In Terms of Experience, a 10,000-foot View of China
In the past 30+ years of PCB manufacturing in China, you would be hard-pressed to find someone more connected to the pulse of the Asian market than Gene Weiner. Barry Matties met with the industry veteran at HKPCA to get his take on the show, the current and future market conditions of China, and any effect the new U.S. administration might have on trade relations going forward.
Gene Weiner at the opening ceremony of HKPCA 2017 in Shenzhen
Barry Matties: Gene, what are your initial thoughts on HKPCA 2017?
Gene Weiner: It is a great exhibition! A little while ago, walking down the aisles, I thought I was in the subway at Tokyo during rush hour. I've never seen crowds like this at prior HKPCA events. It's the biggest PCB crowd since the old NEPCON days in the ‘60s at the Coliseum in New York. The attendees are asking good questions. Many are here to buy; some are even buying equipment they didn't originally intend to buy during the show. There were many kinds of new products for sale ranging from remote verification at Orbotech to affordable 3D printing at WKK; it's just astounding.
Matties: There are a lot of people here that I did not expect to see either, as well as a lot of first-timers.
Weiner: That's true. The first-timers include a vice president of Nan Ya, James Ho, which surprised me. He had never come to this show. He always supported the TPCA, Taiwan's printed circuit show, and then the show over in Suzhou. He appeared to be thoroughly amazed at what he saw here.
Matties: There are a lot of shows, but there are very few shows in the world that have as much equipment as this, where you can really come in, kick the tires and see some options.
Weiner: Well, all of the show’s available space was totally sold out. As I understand it, there are more than 540 companies in three halls. I'm surprised at a number of things. Not only is the Chinese-built equipment more advanced, but the quality of manufacture of printed circuit equipment, ranging from cut sheet laminators down to drilling machines, is much improved over a few years ago. It is now on a global quality level. The other thing that shouldn't have surprised me is that, in the specialty chemicals, the copycats are now going after the direct metallization for the modified semi-additive processes including carbon or graphite as well as the organic metallization processes to make holes conductive and metallize other non-conductive surfaces. The number of companies offering these apparent “knock-offs” surprised me as did the size of their booths.
Aisles are filled at HKPCA
Matties: And the copycat is still an issue, and it's an issue that's just hard to reconcile, because they may shut down one brand and start the next day with another.
Weiner: Well, the answer is still to get somebody, a trusted partner, and arrange for local manufacture, assembly or subassembly whenever possible, which is difficult to do. You have to build relationships like anywhere else. It's a fast-moving industry. It's changing. We're going to see another change due to increases in wafer level packaging. This has already affected the BGA industry very negatively, and there are other new packages coming. But here, everything seems to be turning to automotive electronics. China plans to become the world’s leader in the production and use of autonomous driving and electric vehicles. China has reserved about one third of the booth space at the upcoming CES show in Las Vegas. The city of Shenzhen, where we are, has already completed electrifying all of its public transit with more than 16,000 electric buses.
Matties: Interesting that you bring that up. I was interviewing Phil Carmichael, president of IPC China/Asia. He was mentioning electric vehicles. In China, he explained that license plates are very expensive. Sometimes it's half the cost of the car, I guess. Depending on the car it could be $10,000, $15,000 just to get a license. But the EV, there's no fee for the license, and it's creating a demand.
Weiner: Yes, it's creating a demand. The government here wants all the cars to be electric by 2025, to the point of which Ford Motors is going to introduce a bunch of hybrid and electric models. They announced it just this past week while we were here. The Chinese government is also clamping down on truck companies to focus on the qualified ones that will build quality vehicles that are efficient. Now, it is interesting to note, just before I boarded my plane in Boston, I saw a newsflash that Tesla is setting up a factory here, and what is even more interesting is that they're talking about autonomous driving trucks, tractor-trailers, like an 18-wheeler that can carry a full load for 600 miles and still be autonomous driving.
