Vol. 28, No. 10 October 2018 Few Positives Seen in Trump’s $250 Billion Tariffs for EMS Companies

The latest round of US tariffs is a 10% margins of the companies relying on The Office of the United States Trade levy on $200 billion worth of Chinese those imports, or both,” said Greg Representative issued a comprehensive list of goods, which is set to rise to 25% by the McBride, chief financial analyst at Chinese products that the Trump end of the year. That’s on top of the $50 Bankrate. administration plans to target. The list billion worth of tariffs on Chinese goods Today, the electronics manufacturing includes everything from vegetables and that went into effect in August. industry is caught in the middle. To seafood to chemical elements and construction EMS companies that MMI has offset potential price hikes from the materials. On September 24, a third round of interviewed are unanimous in their tariffs on PCBAs, for example, an tariffs went into effect at midnight. This round condemnation of the proposed tariffs, affected EMS manufacturer might pass includes some products used by the which by all accounts seem likely to through this cost to the customer, move electronics industry, such as copper, nickel, achieve little other than to punish US production to a region not affected by steel, and other metals; select tools; select EMS companies, raise prices on the tariffs (thereby creating potential wire products; select appliances, machinery, electronic assemblies, and threaten lay- domestic layoffs), or sell its products at and automotive parts; select batteries, offs and thereby cause unemployment. a higher cost. None of these options are insulators, LEDs, and printed circuit Let’s review for a moment the theory attractive for EMS companies, so most assemblies; television and broadcast behind tariffs and their proposed have developed mitigation strategies that equipment; solar panels; a range of substances positive effect. The intent of a tariff, or a involve a blend of these changes. But used in the soldering of electronic parts; and tax placed on imported goods, is to most will admit that in the end, the chemical preparations used in lead, metal, and benefit domestic companies by making customer will have to absorb the cost by plastics. These tariffs are currently at 10% but their product more affordable than a having to pay higher prices, at either the will increase to 25% on January 1, 2019, if the foreign alternative. If a car manufacturer distributor or OEM level, and then US and China fail to reach a successful suddenly needs to pay a 25% tax to passing these on to the end customer, agreement before the end of the year. This is a import steel, in theory, it will purchase according to the EMS suppliers powerful incentive for China to negotiate. In steel from an American supplier instead, interviewed by MMI. In some cases, at mid-September, Beijing announced its plan to and that will benefit the American companies like Kimball and Elemental impose retaliatory tariffs on 5,000 American economy and job market overall. Computer, layoffs are being considered goods worth $60 billion in total. The tit-for-tat as production is moved to operations in trade negotiations will continue until the What Tariffs Do in Theory—and in Mexico, where the US tariffs do not second quarter of 2019, at which point new Practice apply. policies could be finalized. However, that’s not always how things work out. For example, Harley- Davidson announced that US tariffs on Some articles in this issue Canadian steel and aluminum imports Cover Story…………………………………………………………………………………….1 could cost the company $45 million to Few Positives Seen in Trump’s $250 Billion Tariffs for EMS Companies $55 million this year, and analysts Some Quarterly Results…………………………………………………………………………….3 speculate that these tariffs will raise Celestica to Acquire Impakt Holdings.………………………………….……………………3 prices of its motorcycles by an extra Apple Buys Part of Dialog’s Business …..…………….………………..….…………….….5 $2,200. “US tariffs on Chinese imports IMI Opens Manufacturing Site In Serbia….…………………………………………………5 can drive up prices for consumers, squeeze profit Here is what some leading electronics Carrier: Transicold, a unit of Carrier Q Company Location(s) OEM companies are saying about the Corp/United Technologies Corp, asked tariffs: USTR to exclude items including parts ASTEEL Tijuana Apple: The company claims a “wide for refrigerators, freezers, and other Guadalajara, Guayas, range” of its products would be affected, refrigerating or freezing equipment from Benchmark Tijuana including the , a low-priced the proposed tariffs. computer that comes without a keyboard or Celestica Monterrey mouse; accessories such as mice, Tariff Mitigation Strategies keyboards, chargers, Apple’s Beats Most EMS companies are employing Compal Juarez mitigation strategies to avoid import headphones, and the new HomePod smart Creation Mexicali speaker; and computer parts for its US tariffs when sourcing components that Guadalajara, Tijuana, operations. Apple’s and watches come from