What Benefit Do IPC Standards Have For The Electronic Hardware Supply Chain?

For more than 50 years, IPC has developed industry standards for the production of electronic hardware. After having been long considered North American standards, IPC standards over the past two decades have spread globally. The question now is: what benefit do IPC standards have for the electronic hardware supply chain?

Providing answers to that question, several companies in Europe representing electronic design, CAD, bare board production, assembly and soldering explain how they use IPC standards in their daily business routines.

This first article covers electronic design/CAD company, GED GmbH, located 30 km southeast of Cologne in Germany.

First experience with IPC standards

GED offers PCB design and engineering and, through the assistance of external subcontractors, bare board, assembly and test services. Currently the company has 14 employees and CAD systems from six different layout vendors. With these resources, the company produces 160 new PCBs and 80 updates per year for rigid, flex, flex-rigid and HDI boards for customers in Germany, Italy, Sweden, the Netherlands, France and the Czech Republic.

From its establishment in 1986 to the middle of the 1990s, the company used its customers’ internal standards from companies such as Siemens, Philips, Rheinmetall and Thyssen. This meant that a different standard was used for every customer. An example of this frustrating situation, says Hanno Platz, owner and managing director, “was when we received an inquiry from Hewlett Packard in Germany with an attachment of 100 pages of requirements for the PCB in question.” At that time, the staff did not know about IPC and its standards. In 1995, the company had a U.S. customer that demanded that the assembly and soldering of a back plane, developed and produced in Germany, be conducted at their U.S. premises according to IPC-A-610, Acceptability of Electronic Assemblies, Class 3 acceptance criteria.

Technology focused on standards

GED found IPC standards through FED, a local German organization with a long-time relationship with IPC, and bought first set of IPC standards. The back plane could now be designed and produced according to IPC standards. Having standards from different areas of the production chain that linked together was a new and positive experience for the company. The staff now regularly discusses how to use IPC standards in their own designs as well as in the purchasing process of bare boards plus assembling and soldering.

Currently, all employees have passed CID (Certified Interconnect Designer) and CID+ (Advanced Certified Interconnect Designer) and are familiar with nearly all IPC standards for electronic design and CAD. All of their order acknowledgments for designing a complete PCB include the following statement, “If nothing else has been agreed upon, PCBs will be manufactured according to IPC standards and its Class 2 acceptance criteria.”

At GED, designers also create PCB layouts. Today, most new PCBs are HDI (high density interconnected) with a high SI (signal integrity) level including high EMC (electromagnetic compatibility). IPC standards have an important influence on these complex boards. The company uses the following IPC standards in their design work:

• The IPC-2220 PCB design series for mechanical properties of track, isolation and PTH (plated-through holes)


• IPC-2223B, Sectional Design Standard for Flexible Printed Boards for flex-rigid PCBs and questions like adhesive type, placement of a flex layer into the rigid part and coverlay dimensions


• IPC-7351A, Generic Requirements for Surface Mount Design and Land Pattern Standard for footprint (land) design, which is even more important than before because of lead-free processes, especially when components like CSPs (chip scale packages) and QFNs (quad flat no leads) are specified in the BOM list.


• IPC-A-610F, Acceptability of Electronic Assemblies for acceptability of solder joints and assemblies


• IPC-2251, Design Guide for the Packaging of High Speed Electronic Circuits and IPC-2141A, Design Guide for High-Speed Controlled Impedance Circuit Boards.With the need to comply with EU Directive 2004/108/EC, and its requirements for high EMC on all PCBs placed in the EU market, SI has become more critical. These standards assist GED designers in selecting microstrip or stripline build up for impedance.

Tool with benefit

The company’s ISO 9002 certification states that Deutsches Institut für Normung e.V. (DIN) and IPC standards serve as the foundation for quality work. IPC standards are required as a tool when the company uses external vendors for bare boards and assembly. For all potential suppliers in Europe, the staff conducts company visits that include an audit of the bare board supplier and their use of IPC standards, especially the IPC-6010 board manufacturing series and IPC-A-600H, Acceptability of Printed Boards. According to Platz, “After visiting hundreds of bare board suppliers, we’ve concluded that the majority of suppliers understand IPC standards but very few can make boards according to IPC Class 3 acceptance criteria. This is absolutely something that needs to improve.”