I envision pictures of a caravan of these without a driver making major deliveries across most of the country. I'd like to see it in the States instead of some of the Mexican trucks that don't meet our safety standards coming across our Southern border. The autonomous driving trucks could be a lot safer and better, but there's a huge, huge challenge for the printed circuitry. The specifications and standards are still being written as they're going forward, and at the same time, we're switching from 6 and 12 volts to 24 volts and 36 volts. Some are using old components that are not yet tested to the new performance demand levels. They have to check the reliability in extremely high humidity conditions. There will unbelievably high temperature rises on cars that will challenge the circuit substrates sensors.
How do you test for that? Bosch told me that they will run a test cycle of 10 seconds between sub-zero and 175°C in the future. There is nobody equipped yet to test to that level or to even set up those tests. That's going to be an interesting during the next few years as these systems get on the road. If we look less than 10 years down the road, 50% of the value of a car is going to be in electronics. And we're going to see more open housings, and more plastic housings instead of metal. We're going to reduce weight. We have to dissipate heat. We have to get airflow. We're going to see more heat on the switching because these are always on, whether they're charging or running, it's an always-on condition, so there's always heat generation. We will see increases in highly automated driving in many vehicles before we see fully automated cars.
Everything is changing. I'm going to be visiting Ventec shortly, and they have developed, which I saw in Germany at productronica, a laminate that dissipates heat that's copper on one side for the circuitry, aluminum on the other. There were three circuits in a headlamp assembly with the aluminum side bonded to a heat sink. The part was designed to be dropped into a Mercedes C200.
Matties: In Europe, just a couple of weeks ago, that's all we talked about was automotive; it is what's driving that market. Here they have automotive, cellphones, consumer. They have a broad spectrum of products that are driving this industry, which I think is a contrast to the other regions.
Weiner: But the profits have disappeared from a number of them because of the competition. The people that built motherboards are getting out of the business; the margins have vanished. People like Nan Ya have said they've lost money, and they're transforming their particular customer market and the factory to support the changes. China produces over half of the world's smartphones. The autonomous vehicle will create demand for 5G systems. These are all currently built by mSAP processes. They are now water resistant. Shanghai PhiChem Materials just introduced their new sprayable fluoropolymer conformal coating that provides 30 minutes of underwater protection to electronic parts that new standards require. We were told that it has just been approved by Huawei for its smartphones.
Matties: And if you need more than 30 minutes, you're probably in trouble. You've been in this industry since what year now?
Weiner: I started as a student technician at MIT Lincoln Laboratories in 1956. In fact, my job start was Friday, July 13th.
Matties: So when you look at when you started to where we are today, that's dramatically different. Is it surprising to you how far we've advanced?
Weiner: No, it's not surprising to me. In 1957, I was on public TV with my boss at the MIT lab. I was fortunate enough to have a supervisor who let me do things. I built the first functioning 3D printed wire memory plane for a ferrite core computer using a fully additive process by doing 3D exposure through planar masks and custom-formed lenses. We did a lot of very advanced things, and we learned how to advance things. Like to butt weld a hypodermic needle to number 38 wire and then string the memory cores. We did a lot of additive things. We also built experimental thin film memories then. Many of these things were just coming to fruition when the semiconductor memory came out, and that ended the future of these processes. But we still built a computer for the SAGE System, the first big computer using ferrite cores (composed of iron and yttrium oxides). The memory was in a huge blockhouse, with the temperature controlled to between 68 and 72 degrees. If not, the expansion and contraction of the wires on which the computer’s cores were strung (i.e., x, y, drive, and inhibit wires) would exert pressure on the wire-threaded cores causing a loss of their hysteresis. This would result in a memory failure and then the computer wouldn't function correctly. Those were tough days. Now you have a cellphones that are more powerful than the machine in that huge blockhouse.
I was talking with an engineer from TSMC last night who said they are planning a new memory with four nanometer features. Four nanometers! You can't see it, you can't measure it, all you can do is test the finished item and hope that you're lined up. Right now, they're also planning an 18-inch disk. That company across the way (from this studio on the show floor), TKK, just got the rights to a system for handling and storing 18-inch disks, whose usage is expected to increase rapidly. They said that they have the rights for the China and Taiwan territories. That would be an interesting interview for you.
