As trade battles between the US and China heated up, Ventec USA has had a front seat.
Ventec USA president Jack Pattie talked with PCD&F editor-in-chief Mike Buetow in August on how the laminate manufacturer is coping with US tariffs, capacity constraints, and his advice for designers of short-supply materials. Excerpts.
Mike Buetow: How are the tariffs affecting Ventec at present?
Jack Pattie: One of the big effects at the beginning was the question whether the tariffs were going to be enforced and when they were going to be enforced? No one really knew, especially on the implementation of the first three tariffs. We followed the US trade representative website [ustr.gov] very closely, so we knew that there was a good chance that it was coming, but in order to fulfill our commitment to serving our customers, we still had to import material from our main factory in China. In the interim we were working on a transition of our US orders to our Taiwan factory. Fortunately, since April 2019 we are a publicly traded company in Taiwan, and we have a fully capable factory in Taiwan, but it took some time for that transition.
So, initially we imported many containers and paid the tariffs and the main reason we did that was our commitment to the North American market, in particular the US obviously, because the tariffs are just in the US. It did cost Ventec a lot of money to absorb the tariff costs and ensure continued material supply for our US customer base while we transitioned production to our Taiwan facility, but that’s all part of our long-term commitment to our customers.
MB: Were fabricators trying to order additional stock in advance of the potentially higher tariffs at the time?
JP: We didn’t really see that. The first list, for us, really included just aluminum and steel. There was minimum impact in that. The second list included prepreg, at 25%, so of course it was quite substantial, but the majority of our customers don’t have really large and robust prepreg storage areas as we do, so we didn’t see anything on list 1 or list 2. And then list 3 came which included laminate at 25%, but then at the last minute the Trump administration reduced it to 10% for a trial period of 90 days. Subsequently, most recently with the failure of the trade negotiations, they increased the third list back up to 25%.
In the second implementation of list 3, they did it a bit differently in that they actually picked the ship date instead of the import date. For the previous list, when they decided to do the implementation of the tariffs, there was a very short and if I remember correctly roughly two-week period from the time that it was decided upon and the date when the tariffs were going to hit. If you had product on the water, you had no choice but to pay the tariffs which are always due within 10 days. We went into that fully realizing that we were going to have to pay some additional tariffs in order to ensure product availability and maintain our commitment to our customers. We didn’t see a ramp-up from our customers to mitigate the tariffs by trying to bring some material in prior to this.
MB: What’s the capacity situation look like for Ventec in Taiwan right now?
JP: It’s good. We have plenty of capacity to support the US market from our Taiwan facility. We’ve been running that facility since 2011 and of course in line with all our facilities, our customers are assured by the strict quality-controlled processes there that are certified to IATF 16949:2016 and ISO 9001:2015.
MB: With 5G and related technologies eating up much of the high-speed laminates market, what advice are you giving designers and buyers working on new products today?
JP: That’s a good question. We are telling designers and OEMs not to be “locked into one type of material.” Many of the designs are hybrid buildups, meaning they are mixing one type of bond-ply with another type of core. Getting locked into a design will put them at a disadvantage if a material shortage or lead times become an issue because they have no alternative. Ventec offers the opportunity to not only match materials in a hybrid design but also provide a homogenous design for antenna designers. We recommend they spec out a slash sheet number and material properties that would allow for alternatives to be used.
MB: Just in terms of capacity, my understanding is finding the higher-speed laminates right now can be a challenge. Alun Morgan has written on this from time to time in our magazine that one of your advantages is that you have the whole chain inside of Ventec.
JP: It’s true. We are really the only laminate manufacturer that basically owns its own distribution channel in North America, the UK and Europe. That certainly is an advantage for us, especially where you’ll see prototyping in the West and production volume in the East. We are able to manage that full supply chain for the customer.
MB: Let me go back to the tariffs for a moment. Have you noticed any changes in customer buying patterