Issue link: https://iconnect007.uberflip.com/i/1473479
32 PCB007 MAGAZINE I JULY 2022 Now, why is it a good time to invest in the industry? I think it's because we're talking about advocacy: a quick increase in expectancy requests in the U.S. supply chain; increased awareness of what should be made in the U.S., according to ITAR rules, or for supply chain security purposes. ose are all great tailwinds for the industry. I certainly do not think that all the business is coming back to the U.S. at's just not going to happen. But if a small portion of the overall market comes back, that's a huge benefit to the industry. Johnson: What's your opinion on how the PCB industry in North America should be retooling to maximize this opportunity? Kastner: e larger companies like Summit, TTM, and so on have the capital to invest in themselves and the companies that they acquire. A lot of the companies that are smaller just really have not invested. Many have, but many have not. ere's a huge investment deficit. Many of those smaller companies that have not invested are very good acquisition targets, and some buyers are looking for that type of target. e companies that have kept up with investments are great acquisition targets for Summit and others that are looking to acquire larger PC board shops. Johnson: Some of the larger shops—Summit, TTM—come to mind, of course. It seems like there's some private equity activity as well. Kastner: Yes, there is quite a bit of private equity interest in the sector. In general, the pri- vate equity firms are interested because they have an interest in re-shoring and investing in the U.S., and the trickle-down business that will come with the emphasis on investment in semiconductors and the supply chain in the U.S. e private equity guys are pretty smart cookies. ey know what they're doing. TTM is a bit of a mixed picture, but certainly FTG has done a couple of acquisitions and Summit has done several. Fralock is an assembly com- pany that acquired both Lenthor and Career. Fralock is private equity-backed, and really, the private equity-backed companies have been doing more acquisitions in the space than the public companies. ere's a lot happening in the EMS sector as well. But I think they're mostly going aer that trend to re-shore and shore up the semicon- ductor supply chain. Johnson: So far, we've talked about buying and selling. What about just raising capital? We were mentioning that the smaller mom and pop shops may not have been keeping up on the investment end; they may not necessarily have had the capital or the cash flow to grow their business, keep it on the leading edge, and make that sort of investment. Is there a strat- egy for them or is that a good investment for someone else? Kastner: You really don't see much venture capital or early-stage capital in PC boards or in PC board-related technology. Interest rates have recently increased, but even now, inter- est rates are relatively low. ere's still a lot of credit, so it's pretty easy to get financing for either new or used equipment. But a lot of the smaller shops are asking, "Okay, where do we start?" Many of them start with direct imaging, which is probably the right place. Next, it's test equipment, new drilling machines, or a new wet processing line. But where you see them jump forward is when they get into direct imaging and new high-speed drills. I'm guess- ing it's because they put it off for 10 years, and finally got to the modern age. ere's plenty of money for equipment financing or to improve facilities, but frankly, a lot of owners have been milking the cash cow. For the milkers, I don't know how much lon- ger they can survive. I visit some shops, and I'm just amazed that they can stay in business.