China. It’s not easy, because were exempted from the trade tariff. up to 90% of electronic components Delta Tlalnepantla Dell Technologies: Dell states that the originate from China and finding Firstronic Juarez proposed tariffs will increase costs of vital replacements is an arduous task. Aguascalientes, Some of the critical factors that have parts and components for its US services Guadalajara, Juarez, and manufacturing operations, specifically suppressed the overall tariff impact thus Flex Reynosa, Tijuana on products such as desktops, servers, far are: the distributor inventory levels, computer parts, and network switches. Dell the percentage of IP&E product made in Chihuahua, Guadalajara, is heavily dependent on electronics China (where roughly 20–25% of the Foxconn Juarez, Reynosa, Tijuana assembly imports from China. affected components are made), and IMI Guadalajara Intel Corp: The company said that the manufacturers with multisite proposed tariffs would negatively affect US manufacturing capabilities. However, Chihuahua, Guadalajara, businesses and “stifle advancements” in tariffs will start to have a greater impact Jabil Juarez, Tijuana telecom infrastructure, including - on the market in 4Q18, as distributors are Katolec Guanajuato generation technologies like 5G, and would having to replenish their inventory levels also raise manufacturing costs for ICT and will start to pass along tariff charges. KeyTronic Juarez products such as desktop computers, Fourth-quarter tariff impacts will become , and servers. more severe, as the China 301 tariffs Kimball Reynosa Fitbit: The tracker maker says the have expanded to some semiconductor Lite‐On Juarez increased tariffs would compromise its product HTS codes as well. What’s not MC investments in US-based innovation, clear for 2019 is the duration of the China specifically wearable products; however, 301 tariff. It is conceivable that if the Assembly Zacatecas these products may soon be exempt. tariffs are not removed in 1H2019, their Micro‐Star Guadalajara Agilent Technologies: The company said impact will be large enough to stall the that the increased duties would financially current market growth rates. NEO Tech Agave, Juarez impede its US operations and its end T. H. Tung, chairman of Pegatron, has New Kinpo Reynosa customers in the US and abroad. It added noted that his company has reestablished that substantial tariff increases will limit its some manufacturing sites in Taiwan in Nortech Monterrey ability to reinvest in US operations, recent years, and that moving production affecting employees engaged in R&D, back to Taiwan, Pegatron has expanded Pegatron Juarez design, and other support operations. its manufacturing capacity there by Plexus Guadalajara Office Depot: The company believes the acquiring buildings and factories. (See tariffs will impact the non-household more examples on 5–7.) Qisda Mexicali seating and furniture, and computer and Guadalajara, Monterrey, electronics components it sells, and lead to The Mexico Option Sanmina Reynosa immense supply chain disruptions and a EMS companies without a Mexican Season likely loss of jobs. manufacturing facility must be proactive Group Reynosa Whirlpool: The company believes that in sourcing alternative materials. higher-cost components from China would However, there is considerable capacity SigmaTron Acuna, Chihuahua, Tijuana increase costs and create supply chain in Mexico for manufacturing electronics problems for US manufacturers, putting products. MMI counts 32 EMS SIIX San Luis Potosi them at a competitive disadvantage. companies and an estimated 72 facilities SMTC Chihuahua Whirlpool said the administration should representing approximately 19 million remove “critical components” such as parts square feet of manufacturing space. This Sumitronics Tijuana of refrigerators and mixers from the is summarized in the side table at right, proposed list and add finished products and while exporting production to TPV Tijuana such as dishwashers to mitigate the Mexico is not always feasible or optimal, negative impact on US manufacturing. it represents the leading mitigation USI Guadalajara strategy for avoiding the Chinese import Wistron Juarez tariffs. Manufacturing Market Insider, October 2018 2 Some Quarterly Results Revenue by Segment Sensors and LeapFrog Enterprises, Inc. Specialist Components (37% of group (LeapFrog) that were taken in the revenue): Revenue in the first half was previous financial year. TT Electronics reported interim £71.3 million (1H2017: £71.0 The gross profit margin of the results for the half-year ended 30 June million), up 7% organically. The group fell from 33.2% in financial 2018 of group revenue of £194.2 company has seen strong market year 2017 to 33.0% in financial million (1H2017: £180.5 million), demand continuing across the year 2018. This was mainly due to which included the contributions of the division. Overall, it has benefited from a higher cost of materials, which acquisitions of Stadium Group plc its strategy to position the business in offset a positive