Productronica day three - a tale of two shows

The Munich exhibition center is divided into two halves, with the A halls on one side and the B halls on the other.  Much of the PCB activity resides in the B halls with assembly dominating the A halls.  This week it feels a little like they are two different shows, and certainly two different industries.

The assembly and PCB industries seem further apart in fortunes now than they have been for some years.  Equipment in both sectors has enjoyed a dividend from the movement to Asia, but the fragmented nature of board manufacturing, and the nature of the product, has meant it has suffered substantially in Europe.

The future for electronics manufacturing in Europe seems to rest on just a few premises.  One of which is that end-of-life issues, coupled with compliance, and the need for design will drive a demand for manufacturing to be closer to the brand owner and the end user.  Another is that expansion, in both directions, along the supply chain, will produce growth and perhaps better margins.

These two issues are linked to the premise that assembly of boards has become a part of the EMS business in which it is very difficult to make money.  That being the case, the whole supply chain has to be explored in order for the EMS to add value and therefore gain a share of the profit. 

At the start of the supply chain is design.  I suspect no-one would disagree that involving the EMS in design is a good idea.  But how far does that go, from concept? And if that is the case where does the IP reside?  In addition, if the IP moves does that mean that an EMS with design skills in a particular area is becoming an ODM?

At the end of the supply chain is another set of offerings that have a positive impact on the businesses involved and hopefully on the environment.  Recycling, repair and disposal are all areas that add value to the business of the EMS and can enhance the brand experience that the end user has.

So, if expansion of the supply chain, coupled with closeness to end user offers a solution for the European electronics manufacturer, is there a parallel in the bare board sector?  After all, the companies that supply the industry are creative and innovative, isn't that absolutely clear at events such as this? 

I fear the answer is no.  The PCB industry has suffered price erosion for many years and although a few niches still prosper, many have become commoditised.  As a result, the companies making boards have cut their expenditure on business development essential, such as R&D and marketing.  I wonder if this affects their ability to adapt and to find strategies to develop their businesses in Europe. 

For sometime now these budget areas have been taken care of by the PCB manufacturer’s suppliers.  They have forged relationships with PCB users and have co-developed products.  It seems the future for the equipment suppliers is much brighter than that of their European customers.

On a more positive note, the assembly sector has been through an interesting period over recent years.  It has had to change its business model, adapting to the global marketplace.  It has also had to deal with the whole RoHS compliance issue, which has undoubtedly soaked up massive amounts of R&D and manufacturing resources.  Now with much of that work successfully completed and new business models starting to function, the industry can look forward to more strategic consideration of its future. 

Today I spoke to many executives who felt that although some nervousness exists in the industry as a result of so much business being consumer driven, the general consensus points to some steady growth in 2006 and a brighter 2007 and 2008.

One thing is for sure - in two years time (at Productronica 2007) we will see more change and more development in the business models of both EMS companies and their suppliers.