Three Industry Giants From WKK Gather Around for Discussion

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HEA: And they're all good cars!

007: Yeah, they're Audis and BMW and so on.

LF: The problem with the young people here is that they've all been weaned to have an expectation now from material growth, and there's just not going to be that much available and it's going to cause a lot of unrest because of this expectation level. "Hey, why can't we have that? Why can't we have it now?"

GW: Yes, there are several things. First will be the expectation, secondly more and more Asian business managers are saying “We no longer trust the Americans, it's too expensive to do business there. Yes we like to own property there, but I don't know if we want to actually be there.” At the same time we look at the other changes on taxes—we're still increasing taxes and they are not. So even if we built these things in the States, to whom are we going to sell them? We’re importing it but we still have to export it.

HEA: I think that Gene makes a very good point. If the United States government continues to increase taxes on American business, why should we do anything there? You’re a businessmen and they're going to go where the best deals are. Our corporate tax rate today is 39%, it's crazy! We used to joke about the Germans being higher than us and now we're higher than the Germans. It's ridiculous. I'm just hoping that the next administration begins to address these issues, because this administration doesn't get it all, or business will continue to decline and leave the country. The other very important point that Gene and Lionel mentioned earlier is when they visited the new Whelen factory, a fresh new PCB plant and one of the first built in 20 years in the U.S., and it only 12 people running the entire factory. This is where we need to be going to bring back business to America but at the same time, what are you going to do with the people that aren't going to have jobs? Do you think Ferguson was the beginning? 

007: That was just a demonstration of what a fine line civility and chaos lives on.

GW: Well that came up in another conversation with some of our Asian friends yesterday too. They said in Hong Kong the civil disobedience leaders voluntarily walked into police stations even though there was no arrest warrant out and said here we are, and then they were sent home and they walked out. In the U.S., following the due process of law with a result according to the due process of law, we have riots and parades all over the country. And I cannot believe they were not organized. They were all happening simultaneous, at the same type of targets carrying banners that were premade and if you look closely at the news videos you will see people in the crowds with microphones and so forth coordinating the whole thing. The Chinese must look at us and say "And you were talking about our little demonstration?" We're worlds apart and they think we're headed towards a Third World country and their fast moving to a first world position.

007: Well, bringing it back to the PCB industry, it's all about automation, automation, automation. 

HEA: Absolutely, if you don't have automation and are going into automation it will have an effect on your ability to sell. These people need to make money and the other issue is that in China the increase for salaries of factory workers is mandated by the government. So if you look at the last few years, they've increased 20% a year so they're over a 100% increase in the last five years. If they continue to go there that'll force companies to automate, and they'll have to start having to get rid of these people. The government is also mandating things with regard to social costs, health care and things like that, which people didn't have here before. Now all of these factors are coming in to add cost. It is now cheaper for you to get a senior level engineer in Malaysia, Thailand, and Vietnam than it is one here in China. So how soon before people say, "Hey, maybe we need to move." 

LF: It does also require innovation. We can't keep using the same old technology. We have to have, for example, better and more efficient ways of transferring data to the substrates. You have to be able to provide at the substrate level the quality that's needed, because as you drive the geometries down, the incidents of fails and defects goes up. Unless you innovate in that area you're not going to get the yields you need to provide the products at the prices we need. 

GW: This leads to the newest generation of opportunity for actual equipment. As we are all now working with the cloud, we now have the fog coming, which is local and regional versions of the cloud where you can extract information locally where you need it, quickly, instantly, and then put it back. And that's going to create another whole industry of electronic arts as well as software. 

HEA: There is one other area which people don't even talk about, and it's even complicated for me to talk about it here, but it's the massive amounts of corruption, even within our industry. People want to sweep this under the rug and you can sweep it under the rug all day long, but only the other day we were sitting here talking to one of the very top companies in all of China. They were saying how they know what's going on even within their own company and they just look the other way. Of course we know that the Chinese government is addressing it, but the government is addressing it at the government level and they haven't even started to do this at the business level, and it is a very serious problem. They have just put under house arrest or in jail 50,000 government employees—that's a huge number and that's just scratching the surface. You can imagine how much that number would be in business. As a public company, it's not in our DNA to even think about things like that but when you deal with it on a daily basis we are forced to walk away from orders after orders after orders. The way people are getting those businesses is because of that. This is different than the West. China is going to have to learn a very hard lesson sooner or later. 

GW: Wouldn't it be nice if in America we followed the rule of law that we talk about and put under house arrest 50,000 government employees that are corrupt? (Laughs.)

007: The thing that is interesting though is the rate at which technology is changing and how we're going to start applying circuits. 3D in my mind is something that is really going change everything.

GW: Well that takes away a lot of the circuit board though. About 3-4% of the surface of a circuit board has already converted to packaging for the past year of what would have been circuit boards. We will continue to see that, but when we talk about 3D though—rather than stacked vias, which are coming but it's too costly yet, especially silicon through vias—the costs are still prohibitive for now and a percentage of that will be integrated into chipset. But the total volume of parts will go up and there will be more smaller parts. It was a fact that last year the surface area of substantive laminate consumed went down. This will be a trend. The net effect was that my guess is in the next five years globally we'll see an increase of printed circuit board production of between 4-7%. With the leaders being packaging and automotive. We see a great deal of movement towards sensors that detect motion nearby and direction of the nearby motion. These are going into automotive things, smart tablets, cell phones, etc. So that business is going to continue to explode. If I would put my money on it right now the way things are in the world, I'd say military boards are going up, though they'll be more secretly done and they'll be in the whole country. Medical boards will continue to increase, it's not a big number, but it'll be in the domestic things in Europe and the U.S. In China, even though the doctors are hustlers here, they don't want to touch anything unless it's FDA approved, and that's United States. Although some of the boards are made here in China, they’re not from as sophisticated of plants.

007: Well guys, it's been great chatting with you. I always enjoy our conversations.



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