Matties: At WKK, you were on the board, and you recently retired?
Weiner: I've retired from the board of directors of WKK after 25 years of service. I've known them since their inception in 1975, when as vice president of Dynachem I became their first chemical supplier. Their first principal was Excellon, a leading producer of NC drilling equipment at that time.
Busy WKK booth
Matties: We've seen a lot of change in China since the '70s, even in the last 15 or so years that I've been coming here. It’s like a completely different China.
Weiner: TIC—This is China. It is still changing. The government keeps tight control of things, and they keep trying to eliminate corruption, but I'm afraid the Mandarin still lives. I'm not saying they're “corrupt,” but there have been a lot of under-the-table commissions and related pressures. The government is attempting to clean it up. We have been told that when major foreign companies are approached and told which of their units are not operating with a good ethical standard, they're removing the offending managers. China, I’ve always said, is an interesting country. It's ancient. It's cultural. It’s modern. It's a customer. It’s a competitor. It’s a creditor. It's a friend. It’s a potential enemy, all in one. That represents a great challenge as well as a great opportunity!
Matties: With our new administration in America, Trump and his business sensibility, what do you think the market climate will be? What do you think that impact will have on foreigners trying to do business in China? You've been here for many years.
Weiner: If I was looking to do business in China I’d have to constantly evaluate risk versus reward and long term versus short term. It boils down to just how much risk do you want to take? How do you want to set it up? How would you protect your intellectual property? Note that China is now more and more beginning to comply with international regulations for control and protection of IP. Would you seek out and establish a trusted Chinese partner? If so, how?
Matties: I would go back, though. It's not always been easy to do business there.
Weiner: No. Well, for me it was relatively easy. I started in Hong Kong in the early 70s. Then I was invited to attend meetings in Bejing and Shanghai shortly after the Nixon accords as a consultant to the first INTERNEPCON shows held in those cities. I met Jiang Ziemin and walked through an SMT exhibit with him. Maybe I was lucky.
Matties: Yeah, for you, but a level playing field was an issue.
Weiner: You have to learn the rules of the game to play.
Matties: That's what I mean. Because it's been a tough game for many companies to play, to the point where they came here, their products were copied, and they were squeezed out based on price.
Weiner: Some of this was their own fault. Many Westerners thought they knew best how to build their markets here. They did not listen to advice. They did not learn the underlying culture and customs that affected business. They tried to impose their practices upon China rather than modify them to adapt and succeed. This made it even more difficult to penetrate markets that were not yet operating to global standards of business and law.
You know, it's interesting. Times have changed. Trump said, "China's killing us in the market. They're going to get us here, and they're going to get us there, and they're not playing fair." He met with President Xi here after meeting with him in the States. They shook hands, they looked very comfortable together, and apparently he came back with $45 billion in new orders and a Chinese commitment to invest in factories in the U.S. So I'd say it's working—partially.
Matties: It seems like it. But the thing that strikes me about this show now is how few American companies are here that used to be here.
Weiner: Many of those American companies no longer exist. They're here under other names. For example, under the name of DuPont Dow or Eternal, there was Dynachem, there was Shipley, and they're all part of that now. That’s always been interesting to me. Companies merge, merge, and merge, and get bigger, bigger, bigger, and then they start shutting down their operations or spinning them off. Why did they buy them in the first place? Who had what vision, at what point? Did they not foresee major shifts in markets? In regional supply and demand? And then when some of these guys make a mistake and their Board gets rid of them, they give them a few million dollars and tell them to keep quiet and go away.
Matties: The other thing that strikes me here is the number of Chinese companies that have filled the spaces and have filled the gaps. There's a lot of Chinese companies here.