currency impact (“Stadium”) (acquired in April 2018) areas with good market demand and and productivity gains. In financial and Precision, Inc. (“Precision”) having combined the sales force and year 2018, the group successfully (acquired in June 2018); these totaled launched a key account management brought most of the products of £14.6 million. Growth was driven by approach, sales to its strategic LeapFrog and Snom Technology new sales wins and strong market distributors increased by 22%. GmbH (Snom) in-house for demand. Revenue grew by 12% at Power and Connectivity (20% of manufacture. constant currency and 3% organically, group revenue): Revenue for the first Group revenue is expected to rise against a strong comparator. Excluding half was £38.7 million (1H2017: £33.2 in financial year 2019. TEL last year’s high-margin, one-off sales in million), an increase of 18% at (telecommunication) products are Power and Connectivity (previously constant currency, driven by the anticipated to return to growth, called Power Electronics), revenue acquisitions of Stadium (April 2018) while contract manufacturing growth was 5% on a like-for-like basis, and Precision (June 2018). The 12% services (CMS) sales are forecast with Sensors and Specialist organic revenue decline relates largely to increase. Components and Global to the absence of the high-margin one- Manufacturing Solutions growing off sales relating to the last-time-buy Company News organically by 7% and 6%, activity from a site closure in the US. respectively. Foreign exchange had a Acquisitions contributed £9.9 million Acquisitions… Celestica £6.4 million adverse impact. of revenue. Underlying operating profit increased Global Manufacturing Solutions announced a definitive by 45% to £14.6 million (1H2017: (43% of group revenue): Revenue for agreement to acquire Impakt £10.9 million), excluding the the first half was £84.2 million Holdings, a maker of processing impact of foreign exchange, with the (1H2017: £76.3 million), up 13% at equipment for the semiconductor improvement largely driven by constant currency, and up 6% and other industries, for $329 operational leverage and better organically. Revenue from Stadium million. The transaction is efficiency. A £3.1 million improvement was £4.9 million. Organically, revenue expected to be accretive to its was from the base business, driving a growth was driven by demand in Asia consolidated non-IFRS operating 60-basis-point increase in return on and North America, primarily from margin. invested capital to 11.2% (FY2017: medical customers. Impakt also builds for the solar 10.6%). Underlying operating profit Vtech. The company announced and OLED display industries. It from acquisitions made in the period results for the year ended 31 March was founded in South Korea in was £1.4 million. 2018, reporting record revenue and 1977, and is now headquartered The underlying operating profit higher profit. Group revenue for the in Santa Clara, California. margin was 7.5%, up 150 basis points year ended 31 March 2018 increased Through this acquisition, as reported and 170 basis points by 2.4% to US$2,130.1 million, driven Celestica expects to gain at constant currency (1H2017: 6.0%). by higher sales in North America and significant new capabilities in The strong margin progression has been Asia/ Pacific. Growth of electronic large-format, complex, high-mix achieved whilst making additional learning products (ELPs) was manufacturing solutions for investment in the business to build negatively impacted by Toys“R”Us, multiple industries, and to capacity for future growth and expand as it filed for bankruptcy protection in broaden its precision component the company’s capabilities. This the US and Canada in September manufacturing, full system investment includes training and 2017, followed by the liquidation of its assembly, integration, and capability expansion in strategic sales US and UK businesses in early 2018. machining capabilities. In and business development to support Profit attributable to shareholders of addition, Celestica anticipates the selling required for product the company increased by 15.3% to that it will benefit from Impakt’s solutions and £0.6 million in Power and US$206.3 million. The rise in profit full spectrum of specialized Connectivity to support capacity was mainly due to higher revenue, as vertical services, including its increases, as indicated at the time of the well as the absence of the one-off South Korea–based machining trading update in May. costs associated with the integration of and manufacturing expertise.

