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Summary: Key Business and Technology Data

The ninth annual Fleck Connection Congress, sponsored by Fleck Research and Global Conventions divisions of Global Connector Research Group was held September 23-25, 1997, at the La Quinta Resort & Club in La Quinta, California.

The management conference was attended by over 200 senior executives of the connector industry from the United States, Canada, Germany, France, the United Kingdom, Japan, South Korea, Switzerland and Singapore.

To follow is a review of the 1997 FCC which summarizes 20 of the pertinent issues and topics addressed by the senior executives who were speakers.

  • Key events of the year (technology and business issues)
  • 1997 performance
  • Digital revolution
  • Pacific Rim
  • Internet, EDI & EC impact on distribution
  • Japanese connector industry
  • Technology driving interconnects
  • The view of the connector industry from Wall Street
  • The bus-board business
  • Revolution in connector design
  • The global cable assembly industry and consolidation
  • Wireless handsets and base stations
  • Military connector market
  • Cable assembly in China
  • Computers
  • Telecom
  • Communications/Wireless
  • Datacom
  • Consumer electronics
  • Responding to industry change

Distinguished Speakers

Addressing this year's FCC were the following industry executives, listed in alphabetical order:

  • Ray Alderman -- Executive Director, VITA (VMEbus International Trade Association)
    Global Market Trends and the Bus Board
  • Bob Barnett -- President, BTC Electrical Components
    The Military Connector Marketplace--How to Effectively Compete
  • Monalisa Berbey -- President and CEO, Global Connector Research Group
    Responding to Industry Change
  • Karen Carpenter -- Manager of Strategic Marketing for Interconnect Products, IBM Endicott
    Technology Trends Driving Interconnects
  • Mike Colman -- Purchasing Manager, Commodities Group, Qualcomm
    Wireless Trends and Procurement at Qualcomm
  • Robert X. Cringely -- Journalist, PBS TV Miniseries Host and Best-Selling Author
    Electronic Industry--Be Alert for Change
  • Fleck Research
    Technological Change: The Business Issues
  • James Mathias -- President and COO, JPM
    The Global Cable Assembly Industry--the Rush to Consolidate
  • Tatsumi Nagatoshi -- President, Japan Aviation Electronics Industry, Ltd.
    Norio Ishinoki -- Vice President of International Operations
    Japanese Connector Manufacturers' Future Directions and Trends
  • John Powers -- Director of PCS Market Development, Motorola Cellular Infrastructure
    Update on the Wireless Industry
  • Robert Rodin -- President and CEO, Marshall Industries
    Internet, EDI and EC--Impact on Electronic Distributors and Manufacturers
  • Rene Savelsberg -- Director of Marketing, Phillips Multimedia Center
    The Digital Revolution--A Perspective on the Move from Analog to the Full Digital World
  • Ron Schubel -- President, Molex Far East South Management
    The Pacific Rim--Technologies and Trends Influencing Growth
  • Ann Schwetje -- Managing Director, Research Division, Smith Barney, Inc.
    The Connector Industry--a View From Wall Street
  • Madhavan Swaminathan -- Associate Professor, Georgia Institute of Technology
    Electronic Technological Trends--Causing a Revolution in Connector Design
  • Chris Tsai -- President, Pan International
    Cable Assembly in Taiwan, Malaysia and Mainland China

Key Events of the Year

Conference host Fleck Research opened the first day's program of speakers by examining the year 1997, which for the connector, cable assembly, backpanel and interconnect industry, was a year requiring significant adjusting to technological change, and the new business issues which resulted.

Over the past 20 years, there have been three transformations within the electronics industry: 1) migration from analog to digital (late 1970s); 2) shift to surface mount technology (1980s); and 3) a large number of dramatic changes in the 1990s (such as demand for greater bandwidth; convergence of TV, telecom and computer networks; development of portable, faster, lighter and smaller products with increased functionality; higher density advanced packaging technologies; higher speed digital signals approaching 1GHz, and many others including wireless, multimedia and optics).

The advancement rate of technology in recent years is staggering--and there is no letup in sight. If this were not enough to concern the connector CEO, imagine the next phase of electronics--the probability of digital signals at 2GHz, pitches of 0.25mm, I/Os approaching 3,000, chips becoming systems and the coming of an all-optical network.

Fast-paced technological changes shorten product life and require significant business adjustments. In the increasingly competitive market, remaining ahead of the technology curve is the only way to avoid an unfavorable impact.

