AT&S (CHINA) CO. LTD
AT&S (CHINA) CO. LTD
Success is in the detail
Keywords: AT&S, China
During a conversation with Willi Dörflinger, the AT&S Chairman(Plate 1), you discover that barely one week back the company was awarded qualification to TS16949. During a tour of the 12,500 m2 plant with Paul Barlow, Operational Director, you understand why it was that the European ISO team, who came expressly to China for the vigorous examination, left with the words "Congratulations, you've passed, and companies don't come any better than yours".
Plate 1 The AT&S Chairman, Willi Dörflinger
What is difficult to begin to understand is the enormity of the work undertaken by those tasked with the creation of this PCB plant that lies on the south-western side of the city of Shanghai. For those in the West who still believe that environmental legislation is an exclusive obsession of Brussels, or the EPA, the regional government of Shanghai is about to introduce legislation that makes ISO14001 look like a picnic. To that requirement add in the factor that in this city the temperatures in summer can ascend to 42°C with 100 percent humidity, and in the winter they can fall to well below freezing, and you may catch a glimpse of the brief given to the designers. It is no surprise therefore that, as a part of the Paul Barlow tour, you are taken up onto the inside roof of the building to see the climate control systems, the solvent scrubbers, the hepa filters for the Class 1000 and Class 10,000 rooms, the air recycling systems, in a room the length of a destroyer and as clean as a wardroom therein.
Time did not permit a visit to the basement, where we might have seen equally impressive waste and water treatment plant of a sophistication such that the water being discharged from AT&S is a lot purer than that which is piped in from the local supply. But we had no reason to doubt that this was so.
AT&S have a strategy to grow their business over the next 2-3 years such that 50 percent of their production will be for telecom, 25 percent for automotive and 25 percent for industrial applications including medical and military demand. In March 2004 they are producing 1800 18×24 in. panels per day working 24/7. With the installation of their third production line this will rise to between 2700 and 3000 ppd by December 2004, and the possibility of a fourth line is under much discussion.
Paul Barlow oversees a PCB manufacturing process that is pure microvia HDI. Küttler is the butler, yield is the key and 95 percent is the figure. Yes, labour is cheap, but manual handling is out of the question; pairs of eyes for 100 percent inspection yes, for AOI and for verification yes, but otherwise it is emphatically hands-off. Working with three panel sizes helps, of course, but after that it is down to the selection of equipment and chemistry to do the job. Experience at Leoben on the manufacture of HDI boards was the benchmark for what happens in Shanghai, and apart from some equipment which came over from the Augsburg plant, all that you see in Jin Du road has been selected as supremely fit for purpose.
The inner layer process marks the beginning of the line. AT&S have three suppliers of laminate, one of them indigenous. Given the extremely tight control over temperature and humidity you know that when Paul Barlow says that he has no problems with artwork film stability then he is speaking from experience. If you can get LDI to work for solder mask, he says, then that would be wonderful, but as for anything else, it is too expensive as a process. After laminate cleaning,inner layers runs through an enclosed area where the imaging and DES process takes place. The riveting of the inner layers is done on a Print Process AG line from Switzerland, and the vast 4×8-daylight fully automated multilayer press system is a Lauffer masterpiece in blue. It is that attention to detail again, but the press plates are cleaned and handled and stacked with the care that reflects the understanding that one small defect in any one of them can ruin a press stack.
The edge trimming line after lay-up is preceded by a tooling three-hole drilling system, and with all edges trimmed the boards are corner-bevelled with one corner (TRH) being double-scooped to provide recognition to the Küttlers– wrong way round or upside down and it is out you go.
The mechanical drill shop is Schmoll, six or five-spindle machines, they drill a lot of holes here at AT&S, a lot; 50,000 per panel minimal. That is HDI for you, so Hitachi CO2 lasers do the small ones, the eight two-beam machines ablating some 92,000 holes in about 3 min. With the advent of two laser layers, a further eight machines are planned. Only panel plating is needed for HDI, so after desmear it is off to the Atotech Uniplate horizontal plating lines for some additive copper, 25 μm in the holes and some 30 μm on the tracks. Tracks and gaps of 75 μm are a norm here. Primary imaging is a dry film operation, double- sided fully automated exposure from Hakuto with four-camera registration, D/E/S is from Schmid and drying ovens everywhere from grow-up in Taiwan. LPISM is aqueous-developing Probimer 77, on a double-sided curtain coater, and the processing is fully automated, including exposure on a double-sided ORC with glass-mounted artwork and four-camera registration. Metal finishing is either ENIG on a PAL line or an OSP finish depending upon specification.