Manufacturing Market Insider, October 2018 3 The acquisition of Impakt will enhance approximately $5 billion across Fort Smith, with its skilled labor pool Celestica’s position as the largest end-to- semiconductor test and handling and lower entry wage base, provides an end capital equipment manufacturer in equipment, thermal subsystems, test attractive opportunity for Alpine 4 and its industry. Through Impakt’s extensive contacting, vision inspection, MEMS, its subsidiaries to expand its US-based capabilities, Celestica will be able to and PCB test. This combination also contract manufacturing services by provide customers with even deeper and further strengthens its ability to fully means that are more competitive with broader capital equipment capitalize on the growth opportunities companies abroad… Starting the first manufacturing services, including in- in its key target markets of week of October, electronics region and vertical offerings. Impakt will automotive, industrial, IoT, and manufacturer Scott Electronics is also expand Celestica’s second-largest communications. Although softening moving to an 80,000-square-foot end market within its growing $2.2 in the mobility market combined with building in Salem, New Hampshire, billion ATS segment, and is well aligned current geopolitical uncertainty are expanding from its current 24,000- to the company’s strategy of expanding creating near-term headwinds, the square-foot space. Renovations are and diversifying its overall revenue and company remains confident about the expected to cost $1.5 million, margin mix through targeted investments long-term growth opportunities in according to reports. The firm plans to and acquisitions. these markets as well as its ability to use 40,000 square feet of space on the Impakt’s deep expertise in its core deliver on its synergy goals and to second floor by January. markets will fit well with Celestica and profitably grow Cohu in the years In the past year, the company has its leading position in capital equipment ahead… Jabil will acquire the hired 34 new employees, for a total of manufacturing. Together, Impakt and manufacturing operations of Johnson 156. Scott Electronics expects about Celestica have the opportunity to create & Johnson Medical Devices in an 20% growth in sales for 2018, compelling end-to-end solutions for $80 million deal. The acquisition compared to 17% growth in 2017. customers across multiple markets and in covers J&J’s endoscopy, surgical, Some 60% of the firm’s production key geographies… Compass spine, trauma, and instrumentation takes place in Salem, while 40% occurs Electronics Group has acquired wiring devices, according to published in Mexico. harness and cable assembly provider reports. Qualitronics for an undisclosed amount. As part of the deal, Jabil will Facilities Expansion… ACC Qualitronics does an outstanding job acquire 14 sites. Jabil expects annual Electronix has acquired an additional meeting the needs of its customer base, revenue to grow to more than $1 20,000 square feet of manufacturing most of which has counted on billion as a result. space to meet higher demand for EMS Qualitronics as a key partner for a The deal’s integration costs and services. With the expansion, the decade or more. Adding Qualitronics’s charges associated with the deal contract manufacturer will nearly extensive history and experience in the reportedly could be some $80 million. double its existing plant size, to 46,000 transportation industry to Compass’s The cash outlay is expected to be square feet… Sanmina-SCI is platform will further bolster its already applied to working capital and planning to expand capacity in impressive wire and cable inventory, say reports. Tatabánya, Hungary, with a €20 capabilities…Cohu announced the million investment, according to completion of its previously announced New Facilities… Alpine 4 reports. The company will focus on acquisition of Xcerra, the provider of Technologies and its subsidiaries manufacturing automotive electronics, back-end semiconductor equipment and have entered into a joint project to while creating 220 new jobs. services, and printed circuit board test. build a contract electronics Sanmina-SCI reportedly is expected The transaction is expected to be manufacturing facility in Fort Smith, to increase its volume of electronic immediately accretive to non-GAAP Arkansas. equipment produced and tested by earnings per share and generate over $20 Alpine 4 will utilize roughly 18,000 50%... Plexus has expanded its million of annual run-rate cost synergies square feet of an existing 68,000- Engineering Solutions business in within two years of closing, excluding square-foot facility that its subsidiary Penang, increasing capacity and stock-based compensation and other American Precision Fabricators efficiency of the Penang Design Center charges. Cohu expects to achieve an operates in. The new space will by moving from its former location in additional $20 million of annual run-rate initially be used for higher-volume the Penang-Riverside facility to the synergies over the three- to five-year cable assembly. Penang-Islandview facility. The move mid-term from products and facilities Alpine 4 expects the project will add could permit a 50% or more increase in consolidation. $2.5 million in annualized sales technical staffing. The acquisition of Xcerra accelerates between the two companies over the The EMS company has more than Cohu’s strategy to diversify its product next 18 months. Alpine 4 subsidiary 600 development engineers