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Nolan Johnson and Andy Shaughnessy visited with Jim Hartzell of Isola to learn about how the company has thrived in the past 18 months, despite some real supply chain backlogs. Jim also talks about new products, and what’s on the horizon for Isola.
Nolan Johnson: Jim, you’re the Vice President of Sales and OEM Marketing for North America. Business operations, after this very eventful year and a half, have shifted. Walk us through the market challenges you’re currently seeing?
Jim Hartzell: Thanks, Nolan. We’ve been fortunate enough to stay extremely busy through these times and the operations team have been hitting record numbers of our shipments and so forth. From that standpoint, COVID hasn’t had a real big impact. Certainly, going and seeing customers has had a big impact due to COVID. Shows like this is where we’re getting a little bit of face time, but for the most part, we’ve been able to come through this shutdown pretty well.
We’re having some issues and some challenges on the logistics side of the business. A lot of our raw materials come in, either by ocean container or by air, but because of logistics delays, we’re having to ship a lot in by air. We’re seeing a significant number of delays coming in from ocean containers, particularly anything coming in from Asia.
Johnson: And if you’re trying to bring anything in by air it’s got to be even more difficult due to the greatly reduced air cargo traffic right now, correct?
Hartzell: Yes. And the expense of air is very volatile. Some of our products aren’t real high margin, so any kind of added expense we get from air freight kills the bottom line, if you will.
Johnson: I’m sure there are some new methods for ordering, tracking, or scheduling. Obviously, there are challenges getting raw materials delivered when and where you need them. And yet there still is a very strict need in the industry for your finished goods to be on time at the fabrication facilities, etc. How do you manage that?
Hartzell: Well, here in North America, we do have significant demand for quick turns and being able to get product to our customers in days instead of even weeks in a lot of cases. We have a strong supply chain management group that is able to forecast and compensate for some of the raw materials coming in. We keep a good amount of inventory, and our facilities do a great job as far as turning around quickly and filling the customers’ needs.
We also have Insulectro as our distributor. They do a nice job of forecasting and get us material orders in ahead of time. I’d say one of the best jobs in the business from a laminate supplier standpoint of keeping our customers’ orders filled.
Johnson: Have you been working on any new materials aimed at new applications?
Hartzell: Sure. TerraGreen 400G was just U/L qualified last week. We’ve developed it to support an extremely low loss market. We’re excited about that material coming out. It’s on the next generation upstream development products that are going to be released for 400G applications. That’s our flagship product for the show, and we’re excited about getting that product out and getting it to the market.
Johnson: What sorts of applications will be particularly interested in this product?
Hartzell: This is a platform product which initially will service next generation high speed, low loss server applications. We’re seeing a lot of demand for new development to service new chipsets. The low loss characteristics help design finer line widths while being able to keep the signal speeds up and the loss down and make longer traces with better material.
Johnson: Looking forward into the next year, 18 months, what do you see? Obviously, struggles with COVID are continuing, but we also seem to be approximating business as usual. What do you see on the horizon for logistics challenges? How can Isola continue to service customers, or maybe even improve it?
Hartzell: Good question, Nolan. And the Ouija board we have is not all that much better than anybody else’s. We do talk to a lot of OEMs out there. We’re getting ready to do our forecasting for 2022, and probably the way it will be forecast is off our raw material availability as well as our output through the factory. Demand is exceeding supply currently. We don’t see that dropping off. I don’t want to jinx it, but I don’t see that slowing for the immediate future. And at least through Q1 and Q2’2022, we’re forecasting still strong demand, tight logistics, tight supply, and the relatively same kind of atmosphere we’re dealing with currently.
Johnson: What adjustments are your suppliers making? Are there ways in which they can start to respond to this high demand as well?
Hartzell: Yes. Currently, our suppliers are making the shifts over into to, I would say, higher margin business. The lower margin business, like 7628 glass, heavyweight coppers, things like that, are getting harder and harder to get a hold of because our suppliers are trying to move into a better margin business. Where they may have had negative or zero margin business with heavy glass or heavy copper, they’re busily trying to move over into lighter-weight glasses, thinner coppers, better resin systems, and so forth.
Johnson: That’s a key point. Customers specifying materials will need to pay attention to which ones are being supported by the raw material suppliers, and which ones are being phased out. What are your recommendations for managing that as an OEM?
Hartzell: I would suggest OEMs, particularly if they’re developing on a new program or part numbers, to stay in close contact with your laminate supplier. Look at any materials as potential problems in the future and make sure that you’re going to have some coverage and forecast. Right now, forecasting is probably one of the most critical aspects of the business. Easy to say, hard to do. But forecasting is extremely important for us to take it back through the supply chain and make sure we are all prepared.
Johnson: This is a new environment for the OEM design teams to consider the performance of the laminates. Materials have been such a long-lived component to the board; some went their entire career using only FR-4. No longer; one substrate cannot be everything to everyone.
Hartzell: Absolutely. I can’t stress that enough. The understanding of where the materials are, what the supply stream looks like, and then the availability is, can be incredibly important right now. And again, forecasting, anything you can do to give the suppliers, all of us, the fabs all the way through the raw materials and give us some insight into what’s coming. It’s very important.
Andy Shaughnessy: It’s like everything on the board is in short supply. It’s just like it was about two years ago.
Hartzell: Yes, when it was completely chaotic a couple of years ago. And you’re absolutely right, Andy. Most aspects of the board are in short supply if you look at it: copper, things of that nature. The one piece of advice I would give is the closer you can keep it to standard the more chance you have of getting a supply. When you go outside of the standard, it’s difficult for all of us to respond to quickly.
Shaughnessy: Right. Lee Ritchey said recently in our magazine, “I find out what components are available and then put that on the board.”
Hartzell: Common sense, right? I mean just use common sense and that’s absolutely the right thing to do.
Johnson: Parting thoughts?
Hartzell: I’m pleased that we’ve got the marketplace that we do. I’m missing the face-to-face time like we have here, where you can continue to build your relationships and trust. To be honest with you right now, probably more than ever, being able to trust your suppliers and look them in the eye—it’s important. Difficult, but important.
Johnson: Thanks for taking the time to speak with us.
Hartzell: Thank you, Nolan. Thank you, Andy. I appreciate it.