IPC’s Phil Carmichael on Asia, New Standards, and the Future
At the very busy IPC APEX EXPO in Las Vegas recently, IPC’s head of operations for Asia, Phil Carmichael, spent a few minutes in the I-Connect007 booth with me and Stephen Las Marias, managing editor of SMT Magazine, discussing all things Chinese. Among the topics we covered were the association’s current role in Asia, and the new corporate social responsibility standard currently being developed, something IPC is very excited about.
Barry Matties: Phil, thank you for taking time out to speak with us. Why don’t you give us an update about what IPC is doing these days in Asia?
Phil Carmichael: First of all, Barry, thank you for this opportunity to talk to you. I always appreciate talking to I-Connect007, which gets the important news to the people that matter.
Matties: Thank you.
Carmichael: We're continuing our growth trend in the People’s Republic of China. We've brought in membership, in a five-year period, from a little over 200 to around 700 members. Clearly we're offering some value to our members otherwise we wouldn't be gaining members. Our offerings are a little bit different there than in the U.S. The certification and training to maintain consistency and quality is actually done by our own staff. We have our Ph.D. level training staff—some of the best in the country. One of the things our members really appreciate is the fact that we offer, at a very competitive price, really good training programs, both on our standards and some other programs as well.
One of the new programs that we have just brought out is what we call the operator entry level program, developed specifically for China from IPC worldwide content. If you think about China, there's a lot of volatility in the manufacturing workforce. People come to work, they work until Chinese New Year, they go home and 70% of them come back. You have a pretty good churn in the employee workforce.
We offer a special program that's about a day and a half long and it's basics of how to be an operator in the electronics industry based off of all of our standards. It's also presented as a face-to-face program, but with DVD takeaways, so that people can go back and learn things. It's extremely competitively priced. A couple of companies now have adopted it as part of their employee onboarding. That's another thing that we do a little differently in China than we do elsewhere in the IPC world. We continue to grow in China faster than the economy.
Matties: Is the training really the impetus and the foundation behind that?
Carmichael: There is a value proposition in China. If your company becomes an IPC member, the price to become an IPC member in China is exactly the same as it is here in the U.S. The value proposition is a little bit different. We offer a free seat at a training program, we offer free downloads, and we offer some stuff in Chinese that you can't get elsewhere, such as white papers, discounts at shows, etc. The package of actually tangible benefits is about 4x the price of your membership. It's that value proposition that's a little bit different that's attractive to our members.
We spoke earlier about a new standard and a new type of standard that we're developing in China, which was initiated in China by some Chinese major corporates. It's the IPC-1401, which is a corporate social responsibility standard. It's not how to put together a multi-layer, rigid, PCB. It’s how to actually document compliance with specific requirements for corporate and social responsibility that are being dictated out of the EU.
One of our major partners, Huawei, has about 40% of its business in EU. The EU is asking for not just Huawei, but their second- and third-tier suppliers to actually show that they're corporately and socially responsible, including things like conflict minerals compliant and things like that. When you think about a medium-sized business with a $50 million U.S. turnover, who makes boards and sells it off to an ems who then sells them off to Huawei, this guy does not have a clear understanding of how to comply with EU compliance regulations.
So 1401 is actually a kind of a handbook including down to the form level so that a guy can go through this book, fill out the forms properly, and be able to show that he has compliance with all the latest CSR requirements in Europe. This came from China—not the EU and not the U.S. It was Chinese corporates who wanted to do this, both from their commitment to social responsibility, but also to help the supply chain. It’s a pretty interesting twist for IPC.
Matties: Right, where the lead is coming from. I would think that's an extremely sought after handbook.
Carmichael: An update to that, we're using the same IPC worldwide approach on how to develop this standard, so it's going to balloting the second quarter of this year. We hope to be able to release it sometime before the end of the year.
Matties: Great, that's exciting.
Carmichael: We'll certainly let I-Connect007 know about it first.
Matties: Thank you.
Carmichael: It's getting ready to launch and it's actually been highly sought after by the Chinese government. There's going to be some associated attention given by the Chinese government about this because the idea came from China. That shows that China is actually progressing in their maturity.
Matties: A lot of rapid change is happening in the industry in China. Automation, obviously, is a key driving factor with labor rates.
Carmichael: It's clear that China is on a path that as they progress, entry level, low and touch labor is actually moving elsewhere. We've seen a number of factories move out of China into places like Vietnam and Indonesia, because the touch labor rate in those countries is about 25% an equivalent person in China. That's a fairly big delta if you've got hundreds of workers. What we also see is that China is moving up the knowledge ladder. They're doing more complicated things. They're doing more integrated activities and they're also more involved in the design instead of just the final production.
I see two things happening. I see people moving up the value chain, which will continue to see growth in China in revenue terms, but I do see some of the volume stuff going elsewhere. That's a natural progression, I think, that we followed here in the U.S., right? It's not a surprising trend.
Matties: One of the things that I'm hearing is there's interest from American companies to buy Chinese produced equipment. I think that's a testament to the level of quality that the Chinese have achieved in manufacturing processing equipment.
Carmichael: I think you see two strong pockets of equipment production. There's China and Taiwan. Both produce high-quality equipment and they've made equipment that's pretty much customized to the PCB industry. If you step back and say, “Okay, 40% of the world's production of printed circuits are made in China,” there's certainly an ancillary equipment need and equipment requirement to service that business. Yes, there are some really great pieces of equipment that are made in China that are being purchased by other people outside of China, including at the show. About half of our Chinese exhibitors who came to the show are actually equipment manufacturers. The other half are EMS companies.