AOI is mostly Orbotech, although a Camtek Dragon system is being assessed. AOT is a Luther and Maelzer operation and final inspection is done by rows of dedicated young ladies who miss nothing. Paul added that their customers in China are extremely demanding, just the slightest blemish, cosmetic or otherwise, and no, thank you very much.
On the way out you pass pallets of shrunk- wrapped new equipment awaiting installation, forming part of the third production line. Paul says that he was not involved with the original plans for the factory layout, if he had been he might have made it slightly more compact, but, he added, looking over the acres of highly polished and spotlessly clean floors, at least now space is not at a premium. At the present estimated 10 percent CAGR they will need it.
What was it that was missing from this tour? There was something, something that most board shops have. Ah yes, that is it – smell. There is not any. There is not any from the wet processing lines, because all the chemistry is below ground. There are no leaks, no pools of water. There is not any from the solder mask line, because it is all extracted, to be scrubbed until the molecules shine, and the heat reused where heat is required. There is not any green paint on the machine, or on the floor, because the housekeeping is so tight. It is that attention to detail again, but anything remotely photomech is in a Class 1,000 or Class 10,000 room, so for much of the tour your peer through double-glazing into a squeaky-clean-room world of white-suited people looking at monitors, and handling nothing at all. No smell, no dirt, just 95 percent yield and 100 percent quality.
Willi Dörflinger tells us about where it all began.
AT&S were asked to come to China by their customers, but this essentially strategic move was a e120 million investment for the company. AT&S put in about 30 percent of the capital from their own reserves, bolstered by an IPO in 1999, plus a loan from the bank; it helped enormously that, as a group, they remained profitable right through the recent recession.
"We will have an Ebit close to 10 percent for the financial year, we had good growth last year of some 16 percent". So how do you maintain growth when all about you are contracting? "Ah, that's a secret", laughed Dörflinger, but he added it is no secret that as a technology driven, customer orientated company they had formed strong partnerships with their customers, customers such as Nokia and Siemens, over the last 10 years, and this had been most helpful."We have joint R&D projects with our customers, we have joint cost reduction programmes together, and we get to know somewhat earlier than our competitors what is going on on the technology side, so we can prepare ourselves accordingly". They also employ what Dörflinger proudly describes as highly competent and flexible people who helped the company through the changes to their working time; if the volumes were low, they stayed at home, when the company got busy again they came back, even on to overtime.
AT&S were profitable here 6 months after opening for business in Shanghai, "Yes" said Dörflinger, "We prepared well, we had about one hundred Chinese engineers training for up to eighteen months in Austria, plus we had a lot of experts in China, installing machines. In fact we still have twenty-two of them here working in production, we will keep them as long as we can".
"One of the lessons we learned in India was that if you ramp up to full production and then send them home, you're in trouble. The local working ethos tends to predominate, and that is different to ours. You have to gauge the culture, and keep your own people as long as you can. We found some very good people here in China".
"We did not expect such a short return on capital, we started production in December 2002, by June 2003 we were profitable, and we still had not installed all the equipment, in fact only some 60 percent was installed by then, so being profitable on that basis was very good for us. Now we are installing the third line, which will be finished in the next 2-3 weeks, and then from June/July this year we will have our designed capacity. Now we are thinking about installing a fourth line here".
Would further capacity be in Shanghai, or elsewhere in China? "In Shanghai",answered Dörflinger, "Yes, you can go outside Shanghai, where it is cheaper, but there is no infrastructure, and you are far from the universities from where many of the skilled people can be drawn. Also, for your expert expats you need to have local kindergartens, the international schools, plus the social life of a city. In fact, one of our problems here is that our expats do not want to go home! Austrians are not normally very "mobile" but some of those who came with us to Shanghai have married local women and are therefore to stay,others are reluctant to go back".
AT&S have a plot of 120,000 m2 in Jin Du Road (Plate 2), and there they can stay for the foreseeable future, with maybe a second plant, or a third plant on the same land, where they can use the same synergies. "That way,you can double or triple your capacity with only an 8 percent increase in cost on your overheads. This makes you competitive".