Connector manufacturers are responding with new business strategies and the technology leaders within the industry were present at FCC, as examples:

Connector manufacturers are moving into box-build (three companies attending FCC); developing Z-axis contact systems (seven companies attending FCC); packaging bare-die by wire bonding (two companies attending FCC); offering fiber optic pre-wired panels and frames (three companies attending FCC); in joint development with HP, Alcatel, Toshiba, MMS and TI with regard to transceivers, receivers and optics (three companies attending FCC); involved in automotive power distribution systems (two companies attending FCC); involved in network interface and adapter cards (two companies attending FCC); moving into the production of PCB subassemblies (four companies attending FCC); producing category 5 modular patch-panels (four companies attending FCC); producing active fiber optic devices (two companies attending FCC); investing $23 million in deposition process on flex circuits (one company attending FCC); investing $40 million on next-generation Intel chip (one company attending FCC); engaged in KGD (two companies attending FCC); developing flex interposers (two companies attending FCC); and active on MCMs (two companies attending FCC).

Among the important events impacting the connector industry in 1997 were global telecom alliances among large carriers--such as Bell Atlantic/NYNEX, BT/MCI and GTE/BBN. Also, the convergence of consumer electronics, computer and network industries (Intel, Microsoft and Compaq vs. Sony, Phillips and RCA) and the 1/4-inch, matchbook-sized PC Card, finding applications to store and exchange image, text and voice data in digital cameras, tapeless audio recorders, cellular phones, handheld computers, organizers and other portable consumer devices.

Additionally, there was the agreement between the television and computer industries on a broadcast standard for high-density television (HDTV)--after eight years of negotiations. This clears the road for future digital broadcast and digital HDTV sets. Analog signals will no longer be broadcast after 2006.

Consolidation and restructuring within the connector and interconnect industry continues at a high rate. This year saw 20 mergers/acquisitions/alliances/joint ventures among manufacturers, nine among electronic distributors and 13 among contract manufacturers. The big deals included KKR/Amphenol, T&B/Augat, Sanmina/Elexsys, Raab Karcher/Wyle and Hicks Muse/Lucent Richmond Works.

Other major events included the consolidation of OEM customers--36 "big deals" impacting the connector industry. Among them: Boeing/McDonnell-Douglas, Raytheon/TI Defense, BT/MCI, Compaq/Tandem, 3Com/U.S. Robotics, Lockheed/Northrop Grumman and Bell Atlantic/NYNEX.

1997 Performance

The year 1997 was a difficult year. The total world market for connectors, cable assemblies, backpanels and interconnects was up 6.2% in local currency, but only 0.7% in U.S. dollars: North America up 6.5%; Europe up 4.3% in local currency, but -6.1% in US$; Japan up 6.0% in local currency, but -4.8% in US$; and Pacific Rim up 9.7% in local currency, but up only 3.9% in US$.

The impact of the strengthening dollar is significant. Of the 27 countries/regions of the world (excluding the United States), the dollar strengthened in 25. This caused negative impact across Europe of -9.9%, in Japan of -11.3%, in the Pacific Rim of -6.3% and -3.5% in the rest of the world. Only four countries/regions out of the 27 recorded double-digit growth in 1997, measured in local currency--Mainland China, Malaysia, Thailand and Indonesia.

Opportunities still exist, however. A number of the connector suppliers are outperforming the industry. For example: a major connector manufacturer attending FCC is up over 20% worldwide and up over 60% in Europe, benefitting from the wireless analog to digital upgrade; a niche manufacturer attending FCC is booking major business in Taiwan and South Korea in level 1 interconnections; and a major manufacturer attending FCC is up 50% in Japan, participating in consumer-based digital electronics.

There are 1,080 specific types of electronic equipment and some 150 of these are experiencing high growth.

The Digital Revolution

Digitalization is revolutionizing not only transmission and switching, but the digital world is impacting broadcasting, PCs, telephones, satellites and consumer systems. Rene Savelsberg of Philips addressed the digital revolution and provided a prospective on the move from analog to the full digital world.

Convergence--what is going on in the digital world that we are approaching so rapidly, specifically two areas of activity: digital consumer systems and the wide area of consumer networks.

The most asked question, "Who is going to win, the PC or the TV?" It is a difficult question to answer because nobody knows what the future of video is going to be all about.

The issue in the digital revolution is convergence. Broadcasting, PCs, telephones and satellites all are going to digital, and eventually we will be able to use our TV set as a phone. There is a whole array of new access devices coming to the market--products with different names doing slightly different things--but all capable of digesting digital streams of information.

In the analog world if you wanted to watch TV you bought a TV; if you wanted to make a phone call you bought a phone; if you wanted to compute something you bought a PC. And now you have to make a choice, out of this whole array of applications and possibilities that are out there. It does not make it any easier for users.

The revolution, and therefore the divergence is in new content and services. Philips predicts that in about five years, everybody will have, in their home or at their desktop, the same amount of computing power that was available to Steven Spielberg to create "Jurassic Park."

If that computing power is available on a desktop or in a home, we will see a complete new range of applications and content coming to life that we cannot think about today.