Matties: I think this may be one of the largest contingents.
Carmichael: It's the largest group, Barry, since I've been involved. It's almost twice the number of people who came last year. There's a lot of interest in the show and a chance to have face-to-face communication with buyers and so forth. We've heard some pretty good things about the show's productivity already, just entering into the second day. We've heard some good things about yesterday. It looks like it's a positive for everybody.
There's another element that I would like to bring up which is that we also run an APEX show, as you know, in South China, in Shenzhen, in the first week of December. We're now seeing a few companies, and we hope to see a few more, that are going to be showing at both shows.
Matties: I think that's now the largest show in the world for this industry.
Carmichael: The IPC APEX HKPCA cooperative show is the largest in the industry. I just signed the permits for next year's show at just under 50,000 square meters, or 510,000 square feet—which is 4x APEX Las Vegas. It's a big show.
Matties: One of the things about that show that was so impressive to me last year was the amount of equipment on the show floor.
Carmichael: We could actually produce a printed circuit board there, for sure.
Matties: Because it's a lot of the multinationals bringing their equipment in. It's really a great venue to really go kick some tires, if you will.
Carmichael: It's a very good show for what we'll call a business show because our focus there is more on giving people access to people who buy things. Our metrics show that about 65% of the attendees, of which there's nearly 50,000, are either managing directors or directors who have the ability to buy something. That's pretty important to the guys who display.
Stephen Las Marias: While the show was big, I remember there being some difficulty promoting some of the companies on the far end of the hall. Will the IPC be devising some strategies so that people really visit those remote places?
Carmichael: They're not that remote. When a show expands, it's always a challenge on how best to direct traffic all the way to the back end, but we've got some ideas. We'll see some new things this year. Actually, one of the strongest draws in this show is the China national championship of the hand soldering competition, which we put in the back. It's like the retail idea. You had to walk all the way through the show to get to the back. We'll be implementing a few things like that, but it's a challenge.
Matties: On the solder competition, I’ve watched this now for several years and it's really a quite brilliant strategy that you guys have employed there. The seriousness in which the competitors take this, it's like watching the Olympics. It’s that incredible.
Carmichael: Let me give you a couple of comments on that. First of all, with all the robotics and automation around here you would think that the days of hand soldering boards would be pretty much coming to an end. In class three, the highest and most complex level of board production, used in things like satellites or the control systems of high-speed trains, soldering is still done by hand. The quality is actually better than machines today. That's why companies are really thrilled that we have something like this competition because they can keep hammering on their employees about quality and why this is a good thing to do; it gives them a chance to shine in their factory.
In addition to the prizes we give out, most companies, if they have a person who's a winner or a champion, make a pretty good-sized deal out of it. One of the winners a couple of years ago in China met with one of the national leaders of the country, and had her picture in all the papers nationwide, and she was on TV, so it was a pretty big deal for her. Now she's actually a trainer within her facility and her position has increased as well, based upon her participation in this competition. A lot of people are, as you say, very serious about it.
One unique thing this year is that one of the judges is actually from the Korean Air Force, which is another big participant in the hand soldering competition in Korea. We have two judges from L3 and one from the Korean Air Force. We're continuing to strive to be more global as an organization. That's one of the ways that we show that.
I met with all of the participants last night. We have people from Indonesia. We have somebody from Singapore, Vietnam, Japan, two people from China, Korea and so on. We have a good representation from the Asian countries in the finals coming up here, starting today and then finishing tomorrow.
Las Marias: It really is like the Olympics of soldering competitions for them. It's not just the companies that they represent, but China. It's a pretty big deal and there’s real national pride.
Carmichael: We've had government officials at hand soldering competitions in China. It is a big deal. I think I'm the oldest person at this table, but when I grew up, ‘Made in China’ meant toys and games and gym shoes. No one thought about high-quality PCBs as coming from China that would be actually competitive with something from Japan or the U.S. They certainly are today. The Chinese government is quite pleased to support this type of activity because it does showcase China's continuing evolution in its production capability, which is a positive.
Matties: Very much so. Is there anything we haven't talked about that we should share with the readers?
Carmichael: In China, IPC has made a fairly significant investment in infrastructure. We have, as an example, 12 Ph.D.-level trainers who are actually really at the top of their game. Because of that investment in our infrastructure, IPC is the exclusive provider of IPC training in China. There are no other licensed search centers. Because it's done by IPC, we also offer it at a very competitive price. Certainly it's one of the most competitively priced in the industry and in the country. We always hope that people, if they have a need for training in China, check with IPC.
Just like any other business, if you participate in this show and the show in Hong Kong, you're going to get a better deal. Bundling is always a way to improve your competitiveness. I heard it happened here as well. You mentioned the equipment in the HKPCA/IPC show, a lot of that gets sold off the show floor at the end of the show. It's a way that companies can actually get even a further better deal because the exhibitors don't want to spend the money to send it somewhere else if they can sell it off the show floor.
Matties: That's an option.
Carmichael: That's a very common approach. I think it's more common in the Asian shows than it is here.
Matties: Phil, we certainly appreciate you taking time to spend with us today.
Carmichael: Good to see you as always. Congratulations to I-Connect007 for having a Hall of Famer now on your team. That's pretty amazing.
Matties: Thank you. Patty is amazing and what a great contributor to the industry she's been. And she's the first woman to win this, too.
Carmichael: For the Hall of Fame, she's the first. She's pretty inspirational to women in the industry. If you look around, there's not a lot of women in electronics. In China, more so, particularly at the operator level there's a lot of Chinese women who are making PCBs.
Matties: Phil, thank you so much.
Carmichael: Thank you.