EMSNOW-In4ma 2024 OnTour: Insights, Analysis And Data From Eastern European EMS Visits

Fresh from their 2024 On Tour of Eastern European EMS companies, Eric Miscoll, Publisher of EMSNOW and Dieter Weiss, Founder of in4ma share their thoughts with Philip Stoten in this must-hear interview recorded at electronica. 

The conversation begins with Dieter’s findings from his recent European PCB research, including speculation about why an EMS company they visited in Lithuania is convinced they must build PCBs in-house for their products and customers. 

The discussion covers the outlook for the industry overall in the Baltic region, how labor issues are driving many strategic decisions in Europe, and the many examples of impressive highly technical manufacturing capabilities and automation they witnessed on their tour.

EMS@C-Level is hosted by global inspection leaders Koh Young (https://www.kohyoung.com) and Global Electronics Association (https://www.electronics.org)

You can see video versions of all of the EMS@C-Level pods on our YouTube playlist.

Transcript

European PCB and EMS Industry Insights

Speaker 1 0:00

Okay, hello. Welcome to Electronica 2024. We are hosted by IPC on their booth in Hall A1, and we're going to be talking to the great and good of the EMS and PCB industry. Who better to start with than Eric Miskell and Dieter Weiss? Gentlemen, you've been on holiday together again.

Speaker 2 0:27

Tell me a little bit about your trip Not exactly holiday, but yes, dita and I've just completed our fifth on tour in four years. This time we went to focused on Eastern Europe. So we began the trip last Monday going up to Lithuania, saw a very interesting company up there, teutonica. There's a lot of activity about them. We went and transferred to Romania where we visited. We ended up only seeing six of the EMS that we had hoped to. There were some last-minute cancellations during some unforeseen circumstances, but we got a good sense of the industry in Romania. Then we came back to Germany. Just had a nice meeting yesterday with a very interesting German EMS company who actually had a facility in Romania. It was too far east for us to get to, so we opted to do the local one here.

Speaker 1 1:18

Okay, well, let's park Romania for a minute. Tell me a little bit about Teltonikaika. They're interesting because they have a very vertically integrated strategy.

Speaker 3 1:26

They're adding pcb, building a new pcb facility yes, you know, since april of this year I'm doing the pcb statistics for the european pcb manufacturing industry under the brand data for pcb and to me, this one on this trip is a visit to the. Tonica was the most important one, because number one you need to find out why, in a situation where is a number of PCB manufacturers in Europe is constantly declining and more and more people are stepping out because it doesn't make sense for for them anymore, why is a company now building a huge 30,000 square meter facility in Teltonika to manufacture PCBs? So that was very, very interesting. So why are they doing that? Well, they have a very clear view and, by the way, they are not doing it for other people. They are manufacturing the pcbs for their own ems business and own products and their own products. And they have a very clear vision that they say the customers will be in the future, willing to pay a certain premium if they know that their PCBAs are manufactured with PCBs made in Europe and that will protect the IP of those products.

Speaker 3 2:59

And I totally agree. And if you look at, for example, the United States, there are many or more companies EMS companies who have their own PCB manufacturing, like Sanmina Over here in Europe it is not very common. We have Secor, we have Eurocircuits, we have Elamaster, who are still doing their own circuits.

Speaker 2 3:23

But other than that, yeah, so a small number positive about the business outlook for the rest of this year. They're projecting continual growth and I think it's a very interesting company that's worth keeping an eye on for the PCB, but also with this they also on that what they call Technology Hill, I think their campus. There they have the plastics I mean.

Speaker 1 4:09

so it is totally vertically integrated and that vertical integration is important.

Speaker 3 4:13

They already have six plastic injection molding machines in the existing facility, but again similar to the PCB. They're building another big factory, a big building to just house the plastic injection molding over there and they are as far as I remember. They will increase the capacity in plastic injection molding from six existing machines, I think, to a minimum of 12 or 15. And it will be in the range of 60 to 200 tons.

Speaker 1 4:49

Yeah, okay, just give me a snapshot of what Lithuania looks like as an EMS location. Size of the industry. Number of players there?

Speaker 3 5:03

Yes well, number one, lithuania, amongst the three Baltic states, has 2.7 million inhabitants, which is the highest number, but it has the lowest number of EMS companies only has six. Estonia has 29, latvia has nine and Lithuania has only six, and there are just two big players one is Teletonica and the other one is a subsidiary of Ketron, and both are doing roughly similar revenues.