globally, offerings and customer base, expanding Quality Circuit Assembly is also part with Penang a major hub of operations. Cohu’s addressable market to of the venture. The Penang Design Center is one of eight Plexus operates around the world. Manufacturing Market Insider, October 2018 4 Contract ends… Dell EMC has Apple Buys Part of Dialog’s growth of 10% over the next twelve ended its contract with Celestica and months, the company writes in a press will move production in-house, Business for $600 Million release. according to reports. Celestica in Dialog Semiconductor announced an Galway was reportedly providing agreement with Apple to license certain of IMI Opens Manufacturing server builds and labeling hard drives its power management technologies, and for Dell. to transfer certain of its assets and over Site in Serbia Some 300 Celestica staff could be 300 employees to the Cupertino company Philippines-based EMS provider and impacted by this decision, say reports. to support chip research and development. AC Industrial Technology Holdings In addition, Dell may increase its According to the agreement, Apple will subsidiary Integrated Micro- staffing in Cork. pay US$300 million in cash for the Electronics, Inc. has officially transaction and prepay US$300 million for inaugurated IMI Serbia, its latest Facilities Closure… Jabil will Dialog products to be delivered over the manufacturing facility located in the city temporarily shut down two factories in next three years. The employees who are of Niš, Serbia. Silicon Valley and furlough workers in being transferred have already worked The 14,000-square-meter production response to weak business conditions. closely with Apple for many years. This facility—the company’s twenty-first Some 435 workers will be affected, move is expected to foster a deeper factory—will allow IMI to expand its Jabil reported to local media. collaboration between the two companies. global footprint and support the growing The two sites are located in Dialog says that it has also been market for automotive components in the Livermore and Fremont and perform awarded a broad range of new contracts European region. CNC machining and mechanical from Apple for the development and This investment also forms part of the assembly. The sites are a combined supply of power management, audio continuing effort of IMI and AC 150,000 square feet, according to the subsystem, charging, and other mixed- Industrial to assemble a global company website. signal integrated circuits. Revenues from manufacturing platform capable of The company told local media that the new contracts are expected to be capitalizing on key megatrends such as workers would be given six days’ paid realized starting in 2019 and accelerating increasing electronics in vehicles, time off during the furloughs, which in 2020 and 2021. autonomous driving, the shift to electric will include one week each in Apple will employ more than 300 power, and shared mobility. November and December, respectively. Dialog engineers and other employees The factory will boost the Jabil took a loss of $57 million in its already supporting Apple chip manufacturing of electronic car most recently concluded quarter. development, representing approximately components in the region, and will work 16% of Dialog’s total workforce. This as an extension of IMI Bulgaria. Innolux Names New Vice means that Apple will assume certain Dialog facilities in Livorno (Italy), Management Changes… NOTE Chairman, President Swindon (UK), and Nabern and announced that current board member Innolux has appointed its president Neuaubing (Germany). Johannes Lind-Widestam has been Robert Hsiao as vice chairman and also Dialog has deep expertise in chip appointed CEO and President. Lind- promoted its vice president James Yang development, and the company is thrilled Widestam succeeds Per Ovrén, who will to president, effective immediately, to have this talented group of engineers leave the company. according to an announcement by the who’ve long supported its products now The new CEO had previously been LCD panel maker. working directly for Apple. Managing Director of Kitron Sweden Yang, with 24 years of experience in and Elos Medtech, and brings the flat panel industry, has expertise New Orders… Technology and experience from various senior positions spanning R&D, manufacturing, manufacturing company Cemtrex says at ASSA, Flex, and Nobel Biocare. With marketing, and business management. that it has received over US$13 million in his operational background in industry He also helped Innolux pioneer the new orders in its Electronics and with experience from the EMS production of 19- and 20-inch Manufacturing Services (EMS) segment business focusing on growth and widescreen monitor panels in 2004. during its most recent quarter ended efficiency, Lind-Widestam is considered Partnerships… The market for the September 30, 2018. particularly well suited to lead NOTE in connected home is advancing rapidly. The company’s new orders were driven the future. Swedish EMS provider