AOI and AXI business contracts, machines improve
Agilent Technologies may have exited the automated optical and x-ray inspection businesses, but other vendors say their businesses are healthy, and they are committed to their product roadmaps.
By Ann R. Thryft, Contributing Technical Editor -- Test & Measurement World, 6/1/2009 2:00:00 AM
After Agilent Technologies announced in February that it would leave the AOI (automated optical inspection) and AXI (automated x-ray inspection) equipment markets, other manufacturers made related announcements. Orbotech said in its fourth quarter statement that it had signed an agreement to sell its assembled PCB (printed-circuit board) business in Europe and the Americas, but planned to continue supporting and servicing its assembled PCB installed base in the Asia-Pacific region. The company continues to make AOI equipment for bare-board PCBs, flat-panel displays, and IC substrates. Meanwhile, Machine Vision Products and Viscom each issued press releases stating that their respective AOI businesses were healthy and that each was committed to its product roadmap.
Whether Agilent's and Orbotech's actions represent the start of a wave of AOI industry contraction and consolidation remains to be seen. Omron Electronics' AOI business unit manager Chris Speck said his company hasn't seen any consolidation yet, since each equipment manufacturer has a different, proprietary technology for AOI or AXI, and they don't cross over well from one manufacturer to another. "Companies that aren't as well capitalized as others might exit the market, as well as those for whom AOI is not a key product," he said. "AOI is one of Omron's key global product lines, and we have been investing heavily in this technology."
Other large companies might also sell off their AOI capabilities, especially if it's in a small division, said Jean-Yves Gomez, CEO of ViTechnology. "Since everyone has a different AOI technology, I don't believe there will be consolidation by technology," he said. “But there might be consolidation for the purpose of buying market share, that is, buying another company's customers."
Whether consolidation occurs will depend in part on how long a recovery takes, as well as other factors, said Carsten Salewski, CEO of Viscom. "For example, Viscom is one of the few AOI/AXI companies that is not part of a large group, [and] we are dedicated to test and inspection, most of it in electronics," he said. "As one of the market leaders, we are in a strong position, both technologically and financially, to continue with our long-term strategy." Salewski said he would expect to see more consolidation, and that "there will be fewer companies at the end of all this. The transformation of the market on the supplier side is not over yet."
When Agilent made its announcement, the company cited commoditization in optical inspection products and the consequent lower ASPs (average selling prices), along with the large number of players, as major challenges affecting its decision. Not only is the market fragmented, but engineers use AOI technology for a variety of purposes, said Gomez. Some use AOI simply to make a "go/no-go" decision, labeling a board either OK or not OK. "They want more automation to avoid a lot of time programming, so they log known-good board information into the machine," he said.
Others use AOI to improve productivity and fine-tune production. Explained Gomez, "These customers need a high level of programmability to program parameters so they can find very small defects to improve the process. These machines are all called AOI, yet they are not the same product."
Most manufacturers agree that system prices have come down over the past few years, but they have different takes on why that has occurred. "The basis for founding YESTech in 2002 was the recognition that the inspection market and the technology—meaning, digital camera technology, and the processing power in the PC—is maturing and becoming more commoditized, and hence bringing down ASPs," said Don Miller, YESTech's CEO and president. There will still be IP (intellectual property) involved and differences among competitors, he said. "But in general, the market is offering more value and there are pricing pressures evident more so now than ever, especially in today's market. This is a natural evolution."
The key is to offer technology that addresses the ever-changing requirements of the market, said Miller. "In other words, to evolve and adapt and upgrade your product offering in response to the advancements in the technology that you are trying to inspect. This is the reason for adopting the commoditization instead of hiding from it. In this industry, if you are locked into IP from even just five years ago, you're not moving fast enough to keep up. For customers, the benefit is they are getting more capability for a lower price, and a quicker return on investment."
Salewski said it's important to differentiate between lower-end image-comparison AOI systems versus higher-end algorithm-based AOI systems. The first type "learn" from known-good samples and traditionally are simpler to program. But over time, it becomes less easy to change the program because the database of known-good samples originating in normal process variations continues to increase. In addition, since there's a greater variation of good images, the probability of missing real defects becomes higher.
