A Conversation with IPC's President John Mitchell
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.
Mitchell: Things like that make it really hard for businesses to do what we want them to do. Energy costs have gotten lower, so that's been one plus in helping accelerate some things back to the U.S. If you could overcome the taxes as well, by doing those two things, I think the American economy goes crazy.
Matties: I think we're close, and we have an election coming up.
Mitchell: It's right on the edge. We'll see what happens. In 2017, we might be having a whole different conversation.
Matties: I think Americans, looking at the support that Donald Trump is getting, are ready for something entirely different.
Mitchell: That's how Obama won, too. People wanted change and to make a difference. In his first campaign, he was talking about the need for change.
Matties: When we look at it, we've really paralyzed our economy in manufacturing and jobs.
Mitchell: I think so. There's also some social stigma about it. Right now, if you went to any 20-something year old and said, "Would you like a job in manufacturing?" The image of sweatshop comes to their mind, but that's not today's factory. We need to do a better job of educating the world by saying, “Hey, this is a high-tech world. You're controlling robots. You're doing all this interesting stuff. Whether it's people-less or not, it's still a lot fewer people than it used to be and it's still not drudgery. You're doing cool stuff.” I don't know how to change that view. We need to somehow “popularize” manufacturing.
Matties: You're going to need a good education just to work in a factory.
Mitchell: Exactly. That's the other thing that we've got to fix, education.
Matties: It has really crippled us.
Mitchell: Don't get me going on education.
Matties: Actually, I want to, because I look at Kahn Academy and I think it's a brilliant approach. Are you familiar with that?
Mitchell: Yes, I know Kahn.
Matties: Free, top-level education. Bill Gates' kids were using it and of course they can afford any education.
Mitchell: Right, Gates also invested in it after his kids went there. He said, "Hey wait. This is great. Here's a million dollars. Make it work."
Matties: They turned the school system upside down.
Mitchell: There are also other groundswell organizations that hopefully will change education as well. Right now, the government will never change it. First, education is dispersed to the states, so you have 50 different opinions about how to do it. It is entrenched. I've seen some really innovative educational leaders come out and say, "Hey, we're going to pay common state teachers based on success rates," and they've been shut down by the unions.
To me, the only way to change education is through some of these privatization pieces, and then the government will have to change to keep up. It's kind of that way with anything.
Are you familiar with a program called KIPP? It’s a secondary education, so middle school through high school. Our education 50–60 years ago, when we were primarily agricultural, was designed with the goal of having 70% of people get enough education to go work on the farm. Back then, that was fine. Only the top 5–10% were supposed to become the knowledge workers…doctors, the lawyers, etc. That education system hasn't changed in 50–60 years, so it's designed to do the same thing.
Basically, what KIPP did is say, "Look. Every single person can exceed the expectations of our system." Right now our system says, "There's under-performers, there's over-performers and there's the average. We'll teach to the average.” The majority of these people aren't the average, so they're all frustrated. Either they are too slow or too fast.
What KIPP did is they said, "Everybody can achieve the 94 percentile and you have to or you don't graduate, period." All of them do. All it takes is belief and focus. There are different learning techniques out there that people are not utilizing, like online learning. Right now, the standard teaching mechanism is to dictate, so it's either visual or audio. That only applies to about a third of the population that actually work in those two mechanisms. There's also tactile learning, there’s experiential learning, etc.
I've studied some of these programs on learning, and if you want to remember something as a student, first you look at it. If you stop there and watch a TV program or an educational program on it, three days later you’re down to 70%; six days later, it’s down to 30% retention, etc. Now, if you watch it and take notes at the same time, you've added tactile learning. Typically, the retention rates double just by doing that.
Then rather than reviewing it right after that, instead review it three days later and re-write it and act it out. Music is another piece. If you sing it or create mnemonics for it, you add another. So there's like five different pieces that you can do over and over, and you get 90% retention. You do that periodically for two weeks, and it's yours forever.
It's the same with anything, even this industry. In the China PCB industry, 50 % is just your standard rigid board without many layers. That's mostly what they do here in China. The innovation is flex, hybrid-flex, etc., things like that. That's where the growth is happening. In the cellphones here, they don't have rigid boards. It's high density and then flex circuits that are going on in there, but trying to convince an industry that's already established to re-invest in something brand new is risky. It's going to be a hard change, but that’s where the opportunities are.
When you can just say, "Hey look, I see company X is over here and they just built a factory all around flex." And of the top 10 countries in terms of the printed circuit board market, the fastest growing ones are places like Thailand because they're doing mostly flex stuff. As a result, they're in double-digit growth. They're in the top 10 of all the PCB producing countries in the world. If you want to grow, you've got to stay on top of trends. It's just something that I think the PCB industry has struggled with for decades. When change is in the wind, it's hard for people to get motivated to say, "Hey, I might have to scrap what I'm doing, or at least minimize it because I’ve got to do this new thing."
That's a challenge, because it's kind of like going back to school. Say you get your bachelor's degree and you start working. You're making a nice salary, $60,000 a year, you're doing really well and now you realize you need a master's or you need to go get your doctorate. How many people are going to stop the salary for two or four years to go do that? It's really hard. There are other options, however. You don't have to stop cold turkey; you could do night classes for example.
