The fast-approaching 2006 deadline for the removal of lead from the electronic manufacturing process has helped bring about the revival of the mature surface mount technology (SMT) equipment market. As green manufacturing gains currency, notably in regions such as Eastern Europe and China, this market is likely to experience renewed growth in the future.

      New analysis from Frost & Sullivan indicates that the market generated revenues of $34.3 million in 2005 and is likely to reach $55.0 million in 2012.

      “Lead-free manufacturing has caused process changes in the SMT line that have placed more emphasis on cleaning,” says Frost & Sullivan Industry Manager Keith Robinson. “With more residue left on the assembly during lead-free manufacturing, industries that did not historically clean are likely to do so between 2006 and 2010, thus creating new market opportunities.”

      The nature of lead-free manufacturing is such that it requires higher preheating and heating temperatures, causing changes in the flux that make it more difficult to clean. It also calls for an increased amount of flux, which leads to more residue on the assembly. Defects can occur in products if the assembly is not thoroughly cleaned, thus creating increased demand for SMT cleaning equipment.

      Lead-free assemblies are therefore more difficult to clean than those using lead, causing concerns among electronic assemblers about the feasibility of becoming truly lead-free compliant in 2006. Moreover, cleaning lead-free materials is highly demanding and places increased stress on the entire cleaning process – right from the machine itself to the chemicals involved.

      This has led to many assemblers expressing doubts about the efficacy of SMT cleaning equipment in cleaning lead-free assemblies, which has created a major challenge for equipment vendors.

      “To overcome this challenge, some companies have been very proactive in educating customers on how to clean lead-free assemblies effectively,” says Robinson. “SMT vendors will need to be very aggressive in addressing customers’ needs in 2006, because this is a critical year for the SMT cleaning equipment market.”

      Apart from electronics manufacturing, the medical device, aerospace and defense industries are likely to increase their demand for SMT cleaning equipment. These industries are anticipated to be the primary markets for SMT cleaning equipment in North America and Western Europe. In China, the expanding space program is likely to provide new opportunities to equipment vendors during the forecast period.

Electronics outsourcing

      With increasing levels of competition in consumer electronics, computing, as well as communications and entertainment equipment markets, companies are outsourcing their electronics R&D activities on a larger scale. In addition to the considerable cost savings generated, other notable benefits of outsourcing include better productivity and greater competitiveness through accelerated development times. Developing countries are proving to be the fastest growing markets for outsourced electronics R&D and transnational companies either conduct offshore R&D or outsource to third-party design houses.

      A notable trend seen in the R&D outsourcing market is the progress toward establishing global R&D networks. In accessing the global pool of talent in educational and research organizations, transnational companies are setting up R&D centers or labs in various geographic locations and time zones. This enables companies to stay close to manufacturing centers, perform round–the-clock R&D, track regional technology innovations, and above all, increase productivity. Siemens AG, for example, has established a global network for R&D in the field of electrical and electronics engineering research. Among its 45,000-strong pool of R&D scientists, only 51 percent are estimated to be based in Germany, with the remaining 49 percent spread across the company’s global R&D network.

      “In a highly competitive electronics market, the time factor is an important driver of global R&D networks, since development time has a direct impact on the revenues and profit generated by a newly developed product,” says Technical Insights Research Analyst Vishnu Sivadevan. “Considering this, the fact that mobile phones are developed in a time span of three months is a typical example of the immense benefits of optimized global R&D regimes in accelerating development times.”

      Nevertheless, despite the overwhelming advantages of outsourcing, a key challenge that confronts companies is the risk of an electronics design manufacturer turning into a competitor. In many cases, a large part of the product development process is in the hands of electronics design manufacturers and as the capabilities of third-party design houses and electronics design manufacturers rise; there is a looming fear of the electronics design manufacturer becoming a competitor.

      Further, an added challenge corporations face in terms of ownership is related to intellectual property rights. While standards exist to maintain control over intellectual property rights, they are insufficient to ensure that there is no technology leakage. One remedy for this could be for corporations to take special initiatives to oversee the management of intellectual property.

      “In addressing the critical shortfalls of outsourcing R&D, original equipment manufacturers (OEMs) that outsource such activities will have to implement R&D models that protect the intellectual property interests of the company,” says Sivadevan. “As the industry progresses from outsourcing manufacturing to outsourcing almost everything, companies will have to implement methodologies that protect the R&D landscape of the home country as well as the interests of onshore R&D employees.”