According to GED, IPC standards are the basis of electronic product quality and reliability. In the design process, technical parameters like choice of base material, pad sizes, spaces/traces and isolation distances between layer and component pitches are constant considerations. The use of IPC standards makes it much easier to find solutions. Without IPC standards, the alternative can involve high repair/touch up costs and lots of scrap but also an imperfect electronic product from a quality and reliability point of view. In some cases, this has been a very costly experience for the company’s customers that have not used IPC standards. Platz gives two examples:

Example 1: Working to improve EMC capabilities on a PCB, a designer placed via holes directly in surface mount pads. The result was years of solder and wetting problems with only an 80 to 90 percent yield and difficult repairs. The designer, by not following the standard, placed vias in a pad that was too tight. The profit loss over several years was estimated to be 50,000 to 60,000 Euros. The company was ultimately able to solve the problem by redesigning via hole placement that improved EMC properties.

Example 2: A complex 12-layer HDI board with BGA components on both sides needed to be manufactured using a lead-free process. After the transfer, yield went down to 50 percent. The reason: wrong design parameters and bad layer configurations were used and pads too small for via holes were created. With a higher lead-free solder temperature, many irreparable barrel cracks were created in via holes. The total loss due to the 50% yield in the lead-free process was more than 100,000 Euros.

For GED, IPC standards have been an invaluable tool over the past two decades. IPC standards not only save money, they also make it easier to communicate with bare board suppliers and assembly companies across the world. IPC standards can significantly reduce mistakes and improve end-product quality and reliability.

What Benefit Do IPC Standards Have For The Electronic Hardware Supply Chain?

Global Printed Circuit Boards Market Data 2015

Electronics.ca Publications unearths interesting findings that may reveal golden opportunities for electronics manufacturers. Here are some of the latest discoveries of interest to PCB fabricators:

According to “Monthly IPC North American PCB Market Report” Flexible circuit orders in North America are booming this year and the forecast for the next year is for double-digit sales growth. The North American flex market has grown over the past 3 years while the rigid PCB market has shrunk. Globally, the flex market is now estimated at over $10.2 billion. Yet, U.S. production accounts for only 3.4 percent of the world’s flexible circuits.

The monthly North American PCB Market Report provides timely data on PCB market size, sales and order growth, book-to-bill ratios and near-term forecasts. Data are reported for rigid PCBs and flexible circuits separately. The rigid PCB data are further segmented by company size tiers, and flex data includes trends in bare circuit versus assembly revenue sources. Trends in sales of boards to the military and medical markets are reported for both rigid and flex, as well as trends in prototype sales.

According to Global and China FPCB (Flexible Printed Circuit Board) Industry Report, 2014 was a bumper year for most FPCB companies, and the output value of the entire PCB industry reached USD12.5 billion, rising by 10.5% from the previous year. In 2015, the prices of bulk commodities (particularly the copper price) plummet, which will greatly reduce the raw material costs of PCB companies and help raise their profitability. Larger screen size of mobile phone requires larger FPCB. The FPCB market is expected to grow 8.6% in 2015 as the smartphone market can not continue its rapid growth and the tablet PC is in recession.

In 2014, the euro, the NTD and the yen significantly devalued, while the South Korean won appreciated, which not only hit a serious blow to the competitiveness of South Korean FPCB enterprises, but minified the profit of South Korean PCB enterprises. The revenue and profit margin of all South Korean PCB companies declined, for example, Flexcom’s revenue slumped by more than 50%, the giant Interflex’s revenue dropped 33% and its operating margin turned to be the negative 14.2%, which showed the power of the currency war.

Benefiting from the currency depreciation, Taiwanese and European companies witnessed soaring profit margins. More than half of Japanese companies did not benefit from the depreciation of the yen because they set up production bases overseas, but still better than South Korean companies.

