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15th Annual Fleck Connection Congress

The 15th annual Fleck Connection Congress, sponsored by Fleck Research and Global Conventions—divisions of Global Connector Research Group—was held October 27-29, 2003, at Caesar’s Palace in Las Vegas, Nevada.

Despite the fires in Southern California, which wreaked havoc with airline schedules, the conference was attended by a couple hundred senior executives of the connector industry from the United States, Canada, Germany, France, the United Kingdom, China, Japan, Taiwan, South Korea, Switzerland and Singapore.

Summarizes the pertinent issues and topics addressed by the senior executives who were speakers at the FCC.

Distinguished Speakers

Addressing this year's FCC were the following industry executives, listed in sequence of appearance:

Speakers & Topics at FCC 2003

  Mr. Tatsuya Arai
Hirose Electric
“Wireless Communication and Connectors"

Mr. Robin B. Gray
National Electronic Distributors Association (NEDA)
"Understanding Distribution's Value"

  Mr. Ulrich Wallenhorst
Harting Electronics GmbH & Co. KG
"Market and Technology Trends in the Mobile Communication World
- Impact on Connector Manufacturers"

Mr. Bill Miller
Interconnect Systems, Inc.
"Interconnect Fusion. The Impact of Fine Pitch High I/O Semiconductors on the Interconnect Cost Model"


Colonel David M. Neuenswander
Nellis Airforce Base - Airground Operations Squadron Commandant

  Mr. Matt Sheerin
Thomas Weisel Partners
"The Changing Dynamics of the Electronics Supply Chain:
A Wall Street View"
  Mr. Gilles Rizzo
“FCI: A Technology Driven Company"
  Dr. Wolfgang Jacobi
ODU-Steckverbindungssysteme GmbH & Co. KG
"HOW TO SURVIVE: A second tier company on lessons learned..."
  Mr. Stephen Hopkins
Newark InOne
"Helping You Stay Ahead of the Curve"
  Mr. Gary A. Humbert
Molex Incorporated
"High Speed Connector Market and Technology Trends"
  Mr. Mike Noonan
FONS (Fiberoptic Network Solutions)
“Fiber to the Home"
  Mr. Josh G. Nickel, Ph.D.
Silicon Bandwidth
"Next-Generation OEM System Performance Requirements and
Signal Integrity Issues"
  Mr. Timothy L. Conlon
Viasystems Group
“China and the Evolving Backplane Market”
Mr. Frank Burge
CMP Media
"Thoughts on Buying, Selling and Surviving"
  Mr. Patrick C. Wan
Acon (Advanced-Connectek)
"Connector/Cable Assembly Industry Operating Reality in PRC (China)"



Mr. Darrell Wampler
International Aerospace Solutions
“Military/Aerospace - Programs Driving Connector Procurement”

  Mr. Anthony E. Listro
Judd Wire Inc.
"Environmental Issues Facing the Wire and Cable Industry"


Having Survived 2001 to 2002 -- Now, What is Ahead for the Industry

Fleck Research declared that any analysis of 2003 starts with China. He noted that of 83 companies manufacturing in China interviewed by Fleck Research in October, 2003, 86% reported increased results and only 3% suffered a downturn.

Production of connectors, cable assemblies and backplanes in China has grown from $7.387 billion in 2000 to an estimated $11.7 billion in 2003, an upsurge of 21.5%. Price erosion is rampant.

Among the positive trends within the interconnect industry, Fleck pointed out, are semiconductor sales in 2003 up 10.2% and forecast to climb 16.8% in 2004. Notebook sales are increasing 75% and motherboard sales are up 35%, he said.

In other areas, handset sales will expand a minimum of 20% to a projected 474 million units, while by 2004, 241 2.5G phones will ship (up 42%), along with 48 million 3G phones (140% growth). Digital camera sales are up 63% and desktop shipments are predicted to grow 8.9% in 2003.

“As each day goes by,” Fleck concluded, “It becomes clearer that we are not going to slip back into another recession, and that the economy is making a slow recovery.”

Wireless Communication in Connectors

Tatsuya Arai, manager of Hirose’s Overseas Business Division, addressed the conference on wireless communication in connectors.

He commented that Hirose’s revenue for the last fiscal year translated to US$600 million. Hirose’s growth has been constant, Arai declared, expanding over 50 times in the past 25 years.