If you do that, when you finish you've got a whole new skillset and you've got more options. If you don't do that, your path is limited. I think that's the same, whether it's PCBs, EMS, etc., as technology changes, you always need some sort of innovation path going in order to take on the next thing. GE used to say you have to disrupt yourself because somebody out there is trying to do it anyway. Wow, that was a bit of a soapbox…I warned you that I was passionate about education and change!
Matties: As we walk through this show, and I was at the 3D printing show a week or so ago in San Jose, we are seeing a lot of inkjet technology coming in to play in this industry. It continues to get faster and faster and used in more and more processes. Eventually it looks like it's just going to come down to one box that prints out circuit boards. A lot of people say we're not going to get to the mass level quality anytime soon, but I’ve got to think within 20 years or less, we might.
Mitchell: Especially if you're able to print what they've printed already, like a car, a house, a plane, etc. Let’s think about cars for a moment, and let's use Ferrari as an example; they make 5,000 cars a year. What if they could do that with a couple of printers? I mean low volume, high complexity stuff. There's a market for that. If you could print a plane, that's a whole different ball-game. As soon as you do it there, it's got to move to mass market because people find a way to do it faster and smaller.
Matties: I was at a show in Santa Clara, CA, and a guy there was showing me multilayer circuit boards that he's printing on a table top. He described the base material as liquid FR-4 with conductive silver in between. What about soldermask? We don't need soldermask. What about drilling? We don't need to drill because we can just print right where it needs to be, and then I'm holding it in my hands already.
Mitchell: That's right. It's not the future. It's today.
Matties: It's today, and this unit he told me is going to sell between 70 and 100K.
Mitchell: That's one person's salary.
Matties: If I'm a prototype shop sitting in America, I'm saying, "Let's buy that and open a service," just to start the transition.
Mitchell: Low volume, high mix. There you go.
Matties: It's not going to be for everybody, but it's going to be for a lot of the marketplace. When you can take a machine like this and replace a 45,000 square foot facility.
Mitchell: Look at how fast 3D printing has changed in 10 years. When I was at Bose, not quite 10 years ago, we paid $60,000 for a 3D printer. In 10 years we went from that to printing a circuit board right off a printer. Now we are printing a plane, a car, a house…gigantic things. In one decade, that's a massive transition. Imagine the next decade.
Matties: When people say it's not going to change, I'm having a hard time believing it.
Mitchell: If there's a market for it and it's feasible, they'll find a way.
Matties: It's like going from 8-track to MP3 in the blink of an eye. It's an exciting time. Now you've been with the IPC for three or four years now, how has it been for you?
Mitchell: Three and a half years, and it's been a blast.
Matties: It looks like you're having a lot of fun.
Mitchell: I am. We are trying to make sure our members are benefiting and that we're helping their businesses grow, and we're trying to do that in really tangible ways. We've come up with new programs and we're trying to listen and respond to the needs and wants of our members. One of the things we are trying to change is the standards process, which can sometimes take five to six years to release a major standard. We're changing that because the electronics industry is changing too fast for that to be sufficient. Our members have come to us and said, “You need to do that faster.” Now we're targeting three years. There's some push and pull on that, but we're just trying to be smarter about it.
For education, we've brought online testing to certification to improve the quality of it. We’ve been providing analytics, so if you're a trainer, we can find out if there's a module that your students are consistently doing a little bit worse at, and we can say, "Hey, you might work on that one." On the flip side, if there's a question that 80% of the people in the world seem to be missing, maybe we need to look at the question and change it. Again, leveraging technology to improve things.
We focus heavily on advocacy because regulations are a huge portion of what impacts how we do business globally. We've put a lot of effort into advocacy efforts and the IPC Board has helped us direct that. IPC will soon be in Europe. We've been there, but now we're going to have an actual presence in Brussels coming up very soon. Look for exciting announcements coming up in 2016 as far as what we are doing in Europe.
Then, as far as solutions, something you know we used to do in the past was special projects. We are going back to that, both big things and small. Lead-free and the high-reliability market, that's a big project. We are trying to raise tens of millions of dollars to solve that issue. We want IPC to be remembered for, "You remember that high-reliability lead-free issue? They squashed that. It went away."
Matties: That's real value that you're bringing if you do these things.
Mitchell: Exactly. We're trying to do that. We had one case, and sadly the company doesn't want us to use their name, but it's a large aerospace company that decided to really invest in IPC and they had throughput in some of their electronics manufacturing of about 73–74%. They invested nearly $200,000 in IPC training standards, etc., and at the end of the 18 months they had 100% throughput.
They paid for all that in six months. Then every six months after that in terms of decreasing the scrap and rework, etc. That type of tangible value is what makes a difference. We are in a technology world. The world is changing every second. There's a lot of new things we are going to be able to do to help our members succeed all along the way. It's been very rewarding.
Matties: What's been the greatest surprise to you?
Mitchell: How many manual processes we used to use internally at IPC [laughs]. For a technology group, how much paper do we really need? We're pretty much paperless now, so it's been good. Someday, if we get there on the standards front, we won't have to ship any paper either. We'll see.