Weiner: There's another change there. There was a time when Chinese were just reverse engineering and copying. Then there was a time when they were just trying to represent you or get a license. They don't do that anymore. If you have a good technology, say in semiconductor, they come out and just try to buy your company, period. That's different, and that's where our government has recently prevented acquisition in the semiconductor arena to try to keep the technology away from China. If there were a catastrophe, and we had to go it alone with circuits and supplies from the printed circuit industry and semiconductor business for defense, we could be in serious trouble. Additionally, you must bear in mind that today China graduates more than three times as many engineers—electrical, industrial, bio-chemical, semiconductor, mechanical, even power generation—with bachelor's degrees than the U.S. That changes the relative potential for innovation and manufacturing.
Matties: So, if you were to give somebody advice about their strategic approach to China, what would that be?
Weiner: Get to know the culture. Make friends. Play tough, play fair, know what your required returns are and just how far you will go to achieve them. I can remember my first trip in the early '80s to Beijing to meet with the CCPIT, the government agency for promotion of industry and trade. I met with the minister of electronics. He put his hand around my shoulder and said, "You know, we really would like to work with you and use your products here." This is after they tried to reverse engineer a particular product and failed to copy it. I looked him right in the eye and said, "No discount." And he laughed and said, "You are a friend of China. You understand us." Eventually, we came to terms with several companies here.
Matties: It's interesting because we are also seeing Chinese equipment now coming into America.
Weiner: I just recommended to one of my clients that they buy a Chinese machine that was $150,000 here, but the competitive models, which are only made in Japan and Italy, are $350,000, and the quality of this machine is excellent. It's a Taiwan company producing the equipment in Suzhou, China. Taiwan designed, Chinese built. It’s also worth noting that the world’s largest producer of automated plating and wet process equipment for the printed circuit industry is the UCE Group in China.
Matties: I’ve talked to several American PCB representatives here, and that's what they're saying. They can buy equipment here for 30% of what you would pay in America.
Cut sheet laminator made in China
Weiner: Well, I don't know about 30%, but I can say you can get a discount of 30, 40, 50% on many things, but you have to beware, caveat emptor. Not all of it works the same or as well as the Israeli, Swiss, or German equipment.
Matties: It's interesting seeing the German equipment, for example, drills, but there's a dozen other drill manufacturers here as well, and mostly Chinese.
Weiner: Yes, but you have to look at drills two ways. You have the mass drill production with the six heads for mass drilling of holes greater than six mils (150 microns) or larger. Then you have the specialty applications where you need MLBs x-rayed, or you want close spacing, or the versatility of a driller/router. Your best bet may still be a German, Swiss or an Italian machine. If you are looking at mass production with six spindle machines, you would find it difficult to compete with Taiwan or Chinese NC equipment.
Matties: But at some point there's a crossover. The quality is going to catch up.
Weiner: People say that, and I say people keep thinking of printed circuits and printed circuit fabrication, but they're not looking ahead to packaging instead, which may or may not contain printed circuits, as we know them today, but they're going to have some flexible substrates. They're going to have some hybrids that we've talked about. They're going to have the wafer type processing. We're going to have systems on a chip. It's all going to change. Even Dan Feinberg, an old printed circuit colleague says, "Think packaging now."
Matties: There is that mentality, but in what time frame? What are we thinking, five years, 10 years?
Weiner: It's interesting you say that. That was a dinner conversation last night with several senior Chinese and Taiwanese company officers, and they all said, "You cannot predict beyond three to five years. How do you get a return on investment if you don't know what your product will look like in five years?" So, they're playing a guessing game and trying to adapt as quickly as possible and refocus and redefine their markets. That's not easy. It’s back to the adage that cites the importance of “time to market.” Not everyone will succeed. Those that do must remember that nothing is forever. Everything has a beginning and an end. Change is inevitable.
Matties: Nobody's crystal ball has ever been accurate. It may have been lucky, but not accurate.
Weiner: Now it's only two or three years on specific items and longer on generalities or products with long lead times such as autonomous driving vehicles.
Matties: And that window is still not much of a competitive advantage considering how fast change is taking place.