Communications and computer servers currently are receiving heavy focus from Hirose, Arai stated. It is in those two areas, he noted, that wireless technology is really booming. He compared wireless technology to the remote control on a television set or keyless entry for automobiles -- a convenience that users now take for granted.

Arai displayed his own cellular phone, which he pointed out may be used for Internet connections. He also showed a new camera phone, which he said is becoming quite popular in Japan, and predicted that the home office would be the next big arena for wireless communications.

As the wireless industry market matures, Arai said, more variations in product categories will be available.

Understanding Distribution’s Value

Aside from a slight hiccup earlier this year, the annual rate of industry turnover in distribution has enjoyed a steady climb, according to Robin Gray, executive vice president of the National Electronic Distributors’ Association (NEDA). Monthly sales began an upward spurt in July, 2003, both for the industry’s top 20 distributors and the remainder of the companies.

Gray spoke of the industry’s Value Proposition Study, a landmark project undertaken to quantify dollar value. The study was launched to respond to the threat of disintermediation and provide value to NEDA members.

The survey was inaugurated in 2000 to identify the perceptions of the value that distributors bring to the electronics supply chain. It is intended to identify and measure the value created by electronic distributors for customers and suppliers. Preliminary findings from customers include inventory management and local presence, on-time delivery, multiple product lines and long-term relationships.

Savings to customers are quantified as a reduction in inventory and cost savings due to increase in convenience when using a distributor. Data was collected on different variables such as purchase volumes, lot sizes, fill rates, lead time and expediting costs, transportation, negotiation and switching expenses.

By using a distributor, Gray declared, customer savings range from 15% to 50%, depending on the size of the customer, purchasing methods, lead times, holding costs, etc.

Marketing & Technology Trends in Mobile Communication

Ulrich Wallenhorst of Harting Electronics opened his presentation with a short history of telecom, beginning with Alexander Graham Bell’s invention of the telephone. When the first commercial switchboard began operating in 1878, it served 21 phones on eight lines, consigning many people to a party line.

Three years later, Bell received a patent for the metallic circuit, the concept of two wires connecting each phone, greatly reducing the amount of noise and making long distance possible, Wallenhorst noted. Automatic switching followed, then coast-to-coast transmission thanks to Lee De Forest’s three-element electronic tube.

The cellular telephones we know today had their genesis in Tokyo in 1979. In 1983 Ameritech started the first cellular network in the United States. Today, nearly a billion subscribers use cell phones.

The history of mobile communications shows a permanent increasing number of electromechanical and electronic hardware components and devices, Wallenhorst declared. The 3G rollout has been delayed due to economic conditions, but bandwidth and service needs remain. The future trend to 4G mainly is an integration process of different technologies accompanied with still higher speed requirements, he concluded.

Interconnect Fusion

Semiconductor packaging was the focus of the presentation by Bill Miller, president and CEO of Interconnect Systems, who spoke on “Interconnect Fusion: The Impact of Fine Pitch High I/O Semiconductors on the Interconnect Cost Model.”

Miller reflected on his 40-plus years in the interconnect industry as a period of growth and change. He noted that the changes of the last three decades have been driven by semiconductor technology.

U.S. companies held the majority of the worldwide connector market until the 1990s, he said. Today, five of the top 10 connector companies are foreign-based. Automotive electronics has driven connector growth, with 31% of the top 10 connector companies’ sales in 2003 being to the automotive industry.

Today, connectors are more specialized, and designed for special applications, Miller declared. He told of starting a company in IC packaging which could bring connector experience to the industry.

ISI has the knowhow, the enabling technologies and the products to implement a cost reduction module program, Miller stated. ISI designs and manufactures a broad line of high lead count IC packages utilizing printed circuit board interconnects, unique molding capabilities and thermal management solutions.

Electronics & Air/Ground Support in Afghanistan & Iraq

A late addition to the speaker lineup -- and one of the most well received -- was Air Force Colonel David M. Neuenswander, commandant of the U.S. Air Force Air Ground Operations School at Nevada’s Nellis Air Force Base.

“Iraq looks like a place that’s been ignored,” the colonel -- who recently returned from that country -- told the FCC delegates. The United States is taking a “big stick” approach toward rebuilding the war-ravaged nation.

