The Thierry Ballenghien Interview

With the closure and downsizing of the Western world’s PCB facilities, a number of PCB consultancies have sprung up in Europe over the past few years. Thierry Ballenghien, former Export Sales Manager at Cire, is no exception. Since he left France’s leading PCB manufacturer, Ballenghien has transformed his company, Icape, from a database supplier to a full blown brokerage for PCBs "made in Asia". With 13 suppliers in China and 3 in Taiwan, whittled down from 150 visited in China and 60-odd in Taiwan, the company has a very good handle on the capacities of its suppliers. We spent some time with Ballenghien to muse on the future face of the PCB industry and the people who are bringing about its transformation..PCBNewsline: Why the change from consultant and supplier of data to brokerage?Ballenghien: I realised fairly early on that I needed to get into "real business" – buying and selling – pretty fast if the company was to survive. It was the right decision - business is going very well indeed. In 2001, turnover was _6 million. This year we will close with revenues up _ 2 million and next year, I forecast that we will reach _10-12 million. The show is a good indication of how much interest we are generating – on the first day at Electronica we got 52 contacts. On the second day, 70.PCBN: Where are Icape’s sales generated?TB: 80% of our sales are to French customers.PCBN: That’s a lot of business lost by France’s PCB manufacturers.TB: Icape has taken business from Asian as well as French suppliers. In many cases, buyers don’t want to lose their current suppliers – they just use us to leverage prices down. Some Italian suppliers are selling at Chinese prices. It’s not reasonable for their businesses, but what can they do?PCBN: Have the activities of Icape and its fellow brokerages accelerated the slowdown – and price reductions in Europe’s PCB industry?TB: Possibly such activity has accelerated the move to China, but we have not been responsible for the increase in manufacturing capacity in China. We were simply aware – early on – of what was going on. Three years ago, when I set up Icape, I was one of the first to understand, and then I just did my job, as the first company to set up a network of professionally qualified suppliers throughout China and Taiwan.PCBN: With the transition of PCB manufacture across to Asia, how do you see the future of the industry in Europe?TB: There is absolutely no future for large volumes in Europe, and no future for large companies. Only small companies or groups of small facilities will survive. This is because, for the cost of one European worker, you can get 20-25 workers in China, and purchasing costs of machines and materials, because high volumes are to be found there, are also lower. And materials and equipment are not just coming in from outside – Taiwan has developed a full-blown industry – it has six homegrown suppliers of base materials alone. And this industry is now moving across to China.PCBN: But the region is not just supplying large volumes – small volumes, from what we hear, are also coming to Europe from China and Taiwan. At what point are Europe’s buyers going to the region for their PCBs?TB: The answer depends on the technology – suppliers everywhere are prepared to produce even small quantities, but transport costs cut into thin margins and it makes no sense to ship small quantities of low technology boards. To give you an idea, orders start at around 20m_ of finished product for multilayer boards with 8+ layers. For 4-layer boards, 30m_ is the cut-off point, and for double and single-sided boards, 50m_ is the lowest volume that makes sense. PCBN: And the turnaround?TB: factories in China are typically huge and have a lot of free capacity and a lot of workers. Single sided boards through to four-layer boards are considered standard, large volume production, with a turnaround as fast as 1 week for air shipment, up to 5 weeks if the product is shipped by sea/land.PCBN: We have heard that one of the issues with sourcing boards from China is the inflexibility of suppliers in the case of engineering changes to an order that has already been placed.TB: If a customer changes specs, it is true, it is not possible to change an order. In this respect, there is no difference between a European and a Chinese supplier. If your communications with your supplier work badly, you must be absolutely sure of what you want when you place your order.PCBN: We hear that there is not a great deal of money being made by China’s PCB manufacturers. What is your view on this?TB: As I said before, there are a lot of big factories with free capacity that must be filled. They are fighting against each other for business – while a few specialist companies, and those that have not invested too heavily, are making money, the majority is treading water. They’re not exactly losing money – labour laws are more relaxed, so they can get rid of their workforces more easily if orders are slow.PCBN: When do you think they will start making money?TB: As soon as the local economy takes off and natural selection sees the demise of some of the manufacturers, the others will start to take off. China’s market is growing, there are a lot of educated people and they are making more money. And telephones are important for the Chinese.PCBN: How much spending power does a Chinese individual typically have and how much can he or she afford to spend on a telephone?TB: A worker in China typically earns _100/month, but works more than his European counterpart, with just two weeks holiday a year, so he is more productive. Social costs are much lower than they are in Europe – perhaps 10% vs. the 40% that is typical for us.PCBN: _100 is not a great deal when you consider the costs of buying and running a telephone. Is the electronics industry cutting its nose off by taking manufacturing, workers – and its own consumers – away from Europe and the USA? TB: I don’t think it is interesting to make a telephone in China for sale in another region of the world because logistics costs makes it expensive. Only the components should be sourced from China. The assembly should be conducted where the product will finally be sold. Maybe very large volume, very stable products can be made sensibly in China for export everywhere else, but for other products, products should be developed and assembled in the home market.PCBN: Will Icape do for assembly what it has done for PCB manufacture?TB: Some companies have tried to persuade me to go into assembly, but the time is not yet right for the company.From the size of Icape’s stand at the recent Electronica show, the company has caught the moment perfectly – and in "just doing its job" as Ballenghien modestly points out, is doing very well for itself. Is this a short-lived moment? Can the European market continue to sustain the fact that its manufacture is going elsewhere? Can it buy the products that are being made elsewhere, or are we in a vicious circle? You move manufacturing to a lower cost area to improve margins, and in doing so, by removing jobs from the economy, you remove the money from the high street that could have been spent on your own high margin products. Your new manufacturing region produces better operating margins, but you pay your workforce less, so an individual has less money to spend on your products. So you sell less advanced products and margins become slimmer so you need cheaper production processes and people and so it goes on…