A Conversation with IPC's President John Mitchell

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I recently met with IPC President John Mitchell at the HKPCA show in Shenzhen, China to discuss a variety of topics, such as the China market, what’s stopping PCB manufacturing from coming back to America, education, 3D printing and what the association has planned for 2016.

Barry Matties: First of all, let's talk about the show, which looks like the largest ever.

John Mitchell: It keeps growing each year, so we are very positive. Obviously we don't have the numbers yet, but as far as square footage, it is the biggest ever. I believe we have 50,000 square meters, which is a record. We added a fourth hall, so almost 10% growth.

Matties: And in a bad Chinese economy. Were there any concerns leading up to the show?

Mitchell: That was the most impressive thing. It really was a concern in the middle of Q3 with the whole Chinese economy hiccupping. We weren’t sure what that would mean for the event, but exhibitors and attendees showed up.

Matties: When you walk through the show, it doesn't feel like a recession by any means.

Mitchell: Not at all, but it's not really a recession. You're talking about China’s economy going from an expected growth rate of 7% to worst case maybe half of that. It's still growth. It's not stagnant or reducing by any means.

China’s struggle is that they have the number one cost per person of the Asian manufacturing economies, where they used to compare with Thailand and Indonesia, etc. Their costs are rising and it has been forced by the government. They don't have a lot of choices.

Matties: This is a really strong presence here for IPC through this show. You started your partnership here 13 years ago or something like that?

Mitchell: As Mark Peo, IPC’s Board chairman mentioned in his keynote, it was big. The show dipped a little bit several years ago, but it has been growing ever since. While we've been a partner with HKPCA for a while, about three years ago we made some changes. In 2013, we introduced the well-known IPC APEX brand which helped strengthen the exhibit scope of the show as it catered to the rapid market development of the electronics manufacturing services (EMS) sector in the country. Participation of IPC members in the show increased nearly 200%, contributing to growth in attendance of 20 percent. We are now working in better, tighter collaboration with HKPCA, which is only going to lead to improved results. Anytime you focus on something, you get better results.

Matties: It's prudent because, of course, the market is here.

Mitchell: That's right. IPC tries to be wherever the market is, so we need to be here in China. Not really related to this show, but we're doing some expansion in Europe, too. We are really focusing on global expansion because there are segments of the industry that are really important that we need to serve better. You’ll see a big announcement concerning that coming soon.

Matties: What about India? I know you have some efforts underway over there.

Mitchell: We do have a presence there and maintain offices in Bangalore and New Delhi, India. We have approximately 100 IPC members in India representing all facets of the electronics industry including design, printed board manufacturing, electronics assembly and test, and from the private and public sector.

Matties: When I hear people talk about India, it’s always, "We're going to do this and this and this,” but I don't see it.

Mitchell: For India, the challenges are in market growth from regulatory issues, and for the foreign companies coming in, it's not as easy as it is in other places. While there's still a lot of great potential there, I think until that gets sorted out you're going to find some companies hesitant to do great things there.

Matties: No matter how much they try to convince me, I'm just not convinced.

Mitchell: Show me the money, right? Let me actually see your growth. Instead of seeing 10 or 20% growth there, you might be seeing 1%. That's not enough to really get people excited about going there.

Matties: One of the things that I'm seeing here in China, of course, is a lot of automation. They have to lower labor costs with all the automation that is coming into play. We saw it with the fully automated Whelan factory in America. Do you see a day where mass manufacturing may move back to a place like America because automation levels the playing field?

Mitchell: When we are talking strictly PCBs, now in the U.S. we are down to about maybe 5.0–5.5% of the global market, and most of that is military, aerospace, etc. Not that it's completely gone, but when a good segment of the industry has left, and it's been going on for a while now, a lot of the expertise moves with it. So, to just all of the sudden say “Okay, we're going to bring it all back now because we're automating…” It's a different kind of mindset. It can't just be the machines.

Matties: Why not? I look at automation and the specialty skillset is not required on every level. You might need a few great engineers rather than a team.

Mitchell: Maybe. But you still need a team to run the machines, to program them, and to get them set up correctly. I guess it's possible. If it is all going to just run on machines, why bring it back to the U.S.? If you're going to totally automate, put it where there's a lot of land and space and it doesn't cost a lot for that land. Put it in Africa. Put it anywhere.

Matties: That's what I'm saying. Put it anywhere.

Mitchell: Well, because you may want better trade laws or you want to have it close to the customer. Right now, the tax laws in the U.S. are going to prevent a lot of that. I mean, you have a 20% hit just to do business in the U.S. My point is that there are regulatory issues or cost issues in the U.S. that American business people today, all things being held equal, would be viewed as irresponsible to their Boards for building a factory there.

At IPC, when we are on Capitol Hill and talking to politicians, we try to share that message. We say, "These are people that are paid to make money for their shareholders. If they can go build a factory in Singapore or Kuala Lumpur or anywhere and save 20% just on taxes, how do you compete?" There's not a 20% margin most Boards are willing to ignore.

Matties: Maybe the trend is captive shops, because they don't suffer from the tax regulations. When you look at Whelen, it's zero discharge, so there are no environmental regulatory issues.

Mitchell: That's nice. I love the U.S., and I wish we could figure out how to get back to manufacturing here. The other challenge is the way the U.S. government is run. Basically, it is not very plan friendly for businesses. I can't give a business a five-year plan and say this is what will happen. IPC has been lobbying for change to the R&D tax credit for years.  (Note: the U.S. Congress recently enacted meaningful tax reform legislation, including making the research and development (R&D) tax credit permanent. This is great news, but long in the making.) How do you plan for that as a business? That's ridiculous.

Matties: That's crazy.



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