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
To follow is a review of the 1997 FCC which summarizes 20 of the
pertinent issues and topics addressed by the senior executives who
- 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
- Consumer electronics
- Responding to industry change
Addressing this year's FCC were the following industry executives,
listed in alphabetical order:
- Ray Alderman -- Executive Director, VITA (VMEbus International
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
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
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,
Norio Ishinoki -- Vice President of International Operations
Japanese Connector Manufacturers' Future Directions and Trends
- John Powers -- Director of PCS Market Development, Motorola
Update on the Wireless Industry
- Robert Rodin -- President and CEO, Marshall Industries
Internet, EDI and EC--Impact on Electronic Distributors and
- Rene Savelsberg -- Director of Marketing, Phillips Multimedia
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
The Connector Industry--a View From Wall Street
- Madhavan Swaminathan -- Associate Professor, Georgia Institute
Electronic Technological Trends--Causing a Revolution in Connector
- 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,
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 $40 million on next-generation
Intel chip (one company attending FCC); engaged in KGD (two companies
attending FCC); developing flex interposers (two companies attending
FCC); and active on MCMs (two companies attending FCC).
Among the important events impacting the connector industry in
1997 were global telecom alliances among large carriers--such as
Bell Atlantic/NYNEX, BT/MCI and GTE/BBN. Also, the convergence of
consumer electronics, computer and network industries (Intel, Microsoft
and Compaq vs. Sony, Phillips and RCA) and the 1/4-inch, matchbook-sized
PC Card, finding applications to store and exchange image, text
and voice data in digital cameras, tapeless audio recorders, cellular
phones, handheld computers, organizers and other portable consumer
Additionally, there was the agreement between the television and
computer industries on a broadcast standard for high-density television
(HDTV)--after eight years of negotiations. This clears the road
for future digital broadcast and digital HDTV sets. Analog signals
will no longer be broadcast after 2006.
Consolidation and restructuring within the connector and interconnect
industry continues at a high rate. This year saw 20 mergers/acquisitions/alliances/joint
ventures among manufacturers, nine among electronic distributors
and 13 among contract manufacturers. The big deals included KKR/Amphenol,
T&B/Augat, Sanmina/Elexsys, Raab Karcher/Wyle and Hicks Muse/Lucent
Other major events included the consolidation of OEM customers--36
"big deals" impacting the connector industry. Among them:
Boeing/McDonnell-Douglas, Raytheon/TI Defense, BT/MCI, Compaq/Tandem,
3Com/U.S. Robotics, Lockheed/Northrop Grumman and Bell Atlantic/NYNEX.
The year 1997 was a difficult year. The total world market for
connectors, cable assemblies, backpanels and interconnects was up
6.2% in local currency, but only 0.7% in U.S. dollars: North America
up 6.5%; Europe up 4.3% in local currency, but -6.1% in US$; 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
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
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
"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
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
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
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
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
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
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
"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
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
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
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:
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.
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.
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
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.
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
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.