In the downstream market, the biggest change in 2014 lied in: HDD saw the first growth after three consecutive years of decline. The global HDD shipment amounted to 564 million units, an increase of 2.4% from 2013. Previously, insiders were optimistic about the prospect of SSD instead of HDD; but actually, the SSD price remained high, the tablet PC market decayed, while the laptop computer market recovered to growth after three consecutive years of downturn. At the same time, the development of SSD did not restrict HDD; the new network economy and the big data era stimulated the demand for servers and HDD. HDD will still be the mainstream in the next three to five years, and the HDD shipment is expected to reach 621 million units in 2019. Japanese companies focusing on HDD-use FPCB performed exceedingly well in 2014, for example, the leader NOK (Mektron) achieved the revenue growth rate of 28% and the operating margin of 8.7% (rising from the negative 10.6%), Nitto’s revenue surged by 31%.

The competitiveness of South Korean and American companies weakened significantly. The strong USD made MFLEX’s revenue fall dramatically. The depreciation of NTD facilitated Taiwanese companies to grow by leaps and bounds; meanwhile, Apple greatly reduced orders from South Korean companies, while placed more orders with Japanese and Taiwanese companies in accordance with the principle of the nearest supply. The revenue of ZDT under Foxconn soared 60% in 2014.

 

Global Printed Circuit Boards Market Data 2015

Global Market for Fingerprint Sensors in Mobile Devices

ELECTRONICS.CA PUBLICATIONS announces the availability of a new report entitled “Fingerprint Sensors in Smart Mobile Devices”.  Research Capsule group expects fingerprint sensors to join the cast of now ubiquitous smartphone sensors though market penetration will vary by device. With more than 10 billion smartphones and tablets expected to be shipped during the coming five years, related component volumes are expected to soar.

2014 was a watershed year for fingerprint sensors in smartphones. Apple’s iPhone 6 coupled with the company’s new mobile payment service with a touch-type fingerprint sensor is creating a wow effect among consumers. The use of biometrics for authorizing financial transactions has a futuristic appeal and an allure of improved security and convenience.

Apple’s competitors have reacted quickly to match Apple’s sudden mobile payment lead. Samsung, for example, recently unveiled its own payment service coupled with a touch fingerprint sensor for authentication. It was an expected move, and the company’s use of a magnetic-stripe compatible technology could give Samsung the volume lead. Now other smart device vendors are expected to introduce a similar set of features in their next iteration of flagship phones.

This new report examines current and planned usage of fingerprint sensors in smartphones and tablets and forecasts implementations to 2019. The report coverage includes the market breakdown by touch and swipe sensors, and sales volumes and revenues by region: North America, Western Europe, Eastern Europe, Asia Pacific, Middle East & Africa, and Latin America.

The global market for fingerprint sensors in mobile devices is expected to become a multi-billion dollar market by 2019. While North America has been the key driver of fingerprint sensor adoption during the early years, adoption in the APAC region is expected to take the lead in 2015. Globally, the inclusion of fingerprint sensors in smartphones is reaching a critical mass driving it to become a mainstream smartphone feature in many markets. Research Capsule forecasts that 50% of smartphones sold in 2019 will have a fingerprint sensor.

Research Capsule believes that mobile payment will continue to be the primary driver for fingerprint sensors with the number of use cases expanding during the coming years. The volumes will be significant and though there are currently only a limited number of component vendors supplying the sensors, the flurry of activity is attracting both startups and established telecomm players to cater to this hot market.

Qualcomm’s recent introduction of its Snapdragon Sense ID ultrasonic-based fingerprint sensor could be a substantial disruptor to current component suppliers. The company’s wide industry footprint and relationship with most major smartphone vendors could propel it to a leadership position just as the market is reaching mainstream. Qualcomm’s entry into the fingerprint market was expected after it acquired Ultra-Scan several years back, but the demonstrations recently given at Mobile World Congress were impressive and shipments could happen sooner than expected. Other key competitors discussed in the report include AuthenTec, CrucialTec, Fingerprint Cards, IDEX, Next Biometrics Group, Validity Sensors, and Vkansee Technology.

Details of the new report, table of contents and ordering information can be found on Electronics.ca Publications’ web site. View the report: “Fingerprint Sensors in Smart Mobile Devices“.