It is difficult right now to get the features that are built in PCs or TVs because the systems are so complex and Philips is working hard on these solutions. A new standard under development called the "device bay standard" being established by Microsoft, Intel, Compaq and Philips, which will integrate today's connection standards with the upgraded devices of the future. Meanwhile, USB and 1394 will be extensively utilized.

You are allowed to exchange parts of your total system without upgrading the system. Whatever the industry build as new systems for the office or the home, the industry has to deal with legacy equipment. The industry has to continue to use the old solutions of connecting the devices to the new system.

Molex and the Pacific Rim

The Pacific Rim comprises 12 countries and regions which include Taiwan, South Korea, Singapore, Hong Kong, Mainland China, Malaysia, Thailand, Indonesia, India, Philippines, Australia and New Zealand. Southeast Asia, however, comprises Mainland China, Taiwan, Singapore, Hong Kong, Malaysia, Thailand, Indonesia and India.

Ron Schubel of Molex addressed developments in Southeast Asia and China--technologies and trends influencing growth. Molex has eight factories in the northern region of the Far East, including Japan, and seven factories in Southeast Asia, two of which are in China.

Of the worldwide motherboard production, 73% is outsourced, of which 90% of this outsourcing occurs within the Pacific Rim.

Despite problems managing maturing economies, he noted, the new industrialized countries in Asia are enjoying enviable growth rates by most Western standards. The growth of the Pacific Rim countries, including Japan, still is more than double that of most developed countries.

"From an economic perspective, what has been a three-player world will become a four-player world with the rapid growth of Asia," Schubel predicted. Asia will be the largest market in the world by the year 2000 or the early 2000s and will continue to be the fastest-growing area for the next five years.

In the Far East South, three major economic zones account for more than 95% of the electronic component production today, and also will by the year 2000, he said. Greater China's economy is US$2.1 trillion and is projected to grow at a rate of 7% annually. Based on price, purchase and parity, the GDP of Greater China will be greater than Japan by 2002 and will move to become very close to the United States.

ASEAN, the Association of Southeastern Asian Nations, is pegged at $1.56 trillion, smaller than China, but offering good potential. South Asia, which includes India and Pakistan, has experienced slower growth with a GDP of about 5% and a low per-capita income.

At the component level, semiconductor volume is expected to contribute about 13% of total demand by 2000, Schubel declared, with the interconnect growth occurring faster than the other conventional passive components such as resistors and capacitors.

China's state-owned industrial output value has decreased from 65% in 1985 to 34% in 1995, and the process of moving away from state-owned companies should continue at an even higher rate. China continues to be the world's top investment attraction with over US$4.4 billion in the first half of 1997.

While relations with China still are a long way from normal, the economic forces are very strong, Schubel declared.

Internet, EDI & EC Impact on Distribution

Electronic commerce is not just about online ordering. According to Marshall Industries chief executive Rob Rodin, it's about finding the intersection between people and technology.

Marshall, which has been one of the industry's pioneers of Net-based commerce, offers a host of capabilities on its Web site (http://www.marshall.com), including parametric part-number search, access to more than 300,000 data sheets, the ability to expedite orders electronically, and a full order agent that lets customers buy online using an account number or CyberCash.

The web site has an engineering design lab that allows users to download code, has links to freight forwarders and suppliers and Marshall's trademark Net Seminar, which demonstrates broadcasting of voice/data/video over the internet.

A unique feature of the site is its live help capability, which lets users go into a chat room at any time and have access to an engineer. The company added this live help capability because it recognizes that although the Internet can sometimes replace the traditional interface, there are still times when a customer may need to have questions addressed by a representative from the distributor.

In addition to its Web site, Marshall has a host of offerings behind its firewall. These include intranet capabilities to enhance communications with the company's global alliances, as well as extranet, which lets all supplier and customer reps access specific, confidential information, such as backlog, contract pricing, design registration and sales.

While Marshall has been recognized as a forerunner in the distribution industry with its network activity, the distributor is far from resting on its laurels.

The company is working on a sophisticated product called MACRO (Marshall's Agreement to Coordinate Resources and Organizations) Link. The product will use intranets and data warehousing to link a supply chain around the world, including engineering, forecasting, production and distribution.

The Japanese Connector Industry

Japan, covering an area about the size of California, ranks eighth in population at approximately 125.6 million people. The country is second in GDP with 478,000 billion yen or US $4,050 billion.

According to JAE's Tatsumi Nagatoshi, the country has registered a steady growth in personal computer production, climbing from 68.6 units per 1,000,00 people in 1996 to 77.4 today, with a projected increase to 98.7 in 1999. Data and Telecom demand also is increasing.

The Japanese connector market has shown an average annual growth of 3.8% with telecom, data and consumer products each occupying about one-fourth of the market. Japan's connector manufacturers are active in other countries such as Korea, Taiwan, China, the Philippines, Malaysia, Indonesia and Singapore.

