Contracting Grip Intense At Nepcon : Packaging and assembly houses respond to needs of contract manufacturers

Electronic News, March 8, 1999 by Bernard Levine

Anaheim, Calif.-The intensifying grip contract manufacturers hold on the entire industry was plain to see at the recent Nepcon West show here. More and more industry players, from the back-end semiconductor packaging and assembly specialists here at Nepcon, to component makers, distributors and others, must now plan almost every move with the impact on their key contracting customers in mind.

The Nepcon exhibit floors were filled with assembly and test gear and materials heavily touted to meet the special flexibility and other needs of contract manufacturers. Contractors with checkbooks in hand scoured the Anaheim Convention Center for the latest goodies, paying special attention to materials and gear required for chip-scale, flip chip and other advanced IC packaging techniques expected to surge in coming years. Various deals between suppliers and contractors surfaced here, and the contractors were also scouting for new OEM customers as well.

The driving force behind all the activity is clear: contractors are ready to add a lot of capacity to support expected double-digit growth in outsourcing. A key thrust is expected to be advanced IC packaging. While saying he didn't want to give out too much details to tip off competitors, Ron Budacz, chairman/CEO of contractor DII Group, told a Nepcon press conference "We will be there with the best flip chip capability of any outsourcing provider in the next 18 months."

Many are ready to supply the contractors whatever is required. "We have a contract manufacturing sales team," said Richard Berger, president of Speedline Technologies, which has various offerings of interest to the contracting and other markets. "Contractors are becoming more and more important all the time."

What are contractors looking for? Chip-scale will be a major thrust in coming years, for contractors and their suppliers, according to Tom Di Stefano, founder of Tessera, a leader in chip-scale. Eyeing various equipment and materials from numerous suppliers on display at Nepcon to support the down-sized packaging technology, he said "the pieces are here. The question is, who will put them together."

Meanwhile, among all sorts of new offerings here to support various technologies, it was learned that gear maker Universal Instruments has developed a new straddle mount assembly tool for contractor Celestica to insert AMP's MICTOR side-mounted connectors. Universal intends to market the tool to other customers as well.

Universal's Odd Form and Final Assembly Division developed the tool for Celestica's Toronto location. Celestica needed a custom tool that, when integrated into Universal's GSM-OFA machine, could pick a MICTOR, check its polarity with vision, orient it, and mount it with leads straddling both sides of the printed circuit board. The tool can now be integrated with Universal's GSM-OFA, GSM2-Connector, and standard GSM machines.

Also here at Nepcon, the latest NEMI roadmap was featured in a keynote, with the contracting influence emphasized. The NEMI industry- led consortium is developing technologies and infrastructure to ensure North American electronics manufacturing competitiveness, and Jim McElroy, NEMI executive director/CEO, said "We see the trend toward outsourcing not only continuing, but expanding beyond traditional "contract manufacturing" to include design and other related services. As this happens, the electronics manufacturing services (EMS) providers become increasingly key players in the industry."

He also pointed out one negative result of the contracting surge may be a reduction in spending for manufacturing R&D, a key focus of NEMI. "It is changing the R&D landscape. As OEMs outsource more and more of their business to EMS providers, the responsibility for developing new manufacturing technologies is pushed further down the supply chain, resulting in a reduction in total spending." McElroy claimed that while OEMs typically invested three to four percent of total sales in manufacturing R&D, EMS providers operate with much slimmer margins and often spend only one percent of sales on R&D. As a result, NEMI estimates R&D spending is being reduced approximately $300 million per year. n