So You Want to Do Business in Asia...
Many companies in electronics are moving operations to Asia with mixed results. Therefore, we spent time talking to a few in the back-end assembly side to see what precipitated their actions.
Kulicke & Soffa, a wire bonding equipment supplier, recently established a facility in Suzhou, China. Oded Lendner, vice president, K&S Operations Worldwide, says that the company made their move in July 2002 to establish a presence in a growing region to be more competitive and cost effective. Until 2000, most of the company's products were manufactured in the U.S.
"The first product we moved to our Suzhou plant was our capillary line, which was initially produced in Israel," says Lendner. "Currently, our Suzhou facility manufactures approximately 60 percent of our worldwide capillary production. We recently began production of wafer test probe cards there as well."
K&S ball bonders are assembled in Singapore, but approximately 40 percent of the major subcomponents are produced in China. Assembly of ball bonders remains in Singapore because of the expertise of local workers. Many K&S customers such as AMD, Hitachi, Fairchild, National, Carsem, Intel, Stats ChipPAC and others are just starting operations or have already established manufacturing operations in the same park.
K&S did not anticipate the rapid 25 percent turnover of young, educated, upwardly bound Chinese employees. On the other hand, they were able to ramp up production so that from July 2002 to the present, K&S has already shipped about 2 million capillaries from this facility.
A conversation with AIT, a growing SATS provider offering semiconductor assembly and test services since 1991, sounded much like the K&S experience. Worldwide headquarters for AIT are in Singapore, with two primary factory locations — the largest in Batam, Indonesia, the smaller in Sunnyvale, Calif. Bruno Guilmart, president and CEO, indicated that there were numerous reasons for being in the SATS industry. Reasons for investing in a 370,000-square-foot plant in Bantam, Indonesia offering wafer probe, wafer backgrinding, assembly, final test and drop shipment included assembly volumes of more than 120 million units per month and final test volumes of more than 72 million units a month. Duty-free Bantam offers a talented labor pool that is cost competitive. All traffic is flown through Singapore to and from Bantam. Doing business there has become easier since many other overseas companies have set up technology parks in the area.
Every indication is that this trend will continue. Labor costs are low, though turnover may be high. Having a Singapore connection has helped both companies establish production in the area.