The top five Japanese connector manufacturers have boosted their share of the market from 54% in 1985 to 67% in the fiscal year of 1996. The technology direction of the Japanese connector companies is as follows:

Regarding signal rates: IC sockets are currently at 0.6 GHz, the five-year target is 2 GHz; board-to-board connectors are currently at 1 GHz, the five-year target is 2 GHz; and I/O connectors are currently at 0.15 GHz, the five-year target is to reach 1 GHz.

Regarding pin pitch: IC sockets are currently at 1.27mm spacing, the three-year target is 0.635mm spacing; board-to-board connectors are currently at 0.5mm spacing, there is a 0.3mm design being developed and the five-year target is 0.25mm spacing; and I/O connectors are currently at 0.6mm, the five-year target is to reach 0.25mm.

Regarding I/O count: IC sockets are currently at 0.6 GHz, the five-year target is 2 GHz; board-to-board connectors are currently at 1 GHz, the five-year target is 2 GHz; and I/O connectors are currently at 0.15 GHz, the five-year target is to reach 1 GHz.

Technology Driving Interconnects

The last 20 years of packaging advances have been driven largely by the computer industry, IBM Endicott's Karen Carpenter told the FCC. She cited the mainframes of the early 1970s and 1980s which drove increasing performance and function before the focus was shifted in the late 1980s and early 1990s to a cost-sensitive market that demanded function and performance at low prices.

"The push toward thinner, lighter and smaller applications with increasing performance requirements is driving the increasing interconnect densities," Carpenter declared.

This is being driven by the evolution from the desktop PC (30-60 connections per square inch), to workstations (40-80), to notebook PCs (40-120), to PCMCIA card (100-175), to camcorders (100-200), to cell phones (100-300). Along with this is dramatic change at the motherboard level such as the use of chip scale packages, 3 mil lines and 3 mil spaces, along with higher bandwidth and faster speeds.

Another driving force for the interconnect industry has been weight reduction and size reduction of computer and wireless equipment, Carpenter noted. Over the past 15 years, notebooks have declined from 20kg to 5 kg to 2 kg to .5 kg to .3 kg, while cell phones have dropped in size from 400cc to 200cc to 150cc to 100cc to 50cc.

Technological trends in computers and communication devices are driving the requirements for total market needs--higher performance, increased processing speeds, decreasing voltage, increasing function, functional integration, wider bandwidths, miniaturization, greater reliability and reduced cost; likewise, the impact on packaging of chip carriers--decreasing die attach pitch, decreasing BGA pitch, decreasing feature size, thinner profile and smaller packages.

As for cards and boards, the packaging impact includes increasing interconnect densities, decreasing line widths and spacing, increasing via densities, decreasing via diameters, thinner and high performance materials.

Carpenter also discussed trends in BGAs (a smaller package alternative to quad flat pack, pitch centered around PWB capability), CSPs (package size 1.2x that of die, pitches from 1.0mm to 0.5mm, major use in memory packages) and flip chip technology (low lead count applications, SCM/MCMs for high end data processing, lower inductance than wirebond, smaller footprint with increasing I/O, shortest electrical path).

Applications within the market are increasing the scope of interconnect solutions, Carpenter said, noting that a wide variety of IC packages have developed, aiming at reducing the package footprint, improving performance and decreasing cost. To further this trend and reduce the silicon real estate, the market for flip chip will expand.

High-density interconnects are required for both first and second level packages to accommodate flip chip and fine pitch BGAs, she added. Microvia technology addresses market needs for high density and miniaturization.

The View of the Connector Industry From Wall Street

On Wall Street, connector stocks as a whole are once again showing a high profile after going through a down cycle through most of the 1990s, Ann Schwetje of Smith Barney reported. She pointed out that the industry reflected a five-year growth at the high end of 6% to 9%, an unprecedented cycle in the electronics industry.

Replacement demand for connectors is being driven by shorter end-product life cycles, Schwetje noted. Increased investment requirements and increased globalization were among the trends highlighted in her forecast and, she added, the strongest will excel.

Other electronics trends affecting the stock market, Schetje reported, are better inventory control and tempered down cycles relative to the past. Electronic stocks have lower volatility and a better beta/risk profile.

Connector stocks in the future should sustain shorter and less-damaging corrections, the analyst predicted, and stock performance will be enhanced over time with a more sustained earnings performance.

The connector stock price index has shown a steady upswing from 1984, when it registered at around 100, to 1996, reaching an estimated 300. The target for 1998 is over 400.

The Bus-Board Business

The traditional bus-board markets are maturing, VITA's Ray Alderman pointed out in his address on global market trends and the bus-board. New buses are coming to market and some large companies want to push the market to commodity status.