Among the hazards involved in this mission, Neuenswander declared, is that “too much intelligence is made available to the enemy via the media.”

The colonel conducts classes in close air support for the Army and Air Force during training exercises at the Nevada base. He noted that the latest version of the military UAV (unmanned aerial vehicle) is a “great system, very good at reconnaissance.”

Neuenswander, a graduate of the Air Force Academy, remarked that one of the primary lessons you learn in the armed services is that “you can do a lot of this if you don’t quit.”

A Wall Street View of the Electronics Supply Chain

Matt Sheerin, a senior analyst in equity research for Thomas Weisel Partners, offered what he termed “quick thoughts on the economy”. He noted that most end markets seem to be picking up -- at least seasonally -- and spending on information technology is on the mend.

“Pricing is beginning to stabilize, with some exceptions,” Sheerin remarked. Lead times are stretching and, with capacity utilization rising, we can expect some spot shortages in 2004.

On the downside, he said, the EMS segment of electronics is not immune to the industry downturn. Acquisitions have become too expensive and the supply chain management is inadequate. The result is big restructurings and excess capacity.

Distribution has been particularly hard hit by the downturn, Sheerin said, citing the high cost structure which has led to significant losses. Consolidation is continuing, he pointed out, noting that in the past year, Avnet acquired Kent Electronics, Pioneer-Standard sold its electronics unit to Arrow Electronics and Reptron sold its distribution business to Jaco.”

The future for distribution, he declared, remains bright, as it still is the most effective way to reach a wide audience and the most effective procurement method for small and medium OEMs and EMS providers. Gross margins held up well during the downturn, he added, and smaller distributors are focused and competitive.

“The distribution cycle is lagging suppliers by two to three quarters,” Sheerin said, advising FCC attendees to expect more consolidation, but no major acquisitions. “The business model will continue to change, but peak-to-trough revenue and margins are not as dramatic as in other sectors of the industry.”

FCI’s Road From Innovation to Strategic Technology

Gilles Rizzo, director of strategic planning for FCI, discussed the French company’s development over the years, citing specific trends in connector design and focusing on advanced design capabilities and increasingly sophisticated manufacturing processes.

He cited the diversity of solutions and products on the market, including connectors for switchers and routers, a new generation of IC sockets and automotive connectors. Increased technology has benefitted high-tech manufacturing, he noted, but also has boosted conventional manufacturing processes.

Rizzo described FCI as a technology-driven company striving for innovation. FCI invested over 6% of its turnover in research and development in 2002, he noted, commenting that his company owns 9,000 patents worldwide and 200 new patents are registered each year.

FCI’s objectives, Rizzo stated, included being the early involvement supplier in high-end markets such as telecommunications, high-speed data applications, automotive and consumer niches. The company strives to anticipate new requirements in electronics, he said.

As signal speed increases, connector manufacturers will need to develop signal integrity experience and enhance specific partnerships with manufacturers of active components, cables and PCBs, Rizzo concluded.

Second Tier Company ODU Offers Survival Tips

How to survive a depressed market as a second-tier manufacturer was discussed by Wolfgang Jacobi, president and CEO of ODU. The company’s product strategy, he stressed, was to eschew commodities and concentrate only on design-in and custom specific orders.

ODU, Jacobi noted, has a history of maintaining long-term relationships with its sales partners. Finland has been among that number for 35 years, while Israel, Japan and the Netherlands have dealt with the company for 15 years each.

Jacobi said his company should grow 15% to 20% this year and noted that the medical industry occupies 30% of ODU’s business activity.

“We endeavor to find the best people for our company,” Jacobi said, noting that employees are the company’s most important asset. ODU sponsors classes in the arts for its workers.

Staying Ahead of the Curve

Stephen Hopkins, vice president of product management for distributor Newark InOne, spoke on his company’s impact on the distribution industry.

Newark InOne operates local offices in 19 countries and possesses worldwide export capability, he stated. The company has global contract agreements with multi-national customers, with over 3.5 million products available worldwide and over 1,000 top worldwide manufacturers represented.

Connectors comprise a significant part of Newark InOne sales, Hopkins declared, noting that the company’s annual connector sales were in the $80 million range with 372,000 individual orders and 75,000 accounts.

The Newark InOne catalogue merchandises some 20,000 connectors with 124,000 total products, he noted. The company experienced double-digit growth in 2002 and anticipated even faster growth in 2003.

