'Lights on' manufacturing: if you come, they can build it. Is Endicott Interconnect America's best manufacturer?

Tucked away amid modest mountains and intersected by the Susquehanna River in upstate New York lies Broome County. Rocked to its core by the 2001-02 downturn and the resulting layoffs of thousands of manufacturing jobs, the region today is witness to a historic renaissance. In Owego, Lockheed Martin Systems Integration is booming. The University of New York at Binghamton is flush with grants, having recently won a $14 million award from the U.S. Display Consortium. In Johnson City, BAE Systems is taking full advantage of the run-up in demand for military electronics.

Over in Endicott is the cradle of IBM. It's not often one gets to see the past and future in a single view. Yet that's the scene today at the sprawling, 43-building campus of Endicott Interconnect Technologies.

This month, CIRCUITS ASSEMBLY takes you inside the massive complex, where everything from bare boards to assemblies to chip packages are being designed, developed and built. The story that unfolds is of a unique American company, one still in transition, but with prospects that were hard to imagine just a couple years ago.

On the Rollercoaster

Endicott is part of Greater Binghamton, also known as the self-styled "carousel capital of the world." However, since its divestiture from IBM, the company has been on something more akin to a roller-coaster ride. Taking flight in November 2002, a group of investors along with James (Jay) McNamara Jr. parlayed outside investments and $4 million in state funds to acquire the campus, equipment, certain IP and roughly 1,900 employees--a deal then valued at some $100 million.

Instantly, the company was unique: a manufacturer that looked and acted like a traditional OEM, only without the branded product set. Critics claimed the model would never work, that the efficiencies of outsourcing, especially in low-cost regions, would overwhelm the high-cost footprint of a dedicated North American company, and that once its supply deals with IBM ended, so would Endicott Interconnect.

Immediately, the critics appeared right. Once one of the largest producers of substrates in the country, it saw sales decline from an estimated $450 million in 2000 (1) to about $100 million in 2005, (2) according to Dr. Hayao Nakahara of N.T. Information. Fiercely cutting costs, staff was reduced to 1,500.

But something funny happened on the way to bankruptcy. EI, traditionally a builder of high-end computers, shifted gears. The aftermath of 9/11 brought with it huge sums of investment in national defense and security. Recognizing the impending buildup, the company repositioned itself. It began speaking at military electronics seminars, exhibiting at homeland security expos, and working toward gaining military supplier certifications. It teamed with ENSCO Inc. to build SureScan, a high-speed explosive detection system.

Simultaneously, EI ramped up its quality and reliability expertise and applied it to the medical sector, noting the sector's tendency toward high margins and lower volumes made it a good fit for EI's onshore capabilities and sterling reputation. The company implicitly recognized that, while in one sense a contractor, its strength lies in engineering and offering a vertical integrated solution unlike the Celesticas and Sanminas of the world.

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The company pursued a two-part strategy. In North America, it would focus on NPI programs and produce low-volume, high-mix, high-technology assemblies and IC packages, and offer a one-stop shop for everything from design to sheet metal to laminate to assembly of the most sophisticated electronics available. In China, it would crank out high volumes of semiconductor packages, PCBs and assemblies. Some of this would be accomplished through partnerships. Where feasible, EI would license its patented technology. Most of all, it would end its reliance on IT.

The goal: drive revenue from $170 million in 2003 to $670 million in 2009, an almost 300% increase over six years.

The strategy has thus far worked.

On our last visit, in November, the Endicott factory was flush with activity, and employees remarked how capacity just hasn't been able to keep up with demand. Sales last year: about $230 million. And whereas IT and telecom sales made up 85% of revenue in 2003, it was less than 50% last year, while test equipment rose from nonexistent to 10% and defense and aerospace spiked 24 points to 25%.

An R & D Machine

While many complain that American manufacturing has left R & D to others, EI has made its presence felt. In 2004, it was part of a consortium of New York companies that received NIST funding. The next year it scored again when the U.S. Display Consortium selected EI to host the Center for Advanced Microelectronics Manufacturing (CAMM). Funds from the initial $10 million grant went toward equipment that would help speed microelectronics manufacturing R & D in a roll-to-roll format. In December, it chalked up its 28th U.S. patent since going independent. Applications for dozens of others are pending. Today, EI says it spends 4 to 5% of sales on R & D.

Technology development is where EI will likely make its future mark. Three key patents are in the chip packaging realm. One is for the HyperBGA coreless flip chip, which permits die to operate at speeds above 12 Gb/s. Another is the CoreEZ build-up package. Based on the HyperBGA platform, CoreEZ uses stack vias and is a lower-cost way to maximize the number of signal layers.

An aggressive technology roadmap calls for integrating assemblies and substrates in single package in the near-term, followed by nano-level integrated packaging starting around 2015.

Walking the maze of factories takes more than a day--and a good guide. Spread across multiple floors and curled around structural columns, the assembly portion encompasses five lines: three SMT and two flip-chip/system-in-package. Two new Universal big board Genesis lines are being put in this month. Much of the equipment is Speedline: Accela and UP printers, an Electrovert Pb-free wave, a Camelot Matrixx for BGA balling. Vitronics XPM2 and Heller 900W ovens are used for reflow. Its big board line features an MPM Ultraflex big board printer, GSI Lumonics SVS solder paste inspection system, Universal Genesis placement and a Heller oven. The maximum thickness it can build is over 0.400". Inspection includes a Phoenix X-Ray Argos system and Agilent SJ50 AOIs.