Weiner: No. I wish I were 40 or 50 years younger, I would be tempted to jump in headfirst over here. These are the types of challenges I've always loved.
Matties: There's still a lot of opportunity here.
Matties: A lot of people think you had to be here 20 years ago to really find opportunity, and maybe so, but it was a different opportunity than it is today.
Weiner: There's always a challenge. I listened to the Bosch presentation yesterday, and I looked at the things that they want to do on improving reliability and measuring reliability. Especially where safety could be an issue. Where do you go? How do you do it? Then there is the challenge of the increased “data” demanded by automotive people, the reliability people, by the military, and by medical equipment makers. We saw one potential solution here yesterday over at the Orbotech booth, with remote live verification after four different types of measuring for 3D, for rotation, for size, for defects. With this system you can have a verification station anywhere in the world that prints out the data or views it live, or as you would say at 007, “Real Time.”
One hall of HKPCA
Matties: So now their customers, for all intents and purposes, can have that real-time in their factory or their office.
Weiner: It's true. One of the problems of that is going to be the cost. Many of the high-tech companies that break into this are small. I would think it will probably eventually go to the OEM or the assembly guy buying the verification and sharing that information with the supplier. We might have them there onsite in real-time at the customer's desk. That's how I would do it. But there is [probably still a lack of trust between the different fabs, EMS and OEMs.
Matties: It makes sense. You've got to follow the chain of who has the most to lose in this value chain.
Weiner: You need a new way of doing business. Not to lose, who has the most to gain? Think positive. That is an enabling process, an enabling technology. Is it commercially viable? If not, can it be made so? If so, how? Then what? Will that be the only one? No. Will there be others? Yes, but who's there first? Would it be better to be second in some cases?
Matties: What are they looking at? It's data to ensure that they're getting quality product.
Weiner: Sometimes the data seekers are creating more problems than they're solving. They're often just creating costs.
Matties: You only look at an inspection when you have something to lose.
Weiner: Well, people want reliability and verification that you're doing all the tests. And so that's adding costs and it's slowing down the process the way it's done now. This certification process is nice to go in and certify that everyone knows how to do it, but that in no way guarantees the production quality.
Matties: Exactly. It guarantees that they know how to do it on that day, in that minute, but beyond that, there can't be a guarantee.
Weiner: It guarantees they have a process that works, but does it work all the time? I'll give you an example. Take a copper plating solution. Take 1,000 gallons of electroplating solution. Divide it equally in half, and put it into equal systems, equal rectifiers, equal anodes, equal spacing, equal agitation. Take 10,000 printed circuit boards with dry film photoresist imaged for pattern plating. If you put 5,000 of the boards in one tank and plate one mil, and 5,000 in the other tank and plate one mil, then analyze the solution you will discover that they will be different, because of the processing, because of different levels of resist leeched into solution and because of different levels of heat and agitation which cannot be identical because of the dynamics of the system. But you can level the differences with technology, with pulse plating, with shields, with split rectification, with solution analysis and maintenance, but you never eliminate them.
Matties: What advice would you give to a PCB fabricator in America these days?
Weiner: Stay up to date technically. Partner with your OEM customer. Go through your EMS customer to the OEM and work together to resolve problems and design issues. Design the part for manufacturability. Get agreement on how to do it at a lower cost without endangering quality. Don't go it alone. Don't fight with it. If the EMS guy won't work with you, suggest a meeting with the other customer, or find new customers. That's what I would do.
Matties: Is there anything else you would like to talk about?
Weiner: Sure. name your topic.
Matties: All right. Gene, it's always great to catch up with you, sir. Thanks for stopping by.
Weiner: It's always a pleasure seeing you. It's fun. You enjoy this as much as I do.
Matties: I've been in this industry for 35 years now, and you're absolutely right. The thing that I really enjoy the most is being able to go out and talk to people and hear their stories.
Weiner: I do a lot of that, and you're absolutely right. Some of the stories, maybe you don't want to hear, but you hear them anyhow.
Matties: We hear them anyway. All right, sir. Thank you very much.