NOTE has primarily by customers in wearable smart signed a collaborative agreement with devices, medical devices, industrial Compal Mulling Restarting Plejd, a high-growth smart lighting technology, automation, and measurement enterprise. Batch production is devices. The orders came from both new Production in Vietnam scheduled to start at NOTE’s customers and existing customers such as Compal Electronics is evaluating the manufacturing unit in Lund, in the ERBE, ABB, and Heinzmann. With these feasibility of restarting its assembly lines south of Sweden, in the first quarter new orders the EMS segment’s backlog in Vietnam amid growing US-China next year. remains over $50 million in total, which trade tensions and will come to a puts the segment on a path toward organic conclusion by Manufacturing Market Insider, October 2018 5 the fourth quarter of 2018, according Foxconn Extending Smart motherboards in its Latitude 5285 to company president and CEO 2-in-1 business-use notebook, debuted Martin Wong. City Deployment to at the Consumer Electronics Show in Compal will be able to fully Wisconsin January 2018 and to be shipped to reactivate its plants in Vietnam in 4– As part of the effort to transform itself customers in the second quarter of 6 months, said Wong. When asked from an EMS provider into a tech fiscal 2019. whether the company’s clients would service group, Foxconn has been The closed-loop gold recycling be willing to absorb the costs of the actively proceeding with deployments in process comes in two stages. In the production relocation, Wong said the smart city and smart residential first stage, recycled electronic wastes that the clients will eventually need community sectors, and its latest are delivered to Wistron Green to make a decision amid the prospect deployment is to set up the Foxconn Tech’s Texas plant in the US to of a 25% tariff from the US. Place Racine in the US state of undergo initial dismantling. The plant With the US government having Wisconsin. adopts a metal surface chemistry placed a 10% tariff on many Foxconn has just announced plans to process to extract precious metals, imported goods from China and acquire the One Main Center in the including gold, silver, and copper, planning to raise the tax to 25% in downtown of Racine, Wisconsin, with from printed circuit boards, according 2019, most Taiwan-based supply the center to be renamed Foxconn Place to S. H. Huang, president of Wistron chain players have been actively Racine. It will house at least 100 Advanced Materials. The Texas plant adjusting their production lines in Foxconn employees and serve as a can process 13,000 tons of electronics response to their clients’ requests major foothold for the group’s smart waste a year, sourced from the US recently. In addition to Compal, city solutions R&D base, as well as an and Europe. Quanta and Wistron have also been innovation center of the Wisconn In the second stage, Huang reportedly adjusting their production. Valley. continued, the waste chassis plastics Compal established manufacturing According to C. L. Yang, Foxconn’s are sent to Wistron Advanced plants in Vietnam in November 2007, director of North American strategic Materials’ plant in Kunshan, China but the facilities stopped operation in investment, the planned Foxconn Place for further refining, where the plastics 2013 due to a lack of supply chain Racine and the Wisconn Valley located wastes are recycled into support and difficulties in labor in Mount Pleasant will jointly build environmental plastics to be adopted management. The company had connections with enterprises and high- by Dell’s downstream ODM partners. mulled using the plants to level educational institutes in Over the past few years, Dell has manufacture handsets in 2015, but Wisconsin, seeking to build an had 152 product items adopt recycled the idea never materialized, leaving application environment based on the plastics materials, mostly for chassis, the facilities in an idle state since. AI and 8K+5G ecosystems. and has set the goal of using 100 Compal vice chairman Ray Chen Industry sources said that Foxconn, million pounds of recycled-content has recently noted that the which is carrying out major plastic and other sustainable materials company’s production costs will manufacturing investment projects in in its products by 2020. increase by 3% if its notebook Wisconsin, will also host the “Smart As part of its new circular economy manufacturing operations are moved Cities - Smart Futures” competition to plan for the next 10 years, Dell will back to Taiwan. Chen also pointed inspire all the students and faculties of expand its closed-loop recycling to out that Compal had visited the universities and tech schools in include more waste materials, so as to Philippines to evaluate the feasibility Wisconsin to engage in innovative R&D allow the circular economy concept to of building new production lines on smart city system solutions, as further ferment in more products, there. reported by DigiTimes. according to Vivian Tai, head of Dell Because