Frost: Process Changes in Manufacturing Boost Demand for Reflow Soldering Equipment
October 31, 2006 // Published as a news service by IHS
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Despite lower wages and price pressures from overseas competitors, analysts said the reflow soldering equipment market in North America has bounced back, largely due to the adoption of lead-free solder paste.
New analysis from Frost & Sullivan of the North American reflow soldering equipment market found revenues totaled $41.3M in 2005, with estimates to reach $68.1M in 2012.
According to analysts, quality has always been the mainstay of machinery manufactured in this region, and continued product enhancements have helped improve operational costs, as well as machine down time.
This, along with the transition to lead-free compatible equipment, has created resurgent sales of reflow soldering equipment.
"In a mature market like reflow soldering, significant changes can mostly be attributed to the occurrence of process changes," said Frost & Sullivan research analyst Deepa Mathew.
"Complying with the Restriction of Hazardous Substances (RoHS) guideline has created a pressing and immediate need for compatible equipment that can withstand the new process parameters, thus boosting market growth."
The new lead-free paste has higher reflow temperatures that the current equipment cannot handle. Analysts said in order to comply with the RoHS deadline of July 1, 2006, assemblers had to upgrade their equipment by investing in new reflow ovens engineered to withstand higher temperatures and have better control over the soldering process.
Analysts said a significant factor challenging the market is increased competition from "low-cost" nations, particularly from the Far East, such as China and Taiwan. Since the shift of high volume surface mount technology (SMT) assembly to these areas, local manufacturers have introduced reflow equipment. This lower-priced equipment is a hurdle, even to well-established vendors in Europe and North America.
"With outsourcing becoming a trend to reduce manufacturing costs, China and Taiwan have emerged as the major hub of large volume SMT assembly," said Mathew. "Equipment suppliers face severe price pressures from these overseas competitors and the average price of reflow equipment has fallen dramatically over the past years, owing to the threat from these low-cost countries."
Educating the customer about the cost of ownership of the equipment can contain the threat of low pricing. Analysts said rather than considering the initial investment price as the only criterion, customers should be aware of other related costs as well. In case the machine is non-functional, operational and opportunity costs can add up to a sizable sum. Machine maintenance along with power and nitrogen consumption are additional costs for the assembler.
Source: Frost & Sullivan.