Article | 2016 Electronics & Electrical Equipment Outlook

Article | 2016 Electronics & Electrical Equipment Outlook
4th December 2015 Atheneum Team

What crucial trends are driving the industry?

There are many crucial trends in the electronic and electrical equipment, but there are five (5) trends that I see that will drive the industry over the next few years.

Continued Growth in Connecting of Devices (Internet of Things (IoT)): The massive growth of Internet of Things (IoT) in the connection of “things” such as personal wearables, GPS systems, home systems, sensors and cameras in cars, and tele-health, etc. will continue to grow the industry with some estimates of 50 billion connected devices or “things” by 2020.

The lower costs of devices and the ease connectivity technologies such as Near Field Communications (NFC), Bluetooth and other WiFi or RF technologies will drive further growth in the IoT industry. There will be continued opportunities in the IoT throughout market sectors especially the industrial sector.

Increased Development of Robotics: The advancement of “Mechatronics” (fusion of Electronics and Mechanics) as a skillset will further enable the use of robotics in both home and workplace. The trend is to use Robots in areas such as home, and entertainment. Also, advances in image processing, microprocessor and human simulation will lead to low level human activity applications never seen before for robots. Increased use of Robotics will continue to advance in areas like legacy systems and processes that will impact labor intensive industries, For example our factories have implemented robotics even in our low cost countries like China, Bulgaria and Mexico. The need for improved quality, repeatability and continuous improvement drives the use of automaton and robots in these low cost countries. So robots will continue to expand in different applications and different industries.

Sub-Contract Electronic Manufacturers (SCEMs) develop Hardware Accelerators: SCEMs continue to be squeezed on margins by Original Equipment Manufacturers (OEMs) and raw material suppliers. SCEMs will leverage their design, manufacturing, fulfillment services to enter the higher margin product business with select Hardware Start-ups and Mid-Sized Companies to increase margins. The access to such volume production expertise will help Hardware Start-ups accelerate product development and avoid pitfalls in the riskier and costlier hardware volume manufacturing areas. Larger and global SCEMs will provide this niche service and become robust hardware Accelerators to Electronic Hardware Start-ups and Mid-Sized organizations.

Faster Electronic Hardware Time-to-Market: The use of low cost strategies such as “Platform” Designs or low cost “Reference” Designs used by Integrated Circuit (IC) manufacturers, Design companies or SCEMs will yield faster Time-to-Market for Electronic Hardware products. Platform Design will become more popular with SCEMs. The SCEM develops a design that is 75% to 80% complete and Electronic Hardware Product providers or OEMs will customize the rest, reducing time-to-market and overall design and development costs. In return the OEMs will sub-contract the manufacturing of their product with the SCEM (providing the Platform Design) for a “win-win” situation. The lower development costs and faster time-to-market will be too hard for OEMs to resist and therefore increase the use of platform design model. We have interviewed some of the IC manufacturers and they have explained the need to get a competitive advantage through Platform designs to their customers. As opposed to selling a chip to their customers, they offer a solution with improved time-to-market with their Platform design, therefore their customers are able to customized their product based on their market needs. Tremendous resources are being deployed to capture new markets through the platform business model.

Regionalization of Electronics Manufacturing: The requirements for faster, nimbler and more flexible supply chains in order to respond to local markets has created a wave of global regionalization manufacturing strategies among Electronic OEMs. During the late 1990s, and beginning of the 21st century, most OEMs migrated to China for lower cost Electronic Manufacturing. Market changes such as increased Chinese labor, Logistics Costs, Foreign Exchange & Intellectual Property Risks, together with the increased need to respond faster to local markets has forced OEMs regionalize their supply chains. Currently we are seeing a wave of OEMs regionalize their supply chains, especially for bulky, or complex, capital electronic and electrical equipment. Our customers are telling us that they must react faster to market needs or their competitors will “beat them to the punch” and take business away from them, so speed and flexibility are a major area of change driving end customer demand. For example, some of our customers are restructuring manufacturing, such North America manufacturing for North American consumption, or Chinese manufacturing for China Consumption, Europe manufacturing for European consumption and so on throughout the world. Even though there are some products that will not be regionalized such as smaller, or less complex products, I see the regionalization wave continue over the next few years.

What market segments will experience the most growth and why?

Automotive Electronics Segment: More than 70% of the automotive innovations are coming from electronics and software industry. There will be continued innovations in the areas of Telematics in cars. Car systems that provide driver assistance such as semi-autonomous driving aids for parallel parking, lane assisting, collision prevention systems, sensor-based reporting on maintenance. The term ADAS (Advanced Driving Assistance Systems) for car will develop camera technology for 360 degree view and sensor access on various car models. The myth for driverless cars will continue to diminish, as automobiles will become smarter and safer with these ADAS systems. Forms of ADAS will continue to expand to heavy truck and industrial trailers and into farm equipment. Automotive Infotainment systems will integrate with ADAS and consumer mobile technologies. The automobile is poised for more innovation for both the driver and passenger experience.

IoT in the Industrial Segment: As mentioned in the previous discussion, IoT will continue to grow in the consumer or personal wearables, but the area you will see a larger growth is in the Industrial Segment. The Industrial segment is currently underserved in the IoT and will see increased growth. Industrial IoT impacts the need to monitor, sense, control manufacturing and the supply chain beyond the four walls of the factory. The requirement will drive increased use of sensors, cameras, robotics, interconnected machines, traceability of both raw materials and finished goods throughout the world.

The Industrial IoT will not stop in the application for manufacturing and supply chain. Also, Industrial IoT will apply to the fusion between mobile technology and “specialty” industries such as Military, Aerospace, Medical technologies. The increased miniaturization and reduced pricing of electronics will continue to make it easier create opportunities where remote diagnostics and control of devices will continue to improve in these specialty industries.
As a by-product, the Industrial IoT will need to manage, analyze, and store data in larger quantities. So the markets involving IoT for industrial Segment will impact other market segments such as data storage, data security, data analytics and increased expertise of human resourcesto manage these large data volumes being created.

What are the key challenges?

Internet Security: One of the biggest challenges, as the world becomes more connected, is the ability to protect data. Internet Hackers have become more sophisticated and can penetrate the most sophisticated networks. Continued development of strategies, expertise and defensive tools to protect internet networks will be one of our biggest challenges. The increased threat of terrorism across the world will test our data security systems more than ever before. Along with internet and data security come other challenges such as the ability to train, keep and maintain loyalty of human resources across an enterprise. So the continued advancing of security systems, people and tools will be a key challenge as we enter this new world of sophisticated cyber wars and terrorism against both organizations and governments.

Hardware Intellectual Property Protection: In the Electronics Product area, the need to protect intellectual property is of outmost importance. One of the biggest challenges is to continue to improve systems and processes to protect intellectual product property in the Electronics manufacturing environment. In my company (a SCEM), we take exceptional care and training of our employees in the protecting, processing and maintaining customer drawings, electronic files, and specifications. As more product data becomes stored electronically, the protection of such data will be imperative.

Overall, there are many opportunities, but challenges exist as we develop interconnected technologies across an enterprise. The Electronics and Electrical equipment is in a verge of exponential change and potential disruptive technologies in the next 2-3 years. I look forward to the continued changes and challenges, for I am sure it will be fun.