Compal already has plants Environmental Affairs and Product in Vietnam, moving production there Sustainability for the Asia-Pacific and would be the best option in terms of Dell, Wistron Teaming Up Japan Region, as reported by speed. But a lack of supply chain to Extract Gold from E- DigiTimes. support remains a big issue. Waste Compal’s server and desktop Dell has teamed up with Wistron to Production Relocation… A growing products are also affected by the recycle gold from e-waste and use the number of Taiwan-based IT product tariff, but Compal is not currently recycled gold in its products, marking makers, which are relocating their considering moving its server an upgrade of its closed-loop project production in China back to Taiwan production elsewhere because the launched in 2012 to recycle plastic or other places in southeast Asia amid production volume is still limited, as materials from end-of-life electronics escalating US-China trade tensions, reported by DigiTimes. into new Dell products. may see weaker results in fourth- Since the beginning of 2018, Dell has quarter 2018 and first-half 2019, used gold recycled from waste industry observers have warned. 6 Manufacturing Market Insider, October 2018 With the US government beginning to Network equipment maker Accton value-added products in Taiwan, and impose 10% tariffs on about US$200 is to add two additional production those unable to meet the country’s billion worth of Chinese imports, lines at its plant in Taiwan, which strict environmental protection Taiwan-invested companies in China already has three production lines, regulations will not be able to come that manufacture an array of products, according to company sources. The home, the officials said. including motherboards, networking company also plans to purchase a Inventec and Quanta Computer, at equipment, servers, and other new plant in Taiwan, with the the request of their US-based clients, electronics components, will all be investment project to be finalized reportedly are shifting server affected, said the sources. soon, reports DigiTimes. motherboard production lines from There are few difficulties for Taiwan- While most makers are still China to their existing factories in based makers, long known for their negotiating with clients on how to Taiwan. flexibility in products, to implement split the increased production cost, ODM Compal Electronics has also production relocation plans, noted the some observers believe that the most been requested by clients to shift sources, but added that among the likely outcome is that clients may production lines from China, and the issues involved are that such moves contribute part of relocation costs, company is considering expanding a will result in higher production costs while leaving Taiwan’s makers to factory in northern Taiwan or with less output and consequently absorb the increased production constructing another in Vietnam to reduced profits. costs. house the shifted production lines. In response, most of Taiwan’s suppliers are likely to renegotiate with Taiwan Keen to Syrma Opens Fifth EMS clients on pricing in order to pass on part of the increased production costs to Accommodate Plant in India them, said the sources. Manufacturers Back Syrma Technology announced the As mentioned above, notebook ODM opening of an electronics Compal Electronics has said that it is from China manufacturing plant in Bawal, its fifth evaluating the feasibility of restarting The Ministry of Economic Affairs in India. Bawal is located between its assembly lines in Vietnam on (MOEA) has stepped up efforts to Delhi and Mumbai. clients’ demand to prepare contingency accommodate Taiwan-based makers The electronics manufacturing plans. While notebook products are not moving their production lines back services provider is committing $10 yet subject to higher tariffs in the US, from China amid the escalating US- million over the next three years Compal vice chairman Ray Chen China trade war, according to toward the new plant, which will focus pointed out that the relocation of its government officials. on the automotive, industrial, notebook production lines from China Many makers have been asked by aerospace, defense, and medical back to Taiwan will result in a 3% clients to move their production lines sectors. increase in total product cost, which is in China back to Taiwan, or to The 26,000-square-foot facility very high compared with notebook southeast Asian countries such as includes a Class 10,000 clean room ODMs’ low gross margin. Vietnam, Indonesia, Thailand, and and can be expanded to over 125,000 Inventec, a major supplier of server the Philippines, to avoid the US square feet. Syrma, India’s largest motherboards, actually kicked off an tariffs on China-made products, the domestic-based EMS, said the plant expansion project at its plant in officials said. could employ up to 1,000 workers Taoyuan, northern Taiwan in Economics minister Shen Jong- once fully built out. September, slated for completion in chin revealed that the government is October. The