Global Market for Fingerprint Sensors in Mobile Devices

Security Devices for Connected Homes Market: -- Markets Reach $7.7 Billion By 2021

ELECTRONICS.CA PUBLICATIONS announces the availability of a new study “Security Devices For Connected Homes: Market Shares, Strategy, and Forecasts, Worldwide, 2015 to 2021”.  Next generation home security devices achieve a complete replacement of existing security systems, 3D video cameras, automated connected thermostats, access sensors, and intrusion detection devices can al alert a person on the smart phone. Devices are wireless, are more energy efficient, last longer and have a significantly lower cost of operation. The study has 366 pages and 116 table and figures.

With successful strategies for increased market presence, product leadership and cost-efficiency, apps are well positioned for continued long-term profitable growth driven by the major economic trends: urbanization, rapid technological development and increased security requirements.

There is significant innovation in the market for the connected home. Lower hardware prices, increased bandwidth availability, abundance of cloud capacity, sensor miniaturization, advances in wireless standards and mobile device smart phone evolution are market forces. Improved interfaces and alerting systems are the foundation for the connected home.

Home integrated networks implement home energy management (HEM) and security for the connected home. The connected home is evolving into a multibillion-dollar industry as people use the apps on their smart phone to substitute for a security monitoring service. The smart phone can send alerts and allow control of lighting. As wireless communication standards evolve to support systems integration, home owners gain more control of the living environment through remote access controlled by apps on the smart phone.

Growth has huge implications for energy efficiency and demand response. The plethora of wireless communication standards include Wi-Fi, ZigBee, Z-Wave, Thread, and Bluetooth LE. Numerable platforms are available. A lack of standards has presented a substantial barrier to overall smart home adoption by limiting interconnectivity between devices. The best security products to keep the home and family safe are interconnected modules.

2014 saw a wide expansion of security based do-it-yourself (DIY) home devices. Hub-based systems, point solutions, modules, and kits were available as self-install home security units. Security systems are part of a larger smart home systems market. Early adopters are adding to units already in place. The new modules are interconnected to apps on the smart phone.

Point solutions category are primarily focused on security. The broader set of connected home solutions have modules that range from thermostats, doorbells and ceiling fans to slow cookers and irrigation controllers. Crowdfunding sites like Indiegogo played a major role in helping drive funding for connected home devices and startups.

Consumers, especially in younger generations, expect mobile apps, security cameras, and mobile notification features with their home security systems. Older generations and the non-do-it-yourselfers have a hard time with installation and maintenance of DIY connected home solutions. The combination of needs from both the young and old are creating a favorable environment for strong sustained growth in the Do-It-For-Me (DIFM) interactive security and connected home space.

According to Susan Eustis, leader of the team that prepared the study, “In 2014 the Security for Connected Homes saw a large number of big-name acquisitions and entries. Samsung made an acquisition of SmartThings. Google’s acquisitions were of Nest, Dropcam and Revolv. Apple acquired HomeKit. Quantities of fielded point devices and systems increased. What defines the market is the ability of a device to connect to a smart phone app and send alerts directly from a connected device to a remote smart phone”

Open platforms and device interoperability help consumers preserve their investments by building on top of their existing connected home devices and services. This compatibility also expands the value of connected homes by linking previously isolated devices and services, further enhancing peace of mind and convenience in the home. The hope is to offer consumers a more unified experience by giving them access to all of their devices from a single app or interface and enabling interactions and automation between previously isolated devices and services.

Security Devices for Connected Homes Market

Security devices for the connected home markets at $1.2 billion in 2014 are forecast to reach $7.7 billion dollars, worldwide by 2021. The continuation of 2014 trends, combined with low market awareness of the value of home automation, will force many connected home vendors to pivot and offer more than simple apps for device monitoring and control. This leads us to a big trend for 2015: movement toward interoperability between vendors, devices and platforms.

Security Devices For Connected Homes: Market Shares, Strategy, and Forecasts, Worldwide, 2015 to 2021

Details of the new report, table of contents and ordering information can be found on Electronics.ca Publications’ web site.
View the report: “Security Devices For Connected Homes: Market Shares, Strategy, and Forecasts, Worldwide, 2015 to 2021“.