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Process control is taken very seriously. EI measures the solder volume on every BGA and flip chip site it prints on every board it assembles. First-pass yield at ICT is 95 to 98%, depending on the product, claims Steve Howland, product manager, complex assembly operations. SPI is key, he says, because x-ray "is not process control. It's a great tool for auditing a process or unlayering a problem. But x-ray or test is just sorting, not process control."

A program of 200 pieces a week would be high volume for the plant. For bigger jobs, EI leases space to run a line inside a factory in Shenzhen. However, it is felt Endicott will remain the front-end NPI center, and product will never be sent directly to China.

Endicott is an engineer's paradise. A typical job would be the complete build of a government computing system, starting with laminate manufacture, component module asembly, board fabrication, board assembly, subsystem integration and execution. One of the projects we saw included a part that involved compressing dozens of SMT connectors by 0.020" during reflow (and designing a fixture to accomplish that) for an 8-lb, 2 ft. square board. Another involved assembling very big board with 100 BGA components on two "levels"--one raised some 0.125" above the other.

Howland darts with excitement from rack to rack, searching for sample boards to show off. He doesn't have to look long. "Before we were EI," he explains, "we developed all the BGA, flip chip and wirebond processes for IBM. Now we take that know-how and move it from big boards to small boards and back again."

Business is good and it shows. EI's assembly operations added 80 manufacturing operators in 2006--an increase of nearly 67%--plus 11 process engineers and program managers. (Company-wide, more than 300 operators and 25 engineers, program managers, and contract administrators were added last year.) While walking the floors and building, it's impossible to miss the number of employees scurrying about. Howland smiles. "This is not 'lights-out' manufacturing. It's very engineering intensive."

Growth in Packaging

What makes EI unique among manufacturers is the breadth of its products, of which assemblies are just one (albeit the largest) component. Only Hitachi, Matsushita and Nanya spring to mind as companies that still make laminates in volume for internal use, plus fabricate boards and semiconductor packages. While we didn't see it during our two visits to Endicott, EI also has a full-fledged shop where it builds custom products and process equipment.

Not all areas are growing equally. PCB revenues are diminishing, as offshore competition grows fiercer and more capable. EI now focuses on high-layer count (40 layers or more) boards and backplanes. The board shop is ITAR compliant and has its MIL-PRF-31032 registration.

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The packaging side has been a huge success. Technical project manager Cheryl Palomaki handles process development for the semiconductor products, including its core HyperBGA platform. She says HyperBGA production was up fourfold in 2006. El's semi packages use a copper-invar-copper material, which enhances the CTE, and a Rogers silica-filled PTFE. The Teflon is fuse-bonded (not glued) with a force of 2500 psi at 320[degrees]C. EI uses a six-step sequential build process: laminate, circuitize, laminate, circuitize, drill, add resin-coated copper foil (from Asahi) and laminate, and drill again. The packages are laminated in a Class 1000 layup room using high-temperature electric presses, plated in acid copper plating on a Rohm and Haas line modified to perform knife-edge agitation, and imaged with an electrodeposited positive resist in a Class 10,000 cleanroom. (For an in-depth explanation of EI's substrate and package development, including its elegant via fill process, see "Endicott Interconnect: Filling the Gap," at pcdandm.com this month.)

HyperBGA is engineered with a CTE of 11 (a typical package's CTE would be 20 to 24), which is closer to that of the board. Minimizing the CTE differential significantly reduces the stress on chips and solder joints and improves reliability, Palomaki says, citing EI research (3).

Despite the large campus, the packaging factory is operating at capacity. That, coupled with the sense that packaging would be a major growth area, has led EI to look outside. Last March, the company signed a deal under which it would outsource some high-volume CoreEZ package production to Shanghai Meadville, a subsidiary of Hong Kong-based Oriental Printed Circuits (OPC). Deals are also in place to build bare boards in Hong Kong and Dongguang, and as aforementioned, the assemblies in Shenzhen. In an interview, McNamara alluded to other possible ventures ahead.

Is Endicott Interconnect Technologies' the best electronics manufacturer in the U.S. today? Based on its vast engineering know-how and commitment, and the vertical nature of its business, it just might be.

For such an established company, EI has fascinating potential. Besides supplying to a litany of blue chip customers (IBM, Sun, Cisco), the company also builds product for four of the world's seven largest EMS companies. Throw in the mix of semiconductor and defense OEMs, and you have a high-level customer base that is also sufficiently diverse to weather the inevitable electronics cycles. Or as they might say in Broome County: the economic carousel ride.

References

1. Dr. Hayao Nakahara, "New Year, Same Story," PC FAB, November 2000.

2. Dr. Hayao Nakahara, "The Big Get Bigger," Printed Circuit Design & Manufacture, September 2006.

3. Kim Blackwell, Thomas Kindl, Hal Lasky and Ty Youngs, "Qualification Results of HyperBGA, IBM's High Performance Flip Chip Organic BGA," 3rd Annual Semiconductor Packaging Symposium Proceedings, SemiCon West, July 2000.

Mike Buetow is editor-in-chief of CIRCUITS ASSEMBLY.