Speaker 1 5:34

Yeah, okay, okay, interesting. So next part of your tour was Romania. You visited six factories there. I would encourage anybody to listen to your podcast from those. I don't want to dig too much into them, but just, eric, run me through the companies you saw and then give me a kind of a flavor of what you felt made them fit together as a, as a group of romanian facilities okay, let me see if I can do these in order.

Speaker 2 5:59

We began with pantel, then was flex flex, we saw kimball, we saw uh, c-core with cistronics is what it's called there, but it's a division of C-Corps. We then did Connect Group and then we ended with Zolno. So there were the six of those. That's right, right.

Speaker 3 6:17

Yes, exactly, that's in order.

Speaker 2 6:18

Yeah, I passed, yeah, and so, yeah, so the six of those, I would say very impressive, all for different reasons, right, they are very competent. We see impressive, all for different reasons, right, they, uh, very competent. We see a lot of, you know, my, my background, psychology, so I always try to judge the people and I think the quality of the people renting these facilities were superb. Yeah, in all cases, right, they all have a different story to tell, but they all are, you know, performing very well, modern equipment, good facilities, good layouts. We saw from very large to some smaller ones. Um, uh, what else to say? I mean, if you look at the industry sectors and dita can talk about that most a lot of uh, pin through holes still being done out there, right, so it's hard to automate that, yeah, especially with the volumes, because most of this is going to be, you know, higher makes lower volume type manufacturing as well, so it becomes a challenge.

Speaker 1 7:10

Yeah, and it was fascinating when I was listening to the podcast and I really liked that as you leave the factories, you give us an overview of how many SMT lines, how many THT lines Consistently often as many THT lines as SMT lines. So it is a place where perhaps more labor-intensive products can be made competitively. Where does the labor rate in Romania sit with respect to the rest of Europe?

Speaker 3 7:36

It's the second lowest in Europe, I think at the moment, 9.6 euro per hour, but the interesting thing about it is that the minimum labor rate is very often increased by the government twice a year. Okay, and the reason, I would say, is obvious Romania is losing people, right? Yeah, and I just did some research about four weeks ago because I still had the 2018 numbers in my files and I wanted now to see how they developed in comparison to the 2023 numbers and that Ukraine lost 19% of its people is logic. That Ukraine lost 19% of its people is logic, but Romania lost 16%, which is equal to 3.45 million people, so they are now on 18.5 million, and you ask yourself the question where are these people going? That was interesting, because the answer was the majority of them go to Italy and Spain, and that is due to the similarities in the language. Yeah, it's easier for them to learn.

Speaker 3 8:54

Italian or Spanish, rather than going to Germany and having to learn.

Speaker 1 9:00

German. Yeah, so it's a romantic language.

Speaker 2 9:02

Yes.

Speaker 1 9:02

It connects with them and also it's warmer. Yeah, why wouldn't you go to Spain or Italy? And the food and the wine is pretty good too. So, dieter, from your point of view, what were your big takeaways from Romania, when you look at it holistically, as a group rather than individual factories?

Speaker 3 9:19

Well, number one was the situation that I had seen a lot of high tech, really high tech, and I'm not mentioning where I saw this, but in one company we saw a lot of optical communication technology with the glass fibers and they had 120 women just doing the splicing.

Speaker 1 9:51

The splicing yeah.

Speaker 3 9:52

And we were talking about the fibers in the diameter of 80 micron, which is a little more than my hair. Well, much more than Eric's hair. Yeah, and the optics. For that I thought, well, where are the cameras? And then they're adjusting it and then it's connected via laser. Yeah, I have seen that. Never have seen that before. I was very, very impressed. Yeah, I have to say that.

Speaker 1 10:22

But labor intensive, only so much of those kind of things that you can automate, and hence the reason to have much of those kind of things that you can automate and hence the reason to have them in those kind of environments.

Speaker 3 10:32

Yeah, but see, my impression was it is not just products being sent over there for the cost reason, because it's so cheap, especially with if you have many THC components but we saw a lot of interesting products like, for example, we saw one and a half meter long PCBs in one place, and all of that is something you don't see that often so.

Speaker 1 11:06

I'm always very interested, yeah, to see how they automate that as well, I always think it's fascinating when you go to a lower cost environment and they're not just doing the easiest stuff and using the low cost labor to do that. Eric, this time you visited some of the global players that have the local facilities there. How did you find the way they were working in Eastern Europe compared to you know the way they work globally? Do you feel that they were really assimilated into the region? It wasn't just. This is how we do it from a global point of view. We've really got to grips with what's available and what needs doing in that country.