Security Devices for Connected Homes Market: -- Markets Reach $7.7 Billion By 2021

Rigid PCB Industry Report: Global Top 40 Rigid PCB Companies by Revenue

2014 was a good year for majority of PCB companies, as output value of PCB industry touched USD59.6 billion, rising 3.7% against 2013, the fastest growth rate since 2011. Looking forward to 2015, a collapse in prices of commodities, especially in that of copper, will significantly reduce raw materials costs of PCB companies, thus further driving their profit margins.

In 2014, in key regions of PCB manufacturing, euro, NTD, and yen all depreciated sharply, while the won appreciated, dealing a heavy blow to South Korean PCB industry and cutting profit margins of the country’s PCB companies, which all suffered declines in revenue and profit margins, no exception for Samsung’s SEMCO, whose revenue from PCB business glided 2.4%, revenue from IC Carrier business dropped by 19%, and operating margin fell to below 1% from about 9%.

Global Top 40 Rigid PCB Companies by Revenue, 2012-2014 (USD mln)

Taiwanese companies and European ones, benefiting from currency devaluation, saw a surge in profit margins, while Japanese peers didn’t gain from yen depreciation, as more than half of their production bases are located in foreign countries, but still performed better than South Korean counterparts.

HDI was still a main engine of growth in rigid PCB field in 2014, and is expected to maintain the momentum in 2015. As mobile phone screens become larger, PCB for mobile phone has to react accordingly. To ensure light weight and thinness of mobile phone, the demand for more advanced Anylayer HDI increases tremendously. As Anylayer HDI technology is time- and -capacity consuming, combined with Panasonic’s withdrawal from Anylayer HDI field, various PCB companies will expand Anylayer HDI capacity in 2015. In 2014, the company registered largest growth in revenue from HDI PCB business was Taiwanese Compeq, which boasts customers like Apple and Xiaomi with impressive performance, jumping by 28.3% to USD690 million, one step away from industry leader Unimicron.

Another spotlight in 2014 was PCB for server. With further penetration of internet economy, the coming of big data era, and influx of large amounts of capital into network economy, the demand for server ushers in explosive growth. PCB for server requires high Tg and low Loss, with layer growing more higher, up to 28, driving continuous increase in unit price of PCB for server since 2009. The companies that specialize in PCB for server, such as Taiwanese WUS Printed Circuit and ACCL, accomplished good results, with WUS Printed Circuit’s revenue ascending by 20% and ACCL’s 27%.

Regarding rigid PCB, LED lighting stimulated demand for metal PCB with good heat elimination performance. Taiwanese T.P.T, GIA TZOONG, and mainland Chinese Shenzhen Kinwong Electronic, which are skilled in metal PCB, all enjoyed a decent level of growth. In addition, PCB for automobile also did a good performance.

The most sensational event in PCB industry in 2014 was the merger of TTM and Viasystems. The combined company is absolutely No. 1 manufacturer with total revenue approximating USD2.5 billion. TTM enjoys a strong position in cellular phone and networking/telecom, and Viasystems in automotive and industrial fields, showing a perfect complementation.

Details of the new report, table of contents and ordering information can be found on Electronics.ca Publications’ web site.  View the report: Global and China Rigid PCB Industry Report, 2015.

Rigid PCB Industry Report: Global Top 40 Rigid PCB Companies by Revenue

IPC-4101D-WAM1 Brings Significant Changes and Clarifications

If you need the most current specifications for PCB materials used in rigid or multilayered printed boards, then it is time to upgrade to IPC-4101D-WAM1. This newly revised standard brings critical updates to the already valuable IPC-4101D, Specification for Base Materials for Rigid and Multilayer Printed Boards.

Why wait? Upgrade to the IPC-4101D-WAM1 today!

IPC-4101D-WAM1 delivers key updates for board designers, specifiers of board materials, and OEM’s who use and keep boards current with base materials used in PCBs.

This revision:

• covers requirements for laminate or prepreg base materials used primarily for rigid and multilayer printed boards for electrical and electronic circuits


• contains 64 individual, keyword searchable specification sheets, including a brand new sheet that expands offerings for commercially available laminates and prepregs


• clarifies what is stated in the original release of IPC-4101D for the FR-4.0 materials as “None” for inorganic filler content, now states “<5%” is allowed


• adds table 3-10, Permissible Laminate Substitutions for Specification Sheets /21, /24, /26 and /30

IPC4101D-WAM1

This revision brings significant changes and clarifications. Learn more about how these updates can benefit you. Order IPC4101D-WAM1 today!

