Issue link: https://iconnect007.uberflip.com/i/1506834
16 SMT007 MAGAZINE I SEPTEMBER 2023 it in the big buckets, and that's fine. But now it's peeling back the onion: Where exactly will those funds be spent? As the bill gains momen- tum, we need to develop a detailed plan for that. For example, here's where we see it going in terms of post-secondary education, on the job training, brick and mortar, R&D, etc. Some companies will have to build out their facilities or make a new facility to scale up incremental demand. I'm sure there will be lessons learned aer we do that. I'm not even sure $3 billion solves all the problems, but it's a good start. As we get into the scaling up and onshoring that we expect to happen, we'll find more issues and weaknesses. We'll find more single points of failure and further insight into what we need to get done to make that supply chain resilient. When you look at what it costs for a fabrica- tor to build something new or to retrofit cur- rent footprints, that number seems right in terms of what we hear from each fabricator. When you get into substrates, it's the capa- bility in the machines and equipment and Class 100 cleanrooms that require millions of dollars. at's why it's good to see the momen- tum because you have both the CHIPS Act and HR 3249. You also have DPA Title III funding, where President Biden classified printed cir- cuit boards in January as part of the microelec- tronics ecosystem. Now you have Defense Pro- duction Act funding Title III for PCBs. So, if you look at getting into substrates in whatever fashion, you can actually file white papers for that funding. You now have different vehicles within the government to help create that resil- ient supply chain, so it's all coming together. ere will likely be numerous white papers submitted from many different companies within the ecosystem, not just from fabrica- tors. e government recognizes there's an issue, and that it's more than just chips. It's really been in the past 18 months where we're being invited into meetings, as opposed to us forcing ourselves upon people on the Hill. Johnson: There has been a trend in this industry toward more private equity involve- ment. Does this legislative work create an environment that is more attractive for banking and private equity? Private equity will base most of their decisions on the return on invested capital. If they see an industry like this, it can be appealing to them. e strategy probably would be one of con- solidation, doing a lot of the tuck-ins. Smaller shops are still out there and if there's no succes- sion planning, they would probably be more apt to sell than someone else. So, if a private equity firm buys a platform— a good-sized fabricator—and does a lot of bolt- on acquisitions, there can be money made; you really have to believe in the investment thesis because, at some point, private equity will sell. If the industry continues to shrink, the govern- ment won't approve monopolies, so that can be a tough exit strategy. Do you want to do an IPO? It's hard because the fabrication mar- kets are cyclical. You must show three years of positive growth, but because there are peaks and valleys in this industry, it's hard to do that and get the timing right. If you're a private equity firm, you could defi- nitely underwrite a business case for this market. How will you get in? How will you show organic growth, and how you will leverage bolt-ons?