Gene Weiner: I agree.
Mike Buetow: And then there’s the working capital issue, not just the labor pool, but the working capital issue. We have so much money tied up in inventory already, and customers are saying, “I can’t take anymore right now because I’ve already got this much on the shelves”.
So are we going to reset our expectations for what working capital is going to look like when we have these larger inventories we have to carry because we have buffer stocks or dual stocks all over the world. That’s a finance decision that has nothing to do with government, but has everything to do with Wall Street and the private equity guys and whoever else is controlling the money streams.
These are real issues that all have to be discussed and resolved at least locally, if not globally.
Correct. And there’s also sustainability issues as well coming into it, because companies are looking a lot closer at these things.
But I do think there’s evidence of some companies looking at this and still investing. I mean, for example, in Mexico, again, we’ve got Kurtz Ersa building a factory to build reflow ovens as well as BTU, building a factory to build reflow
ovens for the Mexico market. But it’s also for the European market because it’s a lot closer to Europe than it is to China.
Gene Weiner: Well, it also brings up the effect of unintended consequences
because so many other things that are not out in the open view, as Mike said, are contingent upon where the raw material is, what pollution is caused there. When you develop the raw material, not when you make and use it over here in Bavaria or in England or wherever. And the pollution issue in some of those source countries is really horrendous.
Yes, I totally agree.
Mike Buetow: I love that you mentioned that. Because, you guys experienced this too, you have to go all the way back to the mines. You have to have visibility back to the mines, right?
Mark Goodwin: Right. Well, we have vis- ibility back to our people making copper foil. They have to have visibility further back to where their feed stocks come from anyway.
Mike Buetow: And if we want to de-risk the supply chain, we need greater digitization, okay? Which means the visibility, okay? So you need to know, as a manufacturer, you need to be able to see more than one layer level back, not just to your distributor. You need to be able to go farther and farther back in order to really understand what is happening in the supply chain. And those tools really don’t exist for the most part.
They don’t. And that’s going to be the Issue in the scope 3 emissions. the scope three emissions actually dictate that you have to know what your suppliers supplier is doing. You have to be able to trace all of that back and have them all sign into it.
Mark Goodwin: For particularly one of the consumable products, but also our own products. We’re already… There’s legislation coming through Europe where we have to track the carbon cost and the environmental cost of our materials. And we’re actually working on that now. And it’s very interesting. A number of customers and potential customers are asking us how we’re going to do that. And quite honestly, I’m not telling them because this is going to be part of our IP. If you can’t do this, it’s not my job to educate you. Educate yourself.
Mike Buetow: Are they willing to pay for that though?
Mark Goodwin: No …
Mike Buetow: There’s the the rub.
Mark Goodwin: There is also the issue that, with the possible exception of some of the mil/aero guys, people are saying, we’d like to bring stuff back on shore, but we still want the price that we were buying it in Asia. Well, okay, how?
Gene Weiner: There you go. Resins come from organics. So organics comes from oil. Everything that you use, it starts as ethylene oxide. And If that oil price goes up…
Mark Goodwin: Most copper is from recycled copper. So what was it before? It was recycled?
Recycled copper …
Mark Goodwin: That dissolved in the baths and plated out for us. I have no idea how does anybody track this.
Right. I mean, this is a huge topic and we’ve just literally just touched on a couple of the items in it. I want to thank our panel for a vigorous and lively debate.