The second type of AOI system consists of high-end machines commonly used for a zero-defect strategy in medical, military, automotive, and industrial applications, and consequently, they require more sophisticated programming. "Algorithm-based AOI systems are perceived as requiring a longer learning curve to program and operate," said Salewski. "But the long-term results are that you always know not just whether an item has been classified good or bad, but why." At the high end, Viscom looks at the cost of its product and reduces it where possible, "but we don't compromise on the results," he said. "For us, it doesn't matter whether the technology used is optical or x-ray because we combine them. In our combined AOI/AXI approach, we have been very price sensitive."
Not everyone in the industry agrees that products are becoming more commoditized. "I don't think AOI equipment is becoming a commodity product, since it's much too high tech," said Speck of Omron. "Companies are not manufacturing these products any cheaper than they were a year or two ago. However, the ASPs of the base equipment have clearly come down as a result of AOI companies attempting to gain market share by reducing their profit margins."
"We do not feel a $100,000 [US] AOI system is a commodity, much less a $500,000 x-ray machine," said Jim Lin, VP of sales and marketing for TRI. "These are major investments by our customers and we treat them as such. However, TRI is a Taiwanese company, and we have always been very close to Taiwanese OEM and EMS [electronics manufacturing service] companies, which are very cost-conscious."
These customers were looking for alternatives to the premium prices that some other AOI manufacturers were charging. Therefore, Lin said, TRI's business model from the beginning was to be very cost-effective. "ASPs do come down on the same model, perhaps 5% per year. But we get that back by introducing new models with more advanced features. From the customer's point of view, they keep paying the same price and get better value."
AOI is becoming very commoditized only for those who want a go/no-go machine, where there's a lot of price pressure and competition on specifications, said Gomez. But other customers want to improve their processes, fine-tune parameters, understand what's wrong in the production line, and get warnings when a process has drifted so they can react before a process's limits are reached. "To meet these customers' needs, give them higher ROI [return on investment], and create added value," said Gomez, "vendors need to continually create new hardware and new algorithms, so these vendors suffer somewhat less from price pressure."
Several manufacturers agree that, given the current business climate, it's likely more vendors will leave the business and some consolidation may occur. Others, such as Viscom's Salewski, believe that some recovery in the PCB assembly business could come as early as next year. "Meanwhile, if a smaller EMS goes out of business, there will likely be products that must be produced anyway, so that piece of business may get picked up by someone else," he said.
AOI and AXI machines continue to improve, driven in part by changes in the technologies they inspect. Gomez said that 3-D is becoming important in AOI for both semiconductor and PCB inspection. "With BGA [ball-grid array] components, you need to be sure that all solder balls have the right shape for correct solder reflow, and 3-D inspection can give good information on that shape."
Salewski added that interfacing with SPC (statistical process control), which is enabled by software, is a growing requirement.
"Agilent was the king of x-ray inspection technology, and now that they have left the market, it's not clear where this technology is headed," said Lin of TRI. "X-ray technology is pushed forward by customer requirements, such as the increase in dense IC packages like system-in-package, ball-grid array, and quad flat pack."
Lin said that, in the future, high-density interconnect boards and embedded passive components will become more popular, and equipment manufacturers will have to adjust to these new technologies. "3-D in-line x-ray inspection systems will be a big part of the answer to these challenges for our customers in the data communications, telecommunications, and automotive industries."
For More Information:
"Agilent Exits AOI and AXI Business—Frequently Asked Questions," www.agilent.com/find/inspection.
"MachineVision Products, Inc., Celebrates its 15th Year of Continuous Service to the AOI Industry," www.visionpro.com/website/MVP_News.html#anan021409.
"Orbotech Announces Fourth Quarter and Full Year Results for 2008," www.orbotech.com/Eng/D3_Article/MenuId/527/Id/98/.
"Viscom concentrates its focus on 2-D and 3-D AOI, SPI and AXI," www.viscom.com/en/pm_view.php?cc=enus&press_id=145&pid=
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