SMT007 Magazine

SMT-Jun2017

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June 2017 • SMT Magazine 67 balloon due to expensive rework. (Not an issue in low labor rate regions where rework labor costs can diminish the effect of poor process development and c ontrol.) 2. High indirect and general and administra- tive labor costs that must be absorbed and greatly inflate the labor sell rate. 3. Material cost differences—a potentially big issue. This is especially true for Tier 3, 4 and 5 operations that don't have facilities in low labor rate locations with a central procurement activity to leverage volume production and local favorable material pricing. 4. Government policy such as corporate tax, tariffs and regulation that affects the cost of doing business. The first two are controllable. The second two are thought to be uncontrollable. But, are they really? How would we eliminate the dis- parity between component pricing when buy- ing material for assembly in the Pacific Rim versus buying the same material for product production in Paramus, New Jersey? Make no mistake unless you are a Tier 1 or 2 product as- sembler with a global procurement group that serves multiple sites including ones in low labor rate regions, there are significantly higher prices when buying material for assembly in high la- bor rate markets like the U.S. Why? A paper was written addressing this in 2010 5 . There are two strategies to combat this in- equity. The "unthinkable" approach is to com- petitively produce 0402 (English)/0201 (Met- ric) resistors, micro BGAs, bare circuit boards, et al., here in the States? Is it unthinkable? Why? We'll drill down into this fantasy next month. The other approach is to demand our govern- ment, you remember the one that is supposed to do the will of the people and who, based on the Constitution create that "level playing field" we are always hearing about, use their in- ternational leverage. You know, the one that is by and for the people, the one that the people give up some of their inalienable freedom in the form of very limited government power. There isn't a good reason small- and medium-sized high labor rate assemblers should have to pay 10%, 20%, 30% or more when assembling in a high labor rate environment. Don't try and use the "shipping cost" excuse—it's negligible. Read the paper and inform me. I would appreciate being straightened out on this. Until this is reconciled, getting the labor part of the cost worked out is like spitting into the wind, or like shoveling sand into the ocean. Or as George Carlin, also known as Al Sleet the hippy-dippy weatherman, would say, "RA- DAR has picked up a line of showers…but, the RADAR has also picked up a squadron of Rus- sian ICBMs... So, I wouldn't sweat the thunder storms." How do we get our government to challenge the manipulation of material cost? One way, is to organize and lobby. Perhaps the Electronic Industry Alliance (EIA) would have been a good vehicle to act in behalf of electronic product as- semblers. However, they dissolved and ceased operations in 2011. The ECA (Electronic Com- ponents Association) was designated to carry on passive standards development. They merged with NEDA (National Electronics Distributors Association) to form ECIA (Electronics Compo- nents Industry Association). Of course, JEDEC (Joint Electron Device Engineering Council) handles standards for active electronic compo- nents. All of these are technical standards-based organizations and not really involved in busi- ness issues. Maybe IPC, who was heavily in- volved in the lead-free debate, is the best hope. Or maybe a new lobbying organization needs to be formed. This is not a simple task as subjects like currency manipulation play a role in global material pricing. READING, WRITING, LISTENING, SPEAKING AND ANALYZING MATERIAL COST, PART 1 " How do we get our government to challenge the manipulation of material cost? One way, is to organize and lobby. "

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