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A look ahead A look ahead Special guest column Gene Weiner


do America’s interconnect and packaging industries stand? Are they investing on a grand scale to develop and build the next generation of products in America? Will they expand their R&D in far-away places? Who will provide the equipment, materi- als and specialty chemicals utilized in the manufacturing process? Everyone knows that most production and new jobs will go where the products are developed. I predict that during the second decade


A


of this century the old model of distribu- tion of Western fabrication and assembly supplies in the Far East will be nearly gone. We will still see some high-tech products designed and/or built (or partially fabri- cated) in the Western world make their way into China’s manufacturing machine. However, we will also see the introduc- tion of new systems developed in China by Chinese companies spreading through- out Asia (except possibly South Korea and Japan). We will also see an increase of new products developed by the Chinese research laboratories of Western firms. One should take note of a new “localiza- tion” policy now beginning to appear in the Middle Kingdom. Changes are also apparent in the land


of the rising sun. Japan has notably oſten preferred to buy domestically produced Japanese products over foreign brands— and I do not mean MacDonald’s—even when inferior or more costly. Reality, how- ever, is in the process of forcing this para- digm to change. We see an increase in the number of joint ventures, partnerships and subcontract arrangements to build name- brand Japanese test and production equip- ment and tools in China for marketing in Japan, China and around the world. Japan’s Mektron, for instance, announced that it is building a new plant in China to increase its flexible circuit manufacturing capac- ity. Te new facility is expected to initiate operations in February 2011. Hitachi Via Mechanics is facing increased competition in laser via formation from China’s Han’s Laser Technology. Te latter reportedly sold 25% of the 1,000 systems sold for this


nother decade has closed—not just another decade, but the first decade of the third millennium! Where


purpose in 2010. We will also see a reversal of his-


toric representation practices. We will see Chinese produced (and /or


“fin-


ished”) competitive, quality equipment sold through distributors to the Western markets at superior (read this as cheaper) prices. Tis will include x-ray inspection, AOI systems, reflow equipment and even, in the near future, pick and place machines. We will see a major step forward in the ini- tiation of this trend at IPC APEX in April 2011. If you wonder about quality, note that China has just demonstrated the capability to develop a stealth fighter on its own. Tis business model will be the result of


the shrinkage of western production levels to the point where they could not indepen- dently sustain the R&D and manufacturing required for a healthy domestic or regional industry. Te cost playing field is leveling, but


with a difference. Chinese companies are investing in the latest capital equipment and building facilities to move quickly in volume production of HDI and other advanced interconnects. Te 2011 IPC Technology Roadmap will show the regional differences attributed between “acknowledging a technology and actually having the capability to employ it,” accord- ing to IPC director of technology transfer Dieter Bergman. China is building infra- structure to support its pillar industries and increase the locations where high tech products can be built. It continues to build highways and major high-speed rail lines to the interior and between major cities. Looking forward, we expect China


to spend $153.7 billion on R&D in 2011, up from the $141.4 billion it will spend this year, according to Battelle Memorial Institute. By comparison, Japan is expected to spend $144.1 billion next year, up from $142 billion in 2010...and the jobs follow the research! Scary!!!! I wonder how much of this


will go to “localization.” Remember that term from the South Koreans? In a recent agreement with the U.S., China has agreed to publish a catalog of heavy and other industrial equipment so as “not


to dis- criminate against foreign suppliers or 66 – Global SMT & Packaging – February 2011


provide prohibited subsidies.” Te catalog will obviously be used to encourage the development of machines not currently made in China. China’s new R&D budget coupled with its high rate of graduates in the physical sciences and engineering fields are sure to boost domestic efforts beyond that of mere reverse engineering to develop machines not currently made by Chinese companies. (Source: NY Times December 16, 2010) Let’s look at a few seemingly unrelated


facts and see how this bodes for us here in America. China’s government supports its pillar


(including electronics, solar/wind energy development and implementation) indus- tries with five-year plans. Taiwan works closely with its industry to develop new products and production processes. Japan has favorable accelerated depreciation schemes


that has helped its advanced


industries automate. South Korea has had a localization philosophy for its technologies. China is graduating more than a million engineers and physical scientists a year and has nearly 20,000 students (most of whom will return home aſter graduation) attend- ing American universities. Major American corporations have established R&D opera- tions in China (Intel, Cisco, Dow Chemical, etc.). Western suppliers of equipment, materials and specialty chemicals have found the


shrinkage of their domestic


markets (USA, Western Europe) so deci- mated by the shiſt of manufacturing loca- tions that they have either relocated opera- tions to China, partnered with or licensed their production to Chinese companies, or simply gone out of business. Others remain in jeopardy. Are there some things that America’s


remaining fabricators, assemblers and their supply chain participants can do to help level the current playing field a bit more? Can they buy and use the lower cost equip- ment produced in the Far East as those that have captured the majority of the market have done? Can they have more of their product built abroad to serve the local mar- kets there at a competitive price? Should they? Stay tuned! 


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