Alderman pointed out the 12 variations of PCI--the original PCI spec, passive backplane PCI, passive backplane bridge, compact PCI, IEEE 1386 PMC (mezzanine), small PCI (add-in card), PC/104+, industrial PCI, conduction cooled PMC, PISA (PCI & EISA), IEEE 1996 HiRel PCI and P2CI (sub-bus on VMEbus P-2). He described and defined bandwidth for all bus boards over the past 20 years.

Down the road, he noted, the desktop market will use buses only at the local level (MCM) and will switch to mini-networks (USB, 1394) for expansion. The embedded markets will remain fragmented, if not more so, while the largest embedded board segment will remain "proprietary."

The high-end board market will be dominated by VME and the five-row DIN connector. The lower-end segments will be dominated by cPCI and the 2mm HM connector, but there will be many versions of PCI and cPCI. The bus-board market will begin to move from a polyopoly to an oligopoly, particularly the PCI segments.

The embedded PCI segments will be low-volume/low-margin markets and companies will forgo margin for market share. The bus-board markets will become hyper-competitive and will start showing signs of commodity status.

Revolution in Connector Design

Design issues for high-speed connectors were addressed by Madhavan Swaminathan, a professor at Georgia Institute of Technology, who identified the five elements involved in designing a connector for high performance. These elements are signal integrity, delay, crosstalk, characteristic impedance and operating bandwidth.

The industry is now experiencing application of digital circuits with digital signal speeds of up to 1GHz and edge speeds as low as 50 picoseconds, he noted. Limits are being reached because of increased signal speeds.

The industry is responding with a number of design solutions including interstitial designs, the designation of certain pins as ground, shielding designs, stripline designs, egg-crate designs and finally Z-axis systems to shorten the contact path. In these applications, the industry wants a matched impedance connector. Look for a connector with the smallest amount of inductance.

Noise, he pointed out, probably will be the fundamental bottleneck of future systems. And, unless you can shield your connector in some way to reduce this noise, you really are not going to have a high-performance connector system.

"The connector is a discontinuity, no matter which way you look at it," he concluded. "You need some way by which you can optimize the connector for system performance and not optimize the standard of the connector, because it's going to be too volatile information.

"Everybody wants a matched impedance connector," Swaminathan said, "and it's not easy to do that. One should look for a connector with the smallest amount of inductance and the smallest amount of capacitance."

The Global Cable Assembly Industry and Consolidation

The global cable assembly market and its current trend toward consolidation was discussed by JPM's James Mathias, whose company's sales have skyrocketed during the 1990s with a compounded annual growth rate since 1994 in excess of 35%. JPM now ranks eighth among the world's top cable assembly manufacturers.

Mathias discussed the business issues impacting the cable assembly marketplace, touching on the globalization issues in Mexico, Scotland and Eastern Europe, all locations where JPM has manufacturing facilities.

Mathias pointed out the market dynamics--lower cost, speed to market and higher performance--driving the trends in today's interconnect market. These include reduction in suppliers, accelerated product development, increase in product/technical standardization, reduction in inventory transaction costs and emerging global quality standards. This opens larger opportunities for qualified suppliers.

Criteria for supplier selection include a broad range of custom products, design engineering, globally recognized quality systems, electronic commerce, flexible delivery systems, a global presence with local support (being where the customers are), manufacturing resources, program management and cost management.

Among the factors in JPM's criteria for acquisition of a company are location, recognized quality, comparable business values and vision, customer base/market strategy, management strength, process and product capabilities, size and financial performance.

Wireless Handsets and Base Stations

Mike Colman's presentation on Qualcomm covered wireless trends and procurement practices. The company, organized in 1994, focuses on businesses with a small base of qualified world-class suppliers who excel in quality, provide superior delivery performance and deliver products at the lowest overall cost.

Companies in the Qualcomm supply base must be willing to work closely to exchange ideas, solve problems and ultimately drive down costs by eliminating waste in the business and manufacturing processes. Qualcomm seeks to establish long-term partnerships and to demonstrate a track record of continuous improvement.

Feedback to the supply base involves a five-step process: Capturing supplier performance information, suppliers' reviewing and validating information, track performance trends, supplier review meetings and the development of improved processes. Supplier performance is measured by quality, delivery and service.

Supplier service is rated on a scale from one to five in the areas of quality, accounts payable, purchasing and engineering. Among the rating areas are timeliness/responsiveness, product knowledge and consistency. Suppliers are selected to participate in the program based on total dollars spent and criticality of parts provided. Qualcomm has 64 suppliers in the program.

As a result of the supplier management program, the average cost per dollar has been reduced from 10 cents in 1995 to under five cents in 1997. The benefits of the program are measured supplier performance and feedback, continuous improvement and decreased overall cost.