 

 

IPC-4101D-WAM1 Brings Significant Changes and Clarifications

Can "Make in India" become sustainable for Indian Semiconductor manufacturing sector with coming macroeconomic changes in 2015?

The semiconductor manufacturing is most capital intensive business and it is very important to make these investments sustainable in short term in order to ensure profitability in long term. Sustainability of the semiconductor wafer fabs involves being able to keep the fabs in operation 24×7 to reduce the tool idle time and manufacturing semiconductor wafers that meet the growing demand for consumer electronics and military needs.

My recently released book “Mass Capitalism: A Blueprint for Economic Revival”, takes you through the journey of semiconductor manufacturing in U.S. semiconductor industry. The high cost of manufacturing and keeping track with the International Technology Roadmap for Semiconductors (ITRS) to keep up with progress of Moore’s law forced offshoring of IC packing industry, design engineering services and eventually even the manufacture of semiconductor wafers from United States to Asia. These policies of globalization have resulted in rising trade deficits for the U.S. The replacement of manufacturing sector with relatively low paying service sector jobs has resulted in falling incomes and depreciating middle class in the U.S.

In this way globalization of semiconductor manufacturing resulted into a loss of dominance of the U.S. semiconductor industry and started to make this capital intensive as well as knowledge intensive business unsustainable leading to an early demise of Moore’s law (due to economic limits because of huge capital investments) because of poor return on investments due to poor domestic consumer demand. Since the 2008 financial crisis, the U.S. has been trying to revive its economy by lowering its bench mark interest rates close to 0% and following Quantitative Easing (QE) policies to stimulate its economy. Instead of reviving the economy by boosting domestic consumer demand, the QE policies have instead resulted into growing income disparity as the wages of the middle class haven’t been growing to boost consumer demand.

The growth in domestic demand from increased consumer borrowing due to low interest rates is unsustainable as interest rates cannot remain low forever. Additionally, the low interest rates have not increased domestic investments in the U.S. and instead investors have preferred to get better returns on their investments by investing in countries with higher interest rates like India. Hence, Low bench mark interest rates in developed economies like U.S. and Europe have primarily benefited the wealthy individuals in helping them get cheaper loans on mortgage properties and helping them earn higher incomes through renting these properties. These monetary policies haven’t encouraged the easy money from QE to get invested in domestic economy as investors have preferred to invest for higher yields in countries like India. Hence, QE policies have not been able to solve the problem of unemployment in the U.S. and has mostly created low paying and part time jobs in U.S.

Now that the QE has come to an end and the Fed is on track to raise its rates in mid 2015, the following macroeconomic changes are certain. First, the rising bench mark interest rates will not be able to lure U.S. residents into increased borrowing for mortgaging cars and houses. Additionally, When interest rates rise, the investors who have invested for short term gains in countries like India will move their investments for higher yields to the U.S.. This would put a sudden strain on the Indian rupee (INR). Hence, the net result of rising rates in the US with present monetary policy would be a poor domestic consumer demand in U.S. from decreased borrowing and strain on economies of developing countries like India through rising inflation. These changes would cause a rise in value of USD and depreciation of INR.

The net result would be a rising inflation in India as investors looking for better gains would rush to U.S. for higher returns. The largest withholders of U.S. FOREX viz. China has signed currency swap deals with its major trading partners and performs transactions in Yuan instead of USD. Hence, although USD will rise from foreign investments, U.S. will not be able to reduce its trade deficits through exports as US manufactured goods would become expensive in international markets. As there will be no major buyers for US debt due to bypassing of USD by major withholders of US Forex like China and Russia, the only way ahead forward for the Fed is to reform its current monetary policy so that wages keep track with employee productivity which would reduce US budget deficits. The U.S. has also recently imposed huge tariffs on solar goods from China and Taiwan to boost its domestic manufacturing. Eventually, U.S. will also have to impose tariffs on all foreign goods entering the U.S. to eliminate its trade deficits for revival of domestic manufacturing industry. Without reforming its trade and monetary policies to reduce its trade and budget deficits, any rise in value of USD with rise in Fed’s bench mark interest rates would result into an increase in US twin deficits which would also cause an increase in supply of goods into the an economy, which is suffering from a poor economic demand. This would cause a crash in profits of those corporations when their manufactured goods remain unsold and thereby also crashing the US stock market.

