SMT Hybrid Packaging 06
by Philip Stoten
May 31, 2006
A domestic market poised for growth and development
Having spent just a day at the SMT Hybrid Packaging event in Nuremberg, it is clear that Germany remains the strongest player in the European electronics marketplace. So, in the days leading up to the World Cup (that's soccer for our American readers), is Germany really a world beater, and if so why? In football the answer is probably no â€“ we will not go into that too far now. In electronics manufacturing, perhaps the answer is different.
Germany, like most of its Western European neighbours, has been through a very tough time. Since the â€˜tech wreck' it has suffered more than most. Perhaps this is because Germany had further to fall, perhaps because of the shift in mindset of domestic OEMs, either way times have been really tough.
Business returning to Europe
Germany seems to be benefiting more than its neighbours from the return of electronics manufacturing from China. In the last few years the drift of business to Asia seemed unstoppable, but in the last couple of years there appears to have been a redressing of the balance. OEMs are now demanding a truly global footprint from their EMS and ODM suppliers as well as leaning towards a more â€˜customer-centric' view to manufacturing. By customer-centric, I mean that OEMs understand that they are responsible for products beyond sale, this might mean repairs or end of life responsibilities regarding the environment.
Add to this the rising costs of transport and logistics, and it is easy to see how it creates a demand for products to be manufactured closer to the customer. All this is a bit of wake up call for those EMS companies that invested heavily in China, ignoring Europe and North America. The lesson here has been that you ignore any market at your peril!
Germany has benefited for a number of reasons. First and foremost, it is the largest single market in Europe â€“ take for example the automotive industry, here Germany is entirely dominant, with close to 10% of the working population in the automotive industry or its supply chain. Automotive is a big driver in electronics right now, with growth in both numbers and applications. It is also an industry that is not into the kind of volumes that consumer products require, it also has a very high technical demand and a very high reliability and compliance demand. All this adds up to a very demanding supply chain, the need to settle and stick with approved suppliers and the need to forge very close relationships with vendors. All this leads to a tendency to purchase locally and from tried and tested vendors â€“ it also means more added value along the supply chain.
In Europe, Germans have a reputation for efficiency and a longer term approach to business and investment. As a result they have shown more resolve during the downturn and have maintained enough capacity to deal with the upturn.
All in all, no one in Europe is as well placed as Germany to take advantage of any dividend from business relocation and growth.
Anecdotally it appears that even the PCB sector, a sector which traditionally has the most trouble competing with Asia, is doing well at the moment. Most PCB shops in Germany are close to capacity right now, whilst, in contrast, those in Spain, Italy and the UK are still not enjoying such a recovery.
SMT reflects Germany's confidence in the domestic business. The presence, in a substantial way, of major international players reflects their confidence in this market. And the activity in the region is the dividend of this confidence and patience.