expansion project is being closely watching the development TSMC To Be Only implemented due to requests by its concerning Taiwanese firms’ clients in North America for the production line relocation, and has Supplier of Apple A13 company to relocate its production back asked the Industrial Development Chips in 2019 to Taiwan in the early phase of the US- Bureau to contact companies to Taiwan Semiconductor China tariff war, according to sources, better understand their plans. Manufacturing Company (TSMC) is which added that the company also MOEA’s Investment Commission set to win all orders for A13 chips that plans to adjust its production lines in and Department of Investment Apple will release in 2019, extending Mexico. Services have also jointly set up a its dominance in the pure-play foundry Server makers Quanta Computer task force to help returning makers sector, according to supply chain and Wistron have also already moved solve problems in acquiring factory sources. part of their server production back to sites and securing power, water, and TSMC grabbed a 56% share of the Taiwan, and Quanta is also expanding labor supply, the officials said. global pure-play foundry market in the its capacity at its production base in But not all firms may move their first half of 2018. With TSMC set to Taiyuan, northern Taiwan, indicated the production back, as it will be cost- sources. inefficient to manufacture low- 7 Manufacturing Market Insider, October 2018 remain Apple’s exclusive supplier of Norwegian Geophysical The new laser trimmer was put into A-series chips in 2019, the Taiwan- operation at the Ulm site during the summer. based foundry stands a good chance Company Signs The machine not only replaces the older of seeing its global market share top Contract with Kitron systems, but also adds an automatic loading and unloading system in addition to fast 60% next year, the sources said. Kitron and Magseis ASA have “flying probes” that can be moved freely in The sources said TSMC is set to entered into an agreement to all directions. remain Apple’s exclusive contract manufacture Magseis’s MASS The machine was purchased in order to chipmaker, fulfilling all orders for (Marine Autonomous Seismic master the balancing act between fast the next-generation A13 chip in System) nodes to support their prototype production in the smallest series 2019. TSMC has been the exclusive growth. and short running times as well as series supplier of Apple’s A-series chips Magseis is a Norwegian production with higher quantities. since 2016. geophysical company specializing With this investment, Cicor expands its TSMC’s 7-nm process technology in OBS (ocean bottom seismic) machinery in the thin film sector. is also expected to obtain orders acquisition. Magseis has developed from AMD, Huawei, MediaTek, proprietary MASS nodes and a fully , and Qualcomm. A ramp- automated handling system, which Publisher: Randall Sherman up of 7-nm chip orders will boost the are used to acquire high-quality Editor: Anna Reynolds foundry’s market share to a new seismic data for clients. The OBS high in 2019, the sources noted. market is in steady growth and the Research Analyst: Vivek Sharma TSMC’s in-house-developed demand for OBS nodes is Board of Advisors: Michael Thompson, integrated fan-out (InFO) wafer- increasing. CEO, I. Technical Services; Ron Keith, level packaging technology has Based on the contract, Kitron will CEO, Riverwood Solutions; Andy Leung, made its 7-nm process technology supply electronics, high-level CEO, VTech Holdings, Ltd. more competitive than that of its assembly, and system testing of the Manufacturing Market Insider is a monthly counterparts, the sources suggested. MASS nodes. Production will take newsletter published by New Venture TSMC is also expected to introduce place at Kitron’s plant in Arendal, Research Corp., 337 Clay St., Suite 101, the industry’s first commercially Norway, and the contract is valid Nevada City, CA 95959. Phone (530) 265- available 7-nm EUV process, the for three years with an option to 2004, Fax (530) 265-1998. Copyright 2018 sources believe. extend, a press release reads. by NVR™. ISSN 1072-8651 With GLOBALFOUNDRIES This contract provides renewed The information and analysis presented putting its 7-nm plans on hold growth in Kitron’s here are based on sources believed to be indefinitely, TSMC will have fewer Offshore/Maritime market sector. reliable, but content accuracy is not competitors in the advanced sub-10- guaranteed. The publisher shall not be held nm process segment. TSMC is also New Machinery… Swiss liable for any business decisions influenced by this publication. ahead of Samsung in the 7-nm electronics manufacturing provider foundry business, as the Korea-based Cicor announced that the company E-mail: [email protected] foundry has secured orders only has invested in a new laser trimmer Website: www.newventureresearch.com from Qualcomm and its own mobile for its production site in Ulm, division, the sources noted. Germany.

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