IPC President and CEO Dr. John Mitchell: COVID-19 Global Industry Update
Audio Summary:
On March 20, Dr. John Mitchell, IPC president and CEO, spoke with I-Connect007 publisher Barry Matties in an exclusive phone interview with updates on COVID-19 related current events in the manufacturing industry.
In this information-packed 14-minute audio interview, Dr. Mitchell shares key takeaways from Friday’s IPC Executive Forum conference call. The call, with over 100 industry executives in attendance, had just recently concluded when we spoke with Dr. Mitchell. He shared that the call provided both a briefing and an information-sharing opportunity for those attending.
Dr. Mitchell also outlined the resources in place at IPC for guidance from governmental agencies ranging from global to U.S. state and local information. Mitchell and Matties discuss what lessons are being learned so far from the COVID-related disruptions, what concerns IPC the most at this time, and what the recovery is likely to look like.
I-Connect007 continues to deliver original reporting and coverage of the electronics design, electronics manufacturing, and contract manufacturing industries, including up-to-date information from the companies, associations, and supply chains globally. Find the latest news and information at www.iconnect007.com and on our new topic bulletin board, “Industry Leaders Speak Out: Responses to COVID-19 Outbreak” found here.
Read the transcribed audio interview:
Barry Matties: Today we’re talking to John Mitchell, President and CEO of IPC. John, with the COVID-19 outbreak, the IPC obviously is taking an active role. Why don’t you give our listeners an update as to what’s going on please?
John Mitchell: Yes, so as you know, IPC’s membership encompasses the entire world of electronics manufacturing everywhere. Every region is slightly different and yet there are common threads throughout. So part of what we’re doing is trying to make sure people have and are going to the proper sources to make sure that they have the latest information. What happens in California may be drastically different than what’s going on in Germany or maybe drastically different than what’s going a little bit North of them in Oregon, or could be one city is different than another. And so we’re trying to make sure that they are referencing the right sources there.
So today, actually, just a couple of hours ago, we held an industry call. We called it our Executive Forum on COVID-19 in which we shared an update of what’s going on in those governments. So we walked through Asia, Europe, the U.S. A lot of the callers since we did it on this time zone were US-based. And then we did a brief economic update as well about some of the economic implications of what’s going on with the virus. Our chief economist, Shawn DuBravac did that. He will actually be doing another webinar on that on Monday in a more in-depth. We cut it down about five minutes just so people could see what other people are doing.
We’ve been serving the members and bringing that data to say, “Okay, what are you hearing from your suppliers? What’s the supply chain delay? Is that changing now?” And we were even serving them in doing some polling on this in this forum we just had a couple of hours ago as well. These are basically CEOs, presidents of the various organizations around and we had over a hundred on the call today, which was great. And we’ll be doing that call weekly on Wednesdays going forward.
We had the governor of California in the governor of New York last night and this morning basically say stay indoors, right? Time to be shut in, time to get through this except for only nonessential industries, should be going there. So we yesterday we sent letters to every governor across all 50 states saying, “Hey, there needs to be some clarity about what is essential and what’s not,” because the state can kind of determine that, the federal government does not or has not yet. We also sent it to those same governing bodies as well as the heads of counties as well as the associations for mayors as well to say, “Hey look, the electronics industry is critical to solving this. The things that we’re building are in some ways...” Sometimes they don’t even realize that they’re tied to it. So they’re helping with these devices, infrastructure, defense, whatever it may be, communications pieces.
Mitchell: And so we’re encouraging them to say, “You guys are part of that exception.” And so we’ve been communicating that as well. So those are just a few things that we’ve been doing on behalf of the membership to help solve that.
Matties: What sort of questions, John were coming out of the meeting today from the executives?
Mitchell: This is a peer-to-peer kind of discussion. So a lot of them are saying... So we had some companies that were based in China and so they’re kind of on the back end of this, right? Right now we’re having no domestically reported new cases of COVID-19 in China. And that’s great news and things are starting to get back to a normal-ish over there. And so the experience of China where people were sharing that, they said, “Oh well, you had these three levels. What was level one, what was level two, what was level three?” And the one example was, “Hey, level one was education, level two was okay, we did temperature sensing and things like that. Level three we went all the way to masks, temperature sensing and social distancing.”
So that was one of the questions that was going on. There were questions about shipping. We had one person share an example. They said, “Hey, I was trying to drop ship something from Europe to the West Coast of the U.S.,” and they were getting quoted 10x the price. And so it’s creating an awareness. But those are the kinds of questions and some of it was reporting, “How are you handling, if a patient becomes ill, what do you do? How have you handled that?” And these are people that haven’t experienced it yet, so it’s a great chance for them to take this information back to their companies and say, “Okay, here’s what this company did. Or here’s what that company did. How do we want to form our policies around that?”
Matties: Great. Now you said this is going to be an ongoing weekly call.
Mitchell: Yes. Well, basically planning to be weekly, at least through April. We’ll see if we need to lengthen it beyond that.
Matties: All right, great. And this is open to all members or what’s the protocol there?
Mitchell: We’ve been inviting the executives of member companies. It’s not a free for all. It’s really an invitation thing for the executives because we’re trying to keep it to decision-makers so that we don’t have everybody and their brother. It would be very difficult to suddenly we had 200,000 people get on the phone. It’s much more manageable when it’s a couple of hundred. And even that, it’s a little bit of a challenge.
Matties: Now you mentioned that there was an economic summary there. What was that summary? What’s the telling there?