SMT screen printers

      As the market advances, maximizing performance and increasing reliability will be under the spotlight. The pressure to decease size and weight, at reduced costs, is on the increasing trend. To remain competitive, it is essential for manufacturers to take advantage of the new advances in technology. There is therefore an increasing demand from the OEMs and the EMS providers for screen printers and glue dispensers with a higher throughput and faster cycle times.

      New analysis from Frost & Sullivan indicates that the screen printer industry earned revenue of $190.2 million in 2005 and expects to reach $366.4 million in 2012. The glue dispenser market has earned revenues of $26.3 million in 2005 and estimates to reach $42.1 million in 2012.

      “The demand for screen printers especially in the Asian region is on the rise,” says Frost & Sullivan Research Analyst Lavanya Ram Mohan. “This will boost the total screen printer market. This is a direct result of the explosive growth of the electronics manufacturing service (EMS) providers market in Asia especially China.”

      In comparison, the glue dispenser market is a moderately growing market. The Chinese market, which accounts for the largest market share, is rapidly replacing their glue dispenser with screen printers especially for high volume low mix production. However, the glue dispenser market is expected to witness a relatively steady growth in the North American market. The market is conducive for fast and strong growth especially for screen printers and glue dispensers as well, only if the manufacturers successfully monitor the changes and take proactive steps to capitalize on the opportunities.

      Glue dispenser manufacturers are already facing stiff competition within the market as well as from other products that threaten to replace them. One such instance is the Chinese market, where the demand for glue dispensers has dwindled drastically. The use of screen printers in the place of glue dispensers is rampant and has eaten into the glue dispenser’s market share.  In order to survive and turnaround the current scenario, manufacturers need to introduce a diverse product portfolio, which will be able to meet the customers demand for speed, accuracy and price.

      “Today consumers constantly demand continuous miniaturization of electronic products. This challenges the manufacturers and designers to come up with an intricate and a densely packed design. The reduction in component sizes to meet this demand in turn presents a daunting task for screen printers and glue dispensers to deposit such minute and accurate dots,” says Ram Mohan.

      As the electronic market grows, the sizes of the electronic components themselves are shrinking. The increasing trend towards smaller components makes accurate deposits a big challenge. As the market advances, maximizing performance and increasing reliability will be under the spotlight. The pressure to decease size and weight, at reduced costs, is on the increasing trend. This would require manufacturers to roll out dispensers as well as printers that have very high levels of accuracy.

      Screen printer and glue dispenser manufacturers will need to constantly update their product technology in order to remain successful in the market. Screen printers and glue dispenser manufacturers have to invest further into R & D to come up with the solutions. The market is already witnessing an increased focus on R & D, with manufacturers concentrating on developing solutions to overcome existing challenges.

RFID market

      The radio frequency identification market has witnessed higher interest levels as compared to similar technologies such as barcodes and wireless networks. The initial hype surrounding the technology is on the decline since 2005 with industry participants adopting a more realistic perspective on the potential benefits of RFID. There is an increased focus on integrating RFID technology to work with existing business process and applications.

      “The true benefits of RFID technology in the retail supply chain is likely to materialize only in the face of collaborative efforts by all the trading partners. Isolation of RFID projects along the retail value chain would result in information being owned separately by manufacturers, suppliers and retailers with little or no value proposition in sight,” says Frost & Sullivan Research Analyst Priyanka Gouthaman. “Potential benefits to suppliers including accurate demand forecasts and capacity planning strategies are directly dependant on information received from the retailer’s end. An information gap at any point of the supply chain would minimize the optimal gains from RFID adoption.”

      The technology presents immediately visible returns to retailers in terms of improved inventory management and demand planning that would result in higher turnover. The value proposition from RFID still remains unclear among most suppliers who are therefore hesitant to invest in full deployments.

      “Large retailers such as Walmart enjoy considerable clout over their suppliers on account of their trading volumes,” says Gouthaman. “Most suppliers are therefore adopting RFID technology with a narrow focus of maintaining retailer relations. The ‘slap and ship’ approach being considered by most suppliers is impeding market growth within the RFID industry.”

      RFID vendors need to establish the potential benefits of the technology and the positive return on investment that would accrue to retail suppliers. Industry participants would therefore need to collaborate among themselves to offer integrated solutions that have had a proven rate of success among the early adopters. Overcoming market apprehensions would prove easier in the face of existing case studies of suppliers who have deployed the technology.

      The retail supply chain is increasingly becoming globalized in nature. Manufacturing, assembling, distribution and the ultimate point of sale are no longer confined within a single country or region. The Asia Pacific region is gaining significant importance as the manufacturing hub of the world. While most retail mandates are currently confined to specific geographic regions, it is expected that the technology would be employed across global supply chains in the long term.