Matties: That would be nice. You know, one of the comments we got several times over in our survey was the cost of standards. People would like to see that go down. How do you address that?
Mitchell: If you compare us with other industry standards, IPC charges one-third the cost.
Matties: Some people said, “If I'm member, I should get standards for free.”
Mitchell: There are some groups that do that, but their dues are about 10-100 times what our dues are.
Matties: Have you considered a survey to see if people would pay higher dues and take free standards? They might prefer it to be inclusive rather than feel like they’re being nickel-and-dimed.
Mitchell: That's true. That's a good thought. We haven't surveyed, but we could look at that. The average association dues, depending on the size and revenue, are somewhere between $10,000 and $110,000. IPC’s are at around $1,100.
Matties: Maybe there's room for you to go up with the reduction of standard prices or making them inclusive.
Mitchell: It's definitely an interesting thought.
Matties: Because then what happens is you're really sharing the material in a way that everybody is a part of and you bring real value coupled with all of the other work.
Mitchell: That would be an interesting thing for me to really ponder. It's something that I would have to hear about from the members, as 80% of the people that are really investing the time on the standards are members. Then suddenly we would just be taking all their blood, sweat and tears and giving it away.
Matties: But only to members.
Mitchell: I guess that's true.
Matties: They're paying for it on the other side. For instance, I'm not going to pay you $1,000 for a membership, I'm going to pay you $10,000, but I'm going to get all the standards I need, all the training I need, and whatever I need is inclusive.
Mitchell: We don't provide all the training, so that would be hard to include. It is an interesting point. Let me think about it.
Matties: That was just some industry feedback. I'm sure it's not everybody, but enough that at least we heard it.
Mitchell: I'm glad you're sharing it with me because the IPC A-610 is a 400-page document with colored pages, etc. To buy that book alone, just the raw cost alone is pretty close to it. But, again, go digital, right?
Matties: I'm surprised you're not, why is that?
Mitchell: It’s the industry. If it's digital, they can't put it on the line unless they have LCD monitors everywhere, so it's a cost to them. With paper, it's there. That's really what it is. There are also digital rights management issues. If it was free to the world, it would be easier to go digital because we wouldn't care, but right now, it's not.
Matties: Those are the kinds of obstacles that can get in the way of being productive.
Mitchell: I'm going to get in trouble on this interview, I can tell you that right now [laughs]. You know, we're always open to trying to figure out what will most benefit the industry. You'll see a couple of things this coming year along those lines. It won't necessarily be standards being given away for free, but I think you're going to see some really interesting value that's not only going to affect just the traditional members, but also future members. By that, I mean the younger generation that we're trying to get more involved in the electronics industry, in the standards development and in technical education.
Matties: That’s good, because I was thinking that the IPC needs a creative mentor program.
Mitchell: We actually have one that’s about to be launched. It was introduced to the TAEC at our fall meetings. Basically, we’re taking the stalwarts of the industry and getting them assigned mentorships and they bring mentees to different committees, events, training sessions, etc.
Matties: Let's just shift gears a little. How is APEX shaping up?
Mitchell: IPC APEX EXPO 2016 is shaping up well. We're in Las Vegas this year and excited about that. We're actually in the convention center, which is a little different for us. Mandalay Bay has a great group over there, but they expanded their facilities and unless you can fill it, that’s an issue. We don't even fill the San Diego Convention Center. After this year, we'll be back in San Diego in 2017.
Matties: Two years in San Diego or just one?
Mitchell: Maybe up to six years; we'll be in San Diego for a while.
Matties: People really like that venue.
Mitchell: It does seem to be very good. It's kind of split. San Diego allows us a lot of drive-in traffic because so much of the industry is there in Southern California. Vegas has a lot of international appeal, while it's viewed as a boondoggle in the states, even if it's not. So we contend with that a little bit. On the flip-side, we get a lot of international people because they like Vegas.
Matties: What’s coming next year that you can talk about?
Mitchell: There are three things that will be going on in 2016 for IPC. First, as I alluded to, we are going to be expanding in Europe. You're going to see a lot more focus there. We have more than 530 members in Europe already and we need to better serve them. There's an opportunity to grow that market and meet the needs there, so you're going to see European expansion as one of our primary focuses in 2016.
Secondarily, and I didn't talk much about this at all, is online training. We have our multimedia group that has done things like DVDs and before that VHS tapes, etc. You're going to see a whole new opportunity in what we offer, not just to our industry, but to potential industries in terms of online training. We are in the process of developing some interesting programs and collaborating with various groups. Think Kahn Academy, but for our type of industry.
The third thing is we are redoing our IT infrastructure internally to try to better improve our serviceability to the members. Right now, we take purchase orders, but it's a completely manual process. You can't enter it yourself, so that's something that we're trying to fix so when people want to work with IPC, it's as easy as working with Amazon or anywhere else. So we're making some investment there to better improve our systems.
Matties: Great. Thank you John, I always enjoy our conversations and it’s always interesting sitting down with you.
Mitchell: Thank you.