A Business of Battleships

Telecom is becoming a "business of battleships," according to Motorola's John Powers, who noted that size provides weapons that enhance an operator's global competitiveness. The larger companies boast powerful brands, worldwide alliances and deep pockets.

Powers cited the mergers, partnerships and takeovers among the telecom titans--AirTouch and U.S. West Media/New Vector; Bell Atlantic and NYNEX, SBC and Pacific Telesis, BT/MCI (and Telefonica to form Concert), and 20% of Sprint now owned by Deutsche Telekom and France Telecom.

He introduced and illustrated the Motorola SC 601, the world's first CDM MicroCell product. It is a 1 CDMA carrier with an average of five watts of RF power output and 16 to 36 physical channel elements. The 210-pound system is mounted on a wall/floor/pole mount with front access and uses 360 watts of power with optional VDC input.

Economy of ownership factors of the SC 601 include 40% less footprint, 60% less weight, 50% less power consumed, 25% more power output and 200% greater voice channel capacity. The cell sites comprise 65% to 75% of an operator's total investment. The advantages of PCS ownership include content (voice mail, short message service), high feature, lower price, privacy and clear signal.

The Military Connector Market

Many distributors have left the military connector market, BTC's Bob Barnett pointed out in his address on how to effectively compete in the military connector marketplace, noting that his company remains one of the few reliable sources for this market.

During the cold war period, price (within reason) was no object and delivery was the key to success, Barnett noted. The role of the distributor was serving the military market and the three main suppliers were ITT Cannon, Bendix and Amphenol. The distributor's role was to fill smaller, non-production quantities since the connector manufacturer had direct sales and did not rely on distributors.

In the 1980s, Matrix Science acquired QPL and grew rapidly through Marshall, Time and BTC. Marshall and Time had competing lines and BTC did not. BTC focused only on Matrix Science and brought class A accounts to the firm, which helped BTC get noticed. Within three years, BTC was Matrix Science's top distributor. Even though Matrix Science is not around anymore, BTC still is. BTC's philosophy, then and now, has been to listen to customers and key on special requests. The company, for example, will make airport runs for emergency deliveries and will design changes for small or large quantities.

"We've seen the trends and responded differently by finding the strength of our manufacturers' products and tailoring our lines to meet the customer's needs," Barnett declared.

Cable Assembly in China

Business issues of cable assembly manufacturing in Mainland China and other Pacific Rim countries were the focus of Chris Tsai's FCC address. Tsai's company, Pan International, has six factories in Asia--one each in Taiwan, China, Indonesia and Thailand and two in Malaysia--with a total floor space of 732,000 square feet.

PC-related products manufactured in Asia include desktop PCs and notebook PCs and such peripherals as keyboards, mouses, digital cameras, scanners, printers and modems. There are 10 principal cable assembly suppliers in China, seven in Taiwan, one dominant company in both South Korea and Indonesia, two leaders in Malaysia and three in Thailand.

Tsai provided a cost comparison for companies doing business in China and in other Asian countries. Among the categories discussed for each country were land cost, construction expenses, labor costs, inland transport, electricity, water and loaded labor costs.

Major cable assembly suppliers in China include Pan, Foxconn, Foxlink, Unixtar, Tremon, FAI, LTK, Golden Bridge, Great Link and EDA. Most Taiwanese suppliers have factories in China.

One of the major centers for cable assembly in China is Guangdong, with more than 200 suppliers, including most Taiwanese suppliers. These companies generate between $4 million and $40 million (U.S.) in annual revenue. Low cost and high volume were cited as factors in China's successful cable assembly business, along with major demand from the United States, Japan and the rest of Asia.

Responding to Industry Change

Consolidation and restructure within the connector and interconnect industry continues at a high rate, declared Monalisa Berbey, president and CEO of Global Connector Research Group, sponsor of the FCC.

She pointed out 20 recent mergers, acquisitions, alliances or joint ventures among manufacturers, nine among electronic distributors and 13 among contract manufacturers. Many manufacturers have restructured by demand sector, she noted, adding that engineering departments now have large populations of electronic engineers, and connector manufacturers are adding technology people to their staff recruited from the OEM community.

Among the larger deals cited by Berbey are those of KKR/Amphenol, Thomas & Betts/Augat, Sanmina/ElexSys, Raab Karcher/Wyle and Hicks Muse/Lucent Richmond Works. Consolidation of GCRC's OEM customers include 36 major deals impacting the connector industry, such as Boeing/McDonnell Douglas, Raytheon/TI Defense, Compaq/Tandem, 3Com/U.S. Robotics, Lockheed/Northrop Grumann and Bell Atlantic/Nynex.

Global Connector Research Group, also operating as Fleck Research, places a major focus on mergers, acquisitions, technology licenses, partnerships and private label. The company specializes in "dark" projects, where both buyer and seller are identified, analyzed, introduced and negotiate in secret.