Taking these macroeconomic changes into consideration, India has following things to worry about its “Make in India” plan. The plan to lure foreign investors into India to make India a global semiconductor manufacturing hub like China could fail, if any of these investors are looking for short term gains, as semiconductor investments are long term strategic investments. These investments pay off for any country over a long term and not a short term investments that yield a quick return on investments like financial sector of today’s economy. Hence, Just like TSMC Inc. gets its financial backing from government of Taiwan, Samsung Inc. gets its financial backing from government of South Korea and Globalfoundries Inc. gets backing from government of Abu Dhabi, the upcoming Indian semiconductor fabs should also be sponsored with backing of government of India to make these capital intensive investments sustainable. This approach would minimize any chances of these capital intensive investments becoming unsustainable when investors move their investments out of India for their short term gains due to rise in US interest rates.

These huge capital investments into semiconductor wafer fabs can become sustainable only if there is a solid economic demand for these semiconductor wafers in Indian electronics industry because the economic demand is presently slowing in developing economies. However, If Indian government policies do not encourage consumption of domestic manufactured products and hence if import of foreign manufactured goods continue due to India’s Free trade policies, the trade deficits of India will continue to soar. The government recently passed some strict guidelines to all ministries asking them to give preference to domestically manufactured electronic products. This is a positive step forward aimed at boosting electronics production as part of Prime Minister Narendra Modi’s “Make in India” drive. If trade deficits are allowed to soar, these deficits will put a further strain on already troubled INR. Additionally, the products manufactured by Indian fabs will get consumed domestically only if the wages of Indian citizens keep track with their productivity. This free market monetary policy would also ensure a robust consumer demand for electronic goods in order to keep the fabs in operation 24×7 thereby reducing the idle time of tools. The potential of fabless semiconductor ecosystem in its ability to grow small businesses should be adopted by “Make in India” movement. In this process several macroeconomic reforms should also be advocated because an absence of these macroeconomic reforms have made the fabless semiconductor ecosystem unsustainable for the U.S. contributing to its twin (trade and budget) deficits.

To ensure a good return on its investments by being able to create domestic jobs and to minimize the job loses in economic downturns, a three tier fabless semiconductor business model with decentralized supply chains as proposed in “Mass Capitalism: A Blueprint for Economic Revival” should be adopted by Indian semiconductor industry. This would usher in a competitive free market balanced economy and help Indian economy transition from a developing economy to a developed economy. The trade and budget deficits would be eliminated and ever increasing huge capital investments would make this highly capital intensive business not just sustainable but also very profitable. This is a free market approach to make the investments in semiconductor fabs a success so that India can keep its 2020 projected $400 billion account deficits under control and ensure that its semiconductor manufacturing sector is able to keep track with progress of Moore’s law.

Economy also moves in a systaltic fashion and never in a straight line. Due to this systaltic motion, internal clash and cohesion take places giving rise of economic cycles. The ups and downs of socio-economic life in different phases are sure to take place due to this systaltic principle. Having a balanced economic model will also eliminate the problem of unemployment in economic downturns. In this way excess government spending in economic downturns can be eliminated achieving a true free market economic model for semiconductor industry.

About Apek Mulay

Apek Mulay is CEO of Mulay’s Consultancy Services, a senior analyst and macroeconomist in the United States semiconductor industry and author of the new book, “Mass Capitalism: A Blueprint for Economic Revival.” He attended the University of Mumbai in India and later completed his master’s degree in electronics engineering at Texas Tech University. Mulay is the author of the patent “Surface Imaging with Materials Identified by Colors” during his employment at Texas Instruments Inc., and he has chaired technical sessions at International Symposium for Testing and Failure Analysis (ISTFA) for consecutive years. The U.S. government approved his permanent residency under the category of foreign nationals with extraordinary abilities in science and technologies. www.ApekMulay.com

Can "Make in India" become sustainable for Indian Semiconductor manufacturing sector with coming macroeconomic changes in 2015?