Speaker 2 11:45

Yeah, I mean it's both right. They certainly leverage the global power that their company can provide them. For example, I mean on the supply chain, they talk about sourcing being consolidated but purchasing being local right, so they're still allowing that. And then also talking about other supply chain, I asked all of them what about plastics and metal? Suppliers are using almost without fail. I think there was one exception they were using local too. So there's certainly, and then, of course, just because of the workforce, the challenges there. They have to be local. They're all sending buses out at different radiuses. I think Flex had went out further than anybody else but they're going to these various towns because there isn't really an urbanization within Romania as there are in many other countries, so you have to kind of go find get the people and bring them in and train the people.

Speaker 2 12:36

So yeah, I think they're very much kind of being good citizens in the communities that they serve. They want to be employers of choice. We had one example of somebody who actually moved out of Timisoara further out because they were competing 100 kilometers to the east. They had been in Timisoara. They're competing with two of the bigger ones this is a smaller one. You know the price. Competition was hurting them so they moved 100 kilometers and are and have fantastic facility there and are employer of choice yeah, it's fascinating, isn't it?

Speaker 1 13:05

customers to the west, lots of potential staff members to the east, and, uh, you know, that's kind of how it works in those Eastern European kind of border countries.

Speaker 3 13:15

Yeah, and if you look at the locations of CEMS in Romania to a certain extent at least, those we visited, like on a Pearl Chain, starting in Timisoara with Flax and close to Timisoara Kimball, then you go further north, you go to Arad, you see Sustronics there, then you go to Oradea, you have Celestica, connect Group and Plexus, all in Oradea, and then you get to Satomara in the north, where you have Tsona and the only other bigger one that we didn't go to because it was too far out was Benchmark. They are, I think, 200, 250 kilometers further to the east, maybe as well, for the reason that they want to make sure that they don't have to compete too much on the labor force issue.

Speaker 3 14:11

For the others, to me it was very logic.

Speaker 1 14:15

They settled close to the border to Hungary because most of the stuff is going out, it's going to the west and you have good access to the highways in Hungary and from there it's not far to the west yeah, and it was interesting also to hear that in some cases there were kits of kits of product going in from um, from the west, and being assembled, and then then that final assembly coming back, so the company is there, their, their turnover was basically leveraging the labor and manufacturing rather than that whole, the whole supply chain, which is very much managed by the corporate.

Speaker 2 14:54

I found that fascinating. I would say the challenge is any low-cost country you go into, as we've discovered over the last 20 years, low-cost doesn't stay low-cost forever, and so that's the interesting part. That to me, one of the takeaways is that balance between the human and the automation, and it's a continual balance. And in this particular area, due to the type of manufacturing, due to the large amount of through-hole that's still being done and the size of it, it's harder for the balance there. And we had one example I forget who it was. They automated a through-hole line and we saw what they were doing there and that's great, and they put the cost in, but then the demand dropped on that one.

Speaker 2 15:35

All of a sudden, they're having to second guess. It would probably be cheaper to do it by hand, but they have this all set up now.

Speaker 1 15:42

Yeah, and it's absolutely the case with automation. When you're in a high-mix, low-volume facility, the challenge to automate is huge because you don't know what you're going to be doing tomorrow, let alone next month and next year. So big investments in fixed automation is really difficult. You need adaptable automation to be successful. I'm sure you guys are thinking about your next tour. You don't have to tell me about that, but, eric, I know after we all leave Munich you're off to asia to to do some factory visits there yes, I am.

Speaker 2 16:13

I'm actually. I have a project for one of the large global ems. It'll be interesting. I'll be visiting uh them in china and also malaysia. I'll be doing a report on that. Come out of that and also be excited. I haven't been to asia gosh in almost 20 years, so I'm really excited to get back there. It's a good opportunity.

Speaker 1 16:34

On this one. It's always a challenge because we see multiple companies, kind of just to immerse myself in more to get a sense of that.

Speaker 2 16:39

And yeah, that'll be an interesting trip. I look forward to it.

Speaker 1 16:42

Yeah, and Dieter, are you going to take a break? You could do it the whole day. My friend.

Speaker 3 16:46

Well, I definitely need to take a break. The last three months were very exhausting for me. I have visited lots of companies. I have given lots of presentations in different countries and it is worrying and I'm not the youngest anymore. So far, people still call me the industry expert. I want to avoid that they one day call me the industry expert. I want to avoid that they one day call me the industry wreck. There you go.

Speaker 1 17:15

There you go. You want to be a guru, not a dinosaur. Thank you so much. My friends, pleasure to talk to you and we'll talk again soon.

Speaker 2 17:22

Enjoy the show.

Speaker 1 17:27

Thank you.