"The industry is experiencing rapid change," Berbey said, citing price erosion as a troubling trend. "Nearly all commodity product lines have been affected with dramatic price erosion reported in some product lines." She noted that technology is forcing change in design and application of connectors.

Workshops at FCC

Fleck Research presented workshops totaling five hours' duration which followed the general conference. A summary of data covered in the workshops follows:

Computers

The number and type of components on motherboards and system cases are changing dramatically. Some examples:

There is the move from the ISA bus to the PCI bus, higher speeds and digital signals (500MHz to over 1GHz), increased bandwidth, bus architectures moving from 66MHz to 100MHz to 133MHz, high-capacity disk drives, the transition to Pentium with MMX and Pentium II (P6) and soon 450MHz chip, AGP for increased bandwidth (moving off PCI bus with a new graphics board), increased use of RISC systems, including servers, voltage declining from 5V to 3.3V (the future trend is to 1V) and the move from 16Mbits/s to 64 Mbits/s.

Also, the transition in PC main memory (from DRAM to SRAM, RDRAM and SLDRAM); Intel's SEC module with MPU, L2 cache and PCI chipset; the need for unpackaged KGD to eliminate wire bonds and package leads; 1/4 PC card expanding (Miniature Card, CompactFlash, SSFDC); Multimedia (3-D graphics, full-motion video, surround sound, DVD); the shift of audio to add-in cards; notebooks' high growth, with the same capabilities as desktops in networks and multimedia (with 3-D graphics, USB and docking stations); and PCI backplanes (with serial, parallel and SCSI connectors).

Also, the Internet driving servers, faster modem speeds, the NC and NET-PC taking market share, some shift from QFP to BGA, the early buildup of CSPs, DIMMs increasing to 200 I/O for higher bandwidth, Serial SSA and FC-AL overcoming SCSI shortcomings, and the agreement among Visa, Mastercard and Eurocard for a common smartcard format.

Telecom

With the convergence of telecom, computers and the media, there is a significant impact on the connector industry. Examples: Some 75 million new phone lines installed in 1997, between a half-billion and one billion interconnected computers within 10 years; digitalization revolutionizing transmission and switching (analog signals into bits and bytes); globalization (61% of U.S. companies will have overseas manufacturing operations by 2001 compared to the current 30%); a hyper-competitive world involving RBOCs, LECs, cable providers, satellite operators and others, and global alliances developing among large carriers.

Additionally, services and equipment markets are experiencing high growth. By 2000, there will be some 975 million POT lines, 365 million mobile subscribers and 140 million central office lines. This is the equivalent of adding 45 RBOCs to the infrastructure. The pace of this change is hectic--the rapid evolution of technology, introduction of new services, liberalization of the market and privatization of government-owned network operators.

There will be increased consumer demand for second telephone lines to access the Internet or corporate network. Deregulation will permit local long distance and cable companies to compete with one another in the voice and video market. Over the next 10 years, 20% of the total demand for telephone equipment will be served by wireless. Data traffic is increasing at 30% per year, vs. voice at only 3% (by 1998, data will equal voice). The number of U.S. households on line will reach 17 million in 1997.

The big issue in the Internet is bandwidth. The second issue: Will the next generation of routers and switches have the required capacity? Access to high-speed Internet service will expand over 50-fold to eight million homes by 2000. There will be a demand for telecom network bandwidth with more speed for Internet access, interactive cable service for video, data and voice. Cable providers will offer cable modems with higher speeds and bandwidths.

Telcos are responding with ADSL (digitized video to subscribers over twisted-pair copper), which provides both upstream and downstream. Short-term 56K modems over voice lines will be in demand (only downstream). ISDN will be aggressively marketed by telcos, and DBS will offer a satellite-based Internet service.

Wireless cable technology will be a niche market in the coming years. Telcos have deployed 25 million miles of fiber in the U.S. (adding 4,000 miles per day). Fiber-optic connectors, couplers, adapters, cable assemblies and pre-wired shelves will reach $1 billion in the United States this year, and within 10 years, some 20 million homes will be wired with fiber.

Communications/Wireless Growth

Explosive growth of wireless and the shift from analog to digital is driving new connector requirements. The 1990s is the decade of wireless communications, and advances in technology have been dramatic. The market never seems to reach saturation. Revenues outpaced computer equipment in 1996, with 140 million subscribers enjoying wireless. Of these, the United States has 45 million and reports an annual growth of 30%. Europe has 29 million and the Far East 28 million.

There is no single standard of wireless in the United States. Of seven current standards, three will survive (IS-95CDMA, IS-136TDMA and PCS1900, the U.S. version of GSM). Analog will not disappear.

There are 50,000 digital cell base stations under construction around the world, plus an estimated 100,000 PCS base stations to be built over the next 10 years. Smart telephones are emerging which offer two-way paging, fax, e-mail and voice.