The company supports all major e-procurement systems and is an industry leader in custom e-catalogues and XML orders, Hopkins said, noting that many of Newark’s competitors are too small to support e-procurement systems.

Specialized advertising, direct marketing, product assortment and sales initiatives have contributed the company’s success, he concluded.

High Speed Connectors & Technology Trends

Gary A. Humbert, a project manager for Molex, discussed the high-speed connector market and technology trends. The two primary markets, he noted, are telecom and high-speed computing.

Molex is the world’s second-largest manufacturer of electronic, electrical and fiber optic interconnection products and systems. The company also make a variety of switches and application tooling.

Molex, Humbert pointed out, is the number-two connector manufacturer in the world, with sales approaching $1.9 billion. The company operates manufacturing plants in 19 countries and 26 development centers in 15 countries with over 100,000 product lines. And “a catalogue that could stop a bullet.”

Driving the company, he noted, are performance, growth, investment and innovation. Some 20% of Molex’s revenue is funneled back into new product development. Demand for high-speed bandwidth will increase, Humbert said.

Is Fiber to the Home in our Future?

Fiber to the home is an emerging market, declared Michael J. Noonan, CEO of Fiber Optic Network Solutions (FONS). FTTH projects are increasing and the technology has a significant growth potential, he said.

“Copper took 90 years to reach 90% of Americas,” Noonan declared, “while coax took 50 years to reach 90%. FTTH has been viable for three years with under 1% penetration.”

Noonan pointed out that 21 million homes were passed with fiber in 2003. “By 2004, that figure will reach 625 million,” he predicted.

“Rapidly declining component costs are making fiber the optimum solution for new networks,” he said. “The fiber industry is poised to wire the planet.”

Why fiber now? Noonan noted that the telecom industry is emerging from its three-year depreciation and broadband capacity is a speed catalyst for growth. Rulings by the FCC (that would be the Federal Communications Commission) have encouraged fiber all the way to the home.

“FTTH is on a par with the DSL/copper upgrade,” Noonan said, predicting that equipment and fiber suppliers will be meeting the challenge.

Next Generation OEM Systems Performance Requirements

Josh Nickel, a research and development engineer for Silicon Bandwidth, discussed the need for active and passive signal connector companies to work with one another to enable the ultimate bandwidth solutions.

He spoke of fitting interconnect components into a system to avoid bottlenecks. “You have to be able to predict and analyze what’s happening between component and component, between point A and point B,” he said.

Most customers, he noted, desire an interconnect solution that is small and compact. “We all want something we can hold in the palm of our hand as opposed to something that’s gigantic,” Nickel observed. “This ultimately makes sense from a cost basis.”

Loss, he noted, is not the only issue in connectors. He cited reflection and crosstalk as two major roadblocks. Cost and latency also are involved, he observed, as well as power and thermal issues, which he described as “a huge problem.”

Nickel also cited the need in the industry for qualified signal integrity engineers, noting that he recently taught a class on the subject and expected about eight students, and 20 turned out because their employers said they needed this information.

China and the Evolving Backplane Market

Backplanes are the outgrowth of large telecom systems, according to Timothy Conlan, president of the Viasystems Group, who spoke on China and the Evolving Backplane Market. The current goal, he stressed, is “higher density at lower cost.”

“Bandwidth needs have increased,” Conlan said, adding that “VHDM connectors have emerged to provide better ground shielding and ZD hard metrics open more space for routing on the PCB. Currently emerging are mid-planes with connectors on both sides.”

Recent backplane technology has involved “reduction of the optical-electrical-optical conversions through embedding of electro-mechanical components such as buried coaxial lines and MEMs,” he stated. Backplanes, he noted, are “moving to a higher degree of integration with increased wiring density and better signal integrity.”

“The difference between telecom and computing and datacom applications is blurring,” Conlan said, adding that “telecom is driving development of high-performance backplanes. Optical backplanes, however, won’t be practical until the development of a true optical connector.”

Regarding China, Conlan pointed out that “China’s PCB industry is highly fragmented with more than 500 manufacturers, mostly in southern China. The country’s 2003 PCB production is estimated at $3.8 billion, 43% of which will come from top 10 manufacturers.”