Plate 2 The AT&S Shanghai plant
"We are also", he added, "expanding our plant in India to meet demand there,by the end of April, or early May, we will have increased production from 150,000 m2 a year to 230,000 m2 of PCB per annum. We are happy in Mysore, it is good to be down in the south of that country, and we are No.1 in India, and we have the technology there. There too we can form strategic partnerships with our customers".
Surely the employment of a well-educated hard-working Chinese labour force has helped? "Definitely, you know all the production figures here are comparable with the figures we have in Austria, they have learnt so quickly, The only problem you have in China is the turnover of staff on the shop floor. There is not the "loyalty" or commitment that one is used to seeing in the West; here we have a turnover figure of some 15-20 percent. But we are now beginning a programme of training that will underline a career path with the company, and give the people a better sense of direction that they can follow. Bear in mind,though, that some people we have to let go, they are unsuitable, and given that in this area there are high-tech. companies with a staff turnover of 30 percent,then we are below the average".
Given their location in Shanghai, have there been any supply chain problems?"None at all", replied Dörflinger, "once you understand the culture here then it is OK. Bureaucracy is a pitfall, but our suppliers are our partners;only this week we have been talking to Hitachi about just this matter, companies such as Isola and Matsushita, who supply our essential core materials, are our partners. Having such relationships is vital, you know where you stand when priorities are being allocated".
Discussion moved to the customer base. "We are producing in China mainly for the China market, as well as for international customers such as Siemens, Nokia,and we have some nice business here with Sony Ericsson, Motorola, and some indigenous companies such as Putian, Microcell. In the last 12 months we have had no less than 14 audits from customers, and everything was perfect. Having TS16949 is essential, it is the highest level on quality, and will displace ISO9000. If you want to supply the automotive market you have to have this. It was tough work getting it, but we did!"
In 2003/2004 AT&S will have produced about 20 million PCBs for cellular'phones. Given that demand for mobile 'phones in China is running at some 5 million per month, you can see how the market might evolve, and it is interesting to hear Herr Dörflinger mention that more and more of his customers are now focusing their attention on the market for mobile 'phones in India. India has a population of more than 1 billion people and only 24 million'phone users. "If only one third of that market is realised then it is bigger than the whole of Europe".
Dörflinger is bullish on the subject of partnerships. It was Siemens, he said, that repeatedly requested AT&S to go to China, to maintain a strategic partnership. It was Siemens who, once AT&S arrived, supported them, who loaded them, who was a good and fair partner. It was Siemens who now work with AT&S on R&D projects, on new technologies, and it was Siemens who gave all possible help when production was getting under way. It is a two-way arrangement, where both sides give more than they take. That arrangement works.
Given the achievement of their planned growth and market sector orientation,AT&S Group is looking at revenues of Euro 500,000,000, and, in the next decade Euro 1 billion, but to do this they have to make some acquisition. They are looking at North America, South America, and the former Eastern Bloc. "That"he says "is an enormous market and in some area the labour costs are cheaper than in China, areas such as the Ukraine, and Bulgaria. The future might well be there". They have been looking at the North America to find a suitable company,so far unsuccessfully. But they do not want a "turnaround" company, Dörflinger is adamant that "even a turnaround company, which is free of charge, could be too expensive for us, we do not have the management base to turn it around. If the right company does exist it is probably one of our competitors!"
"The market is growing very steadily at the moment; we are running at 100 percent capacity". How about prices? "Yes, some of our suppliers are pushing these up, and we find that when we talk about this to our customers they have some trouble understanding. We certainly don't understand some of the pricing that is around, especially from some of our competitors". One thing AT&S will never be is a low-price company; they talk all the time about total cost,about the return on the premium paid for partnership. "There have to be benefits for both sides, or it makes no sense. I should add that European and international companies understand value-added concept better than the Chinese,but the Chinese are learning!"
What is the underlying philosophy at AT&S (China) Co. Ltd? Dörflinger thought for a moment. "We stand for technology, that's the first focus we have,we don't want to be arrogant, but in both China and Europe we are technology leaders. We are looking at embedded components, at waveguides, we spend a lot of money on R&D to keep ahead, and we have to lead on quality, on service, and on total cost. We strongly believe in winning and keeping the trust of our customers, if they know that we are content with 3 percent profit in the long term, and 15 percent short term, they have confidence in us in all regards".
It is not just what you see at AT&S, it is what you get.
Not the cheapest, just the best.