The marketing for PCS is not the cellular customer, but a billion wireline customers in the developed nations and several billion potential in undeveloped countries. PCS handset is projected at 81% per year over the next three years. Among cordless phones, the low-cost 49MHz still is in greater demand than the higher-cost 900MHz.

There are over 100 million pager subscribers, with that number projected to reach 200 million by the millennium, and two-way paging is being introduced. There is a high growth in satellites and earth stations (153 commercial satellites and 83 on order).

In the cable TV area, a million network miles have been installed with a pass-by of 95 million television-equipped households. HFC networks with interactive capabilities are being constructed at a high rate, and set-top boxes are moving to digital (1.5 million in 1997). Mobile radio in VHF and UHF bands is driving the demand for base stations, repeaters and handsets. The number of cable modem households is projected to reach nearly five million within five years.

Datacom

Rapid change of technology in networks and datacom equipment is significantly impacting the design and use of connectors and cable assemblies. There will be more networking of computers and devices--there appears to be no limit to the number of endpoints connected to LANs, and customers are constantly changing and upgrading LAN equipment. There is no limit foreseen to the speed of LANs, increasing the demand for higher bandwidth.

Backbone data transmission is now 100 Mbits/s and forecast to reach 1 Gbit/s by 2000. UTP transmission speeds are increasing to 100-150 Mbits/s. Fiber is shifting from backbone to limited horizontal applications (FTTD), and is projected to be more widely used by 2000.

Major shifts are occurring in campus networking with the transition from hubs and routers to switched networks. More LAN ports and faster LANs are in the future, with Ethernet outnumbering token ring by 4-1. Fast Ethernet is increasing at a high rate (but is limited to 1,000 Mbits/s). Higher bandwidth requirements will drive Gigabit Ethernet. ATM is not widely deployed at the desktop LAN, but strong growth is predicted in backbone and WAN.

The Fiber Channel (also Gigabit speed) will be aimed at server-to-server connections, CAD, medical imaging and video editing as FDDI is projected to decline. The growth of the Internet is causing ISPs to offer ATM service. The Gigabit Ethernet and ATM will coexist, and wireless LAN will occupy a niche.

Consumer Electronics

New consumer electronic devices are impacting the connector industry with the convergence of the PC and TV. Home entertainment systems will integrate telephony, phone messaging, programmable control of VCR, CDs, high-quality 3-D graphics, social/multi-player games and other forms of entertainment.

The convergence will enable PC owners to view data and television signals on the same monitor. There will be a convergence of PCs with MPEG video, audio and 3-D graphics. Information appliances adjacent to the TV will provide connections to the Internet as well as send and receive e-mail using the TV monitor.

Consumer manufacturers will be introducing a host of new products--DVDs, digital cameras, PDAs, digital satellite decoders, Internet TV and Intertext TV. The TV will be reborn as a new display device, a cross between a computer monitor and a television screen. DVD-ROM drives (of higher capacity) with backward compatibility to CD-ROM are coming.

The consumer PC battle will move from the home office to the living room. The computer industry's long-planned invasion of the consumer electronics market has begun (Pentium II PCs virtually all will be digital-TV ready).

The MPEG compression system will become one of the most important communications technologies of the decade. Since DVD cannot record audio/video data, the VCR will live on into the next millennium. DVD equipment, however--including video players and drives projected to reach 120 million units--will be worth $30 billion by 2000. Microcontrollers are becoming more pervasive; the average office has 20 MCUs and the typical house has 100.

The Purpose of FCC

The FCC, formerly ICC (International Connection Congress), was conceived in 1989 for the purpose of bringing together senior management within the industry. This mission has been accomplished as seven of the 1997 conference's 16 speakers are presidents of their companies. Others hold such titles as executive director, marketing director or managing director.

As it has in past years, the ninth annual FCC offered an opportunity to obtain a reading on current industry trends and key business issues in every region and country of the world, the latest points of view related to the changes in the business environment and how long the industry growth will last, and technical experts describing the forces of technology on connectors, cable assemblies, backpanels and packaging.

Additionally, the FCC enables senior executives to meet and network with each other. Many mergers, strategic alliances and joint ventures have had their beginnings in the hallways of the FCC.

On the second afternoon of the conference, Wednesday, September 24, golfers among the attendees had the opportunity to compete in a golf tournament on the world-famous Dunes course.

Five workshops also were offered Wednesday afternoon and Thursday morning. These sessions covered topics such as: Technology Trends in Computer & Telecom and Their Impact on the Interconnect Industry; Technology Trends in Communications & Datacom and Their Impact on the Interconnect Industry; Key Market and Product Line Statistics by Region of the World, Including High-growth Product Lines; U.S. Distributor DTAM for Interconnect products (Resale, GPM and Inventory), and the Military Interconnect Market.