Mitchell: So we started off summarizing some of the findings between our differences between our February and March surveys that you can find out on online there. So we shared with that some of the negativity about when it might be passing them in North America. So for instance, that nobody 10 days ago was predicting it to last beyond October of all the survey participants, although 25% said, “It’s too early to tell.” We’re curious to see what that might change to now over the past week because a lot of it’s been changing in just the past few days.
We also looked at, in terms of what they plan to spend in terms of a capex by quarter. The vast majority, two thirds or more depending on the second quarter of ‘20 or all of 2020. Basically most said it’s not changing their capital expenditures. There were about 12% that said it would decrease by more than 5%, but then also 6% says it’s going to increase by more than 5% and then there was some differences between there as well.
And then we did some GDP growth in terms of dropping into recession chances as well. Right now the projection that I think I saw was basically 2020 would not have growth was what they were looking at here in this one here, but so it technically would drop in a recession, but they’re expecting to bounce back in ‘21.
Matties: Good. So when you look at this, we’re just curious what concerns the IPC the most at this point?
Mitchell: So the most concerning thing is of course the safety of the people in these companies, right? So we’re trying to make sure everybody is aware what they need to do to make sure the people are safe. And safe has a couple of different nuances. One is obviously the health. We don’t want them to become sick or become ill. We want to protect their health. Another safety issue is regarding fear, okay? This is going to sound terrible. A lot of media is selling the fear of this stuff because it’s what people want to pay attention to, right? Part of this is helping them understand that there is a light at the end of the tunnel. Like I was sharing with you the China data, we’re about to put out an op ed that’s going to share that, “Look, this was just six weeks ago and China’s at 95% production. People are back at work for the most part. Things are starting to open up. We’re going to get past this people, we’re going to make it. So be safe, but don’t be overly concerned.” Does that make sense?
Matties: It does and we completely agree. We need calm and reasonable thinking to move us forward.
Mitchell: I mean, it’s not very helpful when, yes, people need to have food available to them and they’re working from home, et cetera. But if this wouldn’t have happened, people still would have been eating the same amount of food over the next six weeks or eight weeks or whatever, however long it takes us to get through this. So this run on the grocery stores isn’t necessarily super helpful. So take enough, but don’t fill up every last cupboard of everything so somebody else goes wanting.
Matties: So in this reorganization of the world, and obviously supply chains are being reconsidered, manufacturing strategies are being reconsidered, what lessons do you think are being learned at this moment?
Mitchell: Well, I think there was some learning with the tariff structure. If there’s anything good that I can point to, I always try to find the good in things, right? Anything that I can point to that was good about this tariff war and there’s not much good about it, but at least it taught the global industry, not just the electronics industry to get smarter about their supply chains. So the reason for that is the smarter we are, the better we can optimize and that is probably the one thing that is continuing to being learned here because now how much...
A lot of our business mentality is just in time, right? You don’t want to keep inventory. But now some people who had a little bit more inventory are suddenly looking like geniuses for the next couple of months. So it’s having people reexamined how they think of the business in light of these things. And so, I think those will be some of the lessons learned saying, “Hey, there might be different ways we might want to approach this.”
Matties: What’s your thought about how the administration is approaching this?
Mitchell: Let’s just say things are starting to be moved in a better fashion. I think there was some early losses of opportunity. I mean we sat down and everybody kind of... The things I don’t like is when people sit there and go, “Oh, that’s a China issue or China has caused this to us.” That’s not helpful at all. So those kinds of comments coming from anybody, administration or otherwise I think is just not helpful right now. Let’s look for solutions. Let’s protect people. And everything that’s going on in that direction is moving in the right direction. In some regards, I wish it was going faster and we had more clarity, but they’re enabling tools to be able to be used, which is good. And I don’t fault them for that at all.
So I’m glad that the administration and Congress is voting in these measures. Whether we end up needing them or not, it’s glad that they’re willing to act quickly enough to respond to that. And there’s governments across the globe that are doing the same thing. I mean there’s something like $500 billion Euro that’s available to ensure that no businesses will fail just in Germany, a similar program in the UK, Spain and France. And so that’s Western Europe basically saying, “We’re not going to let any business fail over this. We will cover you.”
There’s upwards of $1.3 trillion additional resources that the US Government is looking at offering. And so there is some question about that. I mean there’s a lot of unclarity. They basically said, “Hey, if you’re a small, medium-sized business, anybody wants that time off, you’re going to give them up to the two weeks paid time off, done and done.” Because it just literally got enacted two days ago, there’s a lot of lack of clarity from the businesses to say, “So are you going to reimburse us for that or is there something we can file on it?” They mentioned that it could come out of some of the getting tax credits for it, but it’s just not super clear. The only thing I would offer as a suggestion would be we need to get more clarity and it may be too early. I think we’ll get there.
I-Connect007: Do you have any additional thoughts that you’d like to share that we haven’t touched on?
Matties: I guess the only thing I would offer in conclusion, and I don’t know that we haven’t touched on it, but I would just reemphasize that we’re going to make it through this. The great thing about this industry is that we’re part of the solution. I mean we are creating the products that are going to help beat this, help shore up those who are ill, help make sure that we can keep talking to each other. The fact that you and I are able to still hold this call on this bandwidth is a testament to technology and the creation of it in such a fashion that allows it to work reliably so that even in this crisis where we’re not necessarily in the office where we anticipated being normally, it’s still working fine. And so the electronics industry is the backbone of all other industries. Every single other industry is reliant on us, and so we need to keep doing a good job and proceed forward.
I-Connect007: John, we certainly appreciate you taking the time today to share your thoughts with our readers.