China, he declared, changes everything, citing “new competitors, designs being initiated in China, incredible pricing, quality often equal or better than the West and new market opportunities.

“Being in China stretches the logistic chain,” Conlan declared, adding that companies should “get into China asap.”

Frank Burge’s Thoughts on Buying, Selling & Surviving

Frank Burge, vice president of strategic marketing for DCMP Media Electronics Group and EE Times, offered a backward glance at the beginnings of the electronic industry.

“After World War II, we rebuilt what had been destroyed,” he said, “and our enemies became our friends.” He credited the GI bill with helping to educate millions of former servicemen, many of whom helped build the electronics business.

Burge focused on the “customer experience and its relationship to business and personal life.” He offered life experiences which bolstered his skills as a salesman early in his career.

Connector / Cable Assembly Operating Reality in China

Patrick Wan, vice president of Advanced Connectek (ACON), pointed out that, despite the concerns about the SARS epidemic, his company has sustained its growth in the mainland.

In terms of direct foreign investment, China is far ahead of other countries, with the United States running second. Mexico, Poland, Germany, India, the United Kingdom, Russia, Brazil and Spain all are bunched up straining for the number three position.

China has advanced to sixth place among the world’s economies at U$11.5 billion, far behind the United States at $102 billion.

Wan cited Hong Kong’s new closer economic partnership agreement (CEPA) with China, offering a market-timing advantage for Hong Kong-based service providers, banks, insurance companies, law firms, etc., to enter the China market three years in advance of the World Trade Organization requirement.

“Hong Kong telecom companies will get a head start in the mainland market, compared to their foreign counterparts,” Wan stated.

The pros and cons of operating in China were discussed by Wan, who noted that a primary advantage is that China is one of the world’s lowest-cost manufacturing places with appropriate skill levels. It’s also the world’s largest market with a long supply pocket of labor and engineers.

“To a certain extent, issues and matters can be negotiable to your advantage,” Wan said, adding that “the Chinese are really tough negotiators and visiting Western company executives always are under time pressure.”

Military / Aerospace Driving Connector Procurement

The military / aerospace industry offers unlimited opportunities for connector manufacturers in this post-9/11 world, according to Darrell Wampler, president of International Aerospace Solutions.

“Military / aerospace programs are driving connector procurement,” Wampler told the FCC attendees, noting the progress in satellites, launch vehicles, aircraft and munitions. Of the satellite programs, 52% of this activity is taking place in the United States.

Astrium, Space Systems Loral and Boeing share the leadership among U.S. satellite manufacturers, largely in commercial operations, Wampler noted. Lockheed Martin has the highest percentage of military satellite business.

Mil/aero remains a “highly specialized business,” he said, requiring special connector needs. Future aircraft requirements involve the F/A 18 E/F program and the Joint Strike Fighter, which has “open opportunities for clever engineering solutions to save weight and complexity.”

Wire & Cable Environmental Issues

Anthony Listro, vice president for engineering at Judd Wire, closed the FCC program with a talk on the various environmental issues facing the wire and cable industry.

“The European Union End-of-Life Vehicle Directive, passed in September, 2000, covers vehicles and their components and materials,” Listro said. “It’s goal is the prevention of waste by re-use and recycling.”

A similar EU “end-of-life” directive for electrical and electronic equipment covers the waste from electrical and electronic equipment and reduction of hazardous substances, he noted. “The directive makes producers responsible for taking back and recycling these goods.”

“The latter directive applies to all producers of electronic and electrical products who do business in Europe -- including U.S. manufacturers,” Listro said. “In effect, this sets a new global standard.”

Listro outlined the implementation scenario of the directive, from its adoption in December, 2002, by councils and parliaments to the target dates in 2005 and 2006 for collection systems to be operational and financing targets attained.

“The European Commission wants electronic goods manufacturers to replace lead, mercury, cadmium and hexavalent chromium with less-harmful substances by July 1, 2006,” he declared. Other nations approving similar bans include Sweden, Denmark, Japan, China and the United States.

Progress attained by electronics OEMs was cited, including such companies as Apple, Cannon, Hitachi, IBM, NEC, Panasonic, Sony, Toshiba, Xerox, Dell, Logitech and Microsoft.

“OEMs and suppliers must be award of the ever-changing environmental demands that are being placed on them,” Listro concluded.