TECHNET Archives

January 2012

TechNet@IPC.ORG

Options: Use Monospaced Font
Show Text Part by Default
Show All Mail Headers

Message: [<< First] [< Prev] [Next >] [Last >>]
Topic: [<< First] [< Prev] [Next >] [Last >>]
Author: [<< First] [< Prev] [Next >] [Last >>]

Print Reply
Subject:
From:
Ahne Oosterhof <[log in to unmask]>
Reply To:
TechNet E-Mail Forum <[log in to unmask]>, Ahne Oosterhof <[log in to unmask]>
Date:
Mon, 23 Jan 2012 11:41:56 -0800
Content-Type:
text/plain
Parts/Attachments:
text/plain (208 lines)
The late 70-s and early 80-s was the time when business leaders discovered
MBA-s. I saw several being hired just based on their diplomas and
theoretical skills.

It was easy for them to prove, based on just single production steps, that
it was "cheaper" to outsource many of these steps.

[Definition: cheaper=low cost and it does not work / expensive=it works but
costs too much / inexpensive=it works and it does not cost too much.]

Some generalizations of the problems with outsourcing: the designers loose
contact with manufacturing, therefore no DFM; some unscrupulous CMs take
advantage of (or steal) your intellectual property; leadtimes for design
changes become longer; if a production or design error shows up the rework
is larger because more material in transit, etc. But the advantage is that I
can get a cell phone for free (just by agreeing to use it for a year or
two).

And once the US production capacity has been  moved overseas, all further
production improvements happen there and we keep losing ground.



Why do you think that our military insists for some products: Made in
America?

Ahne.





-----Original Message-----
From: TechNet [mailto:[log in to unmask]] On Behalf Of harvey
Sent: 22 January, 2012 12:45 PM
To: [log in to unmask]
Subject: Re: [TN] The iPhone Economy (from NY Times)--BACKGROUND FACTS &
HISTORY FIRST



Here are some facts (I hope) that I am working with for an article on
electronic equipment manufacturing and the Electronic Manufacturing  Service
companies that do most of it.

It will appear soon in iConnect007.com epubs.  Comments and questions are
welcomed.

I'll be glad to credit any--or not-- as you wish.

----------------------------------------------------------------------------
---------------------------------------------

THE FACTS

The largest EMS company in the world with over 1/3d of segment sales is
Foxconn, also known as Hon Hai. Sales are $110B/year, before recent
divestiture of printed circuit fab activity, about$2.5B.

For every iPhone they get $1.50 for assembly-- compare that to the iPhone
price, compare that to what Apple gets!!

Apple furnishes components and capital

equipment; Foxconn furnishes labor, plant, manufacturing organization--- all
for that $1.50.  (And Apple is pounding on them to reduce it!!  No wonder
Foxconn is under pressure that is transmitted to their Chinese  workers.

How would you like to be one of them???)



Foxconn has about 20,000 (!) production lines, so revenue per line is about
$5M.  That is about half of the industry average annual revenue per line.
(Averages cited are gross estimates, useful for economic metric purposes,
there are large variations dependent on manufacturing mix, production scale,
etc.)



EMS companies typically net less than 5% of sales, usually much less.  They
make over 10%, often much more, on assets.

So they follow the Costco business model, supplying the components and
turning them over fast--- except for the Foxconn-Apple relationship, as
described.

(You see why Steve said, "Those jobs will never come back!")



THE HISTORY

The EMS business segment emerged in the 1980s as a result of developments
that occurred on three fronts: (a)business, (b)economic, and
(c)manufacturing technology .  The three were closely interrelated.



(a) On the business front, in the late 1980s the original  electronic
equipment manufacturers (OEMs) like Apple, IBM, HP, etc. decided, with  rare
exceptions, that PCB fabrication and assembly were not their bag. Apple
closed their Fremont CA plant  (I went on a tour headed by Steve Jobs in the
early 80's. Steve was so proud of that plant!) Why did the OEMs decide to
outsource manufacturing?  One has to consider the economics and the
manufacturing technology changes to understand their historic decision.



(b) On the economic front, economies of scale favor manufacturing
specialization as business model. Electronics equipment markets are
dynamically changing under the influence of macroeconomic business cycles
and their own short life cycles.

OEMs loved to shift the resulting risks to EMS companies.  Inventory risks
and supply chain logistics were shifted along with manufacturing.  OEMs
could concentrate on product development and marketing, the valuable
differentiators in their fiercely competitive markets. EMS companies were
able to leverage buying power  for the  component/ materiel needs of many
companies and products to become distributors, in essence.



(c) Another shift occurred in the 1980's that contributed to the business
and economic reasons for transfer of manufacturing from OEMs to EMS
companies-- the manufacturing technology shift from one-sided through hole
to two-sided Surface Mount Technology.

That required large investments in new equipment, new supply chains, new
skills.



Oh, but the OEMs enjoyed unloading all that and the EMS companies were
equally overjoyed to taking it on!!  But what a business!!--  more on that
in my articles.



My article will include a couple sequels--technology and business, looking
at the future.

It will include a special look at EMS competition as it plays out in Silicon
Valley and on the global stage.






<http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-mid
dle-class.html?_r=1&hp>
http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-midd
le-class.html?_r=1&hp




<http://www.nytimes.com/interactive/2012/01/20/business/the-iphone-economy.h
tml>
http://www.nytimes.com/interactive/2012/01/20/business/the-iphone-economy.ht
ml



______________________________________________________________________

This email has been scanned by the Symantec Email Security.cloud service.

For more information please contact helpdesk at x2960 or
<mailto:[log in to unmask]> [log in to unmask]
______________________________________________________________________



---------------------------------------------------

Technet Mail List provided as a service by IPC using LISTSERV 16.0 To
unsubscribe, send a message to  <mailto:[log in to unmask]> [log in to unmask]
with following text in the BODY (NOT the subject field): SIGNOFF Technet To
temporarily halt or (re-start) delivery of Technet send e-mail to
<mailto:[log in to unmask]> [log in to unmask]: SET Technet NOMAIL or (MAIL) To
receive ONE mailing per day of all the posts: send e-mail to
<mailto:[log in to unmask]> [log in to unmask]: SET Technet Digest Search the
archives of previous posts at:  <http://listserv.ipc.org/archives>
http://listserv.ipc.org/archives For additional information, or contact
Keach Sasamori at  <mailto:[log in to unmask]> [log in to unmask] or 847-615-7100
ext.2815

-----------------------------------------------------



______________________________________________________________________
This email has been scanned by the Symantec Email Security.cloud service.
For more information please contact helpdesk at x2960 or [log in to unmask]
______________________________________________________________________

---------------------------------------------------
Technet Mail List provided as a service by IPC using LISTSERV 16.0
To unsubscribe, send a message to [log in to unmask] with following text in
the BODY (NOT the subject field): SIGNOFF Technet
To temporarily halt or (re-start) delivery of Technet send e-mail to [log in to unmask]: SET Technet NOMAIL or (MAIL)
To receive ONE mailing per day of all the posts: send e-mail to [log in to unmask]: SET Technet Digest
Search the archives of previous posts at: http://listserv.ipc.org/archives
For additional information, or contact Keach Sasamori at [log in to unmask] or 847-615-7100 ext.2815
-----------------------------------------------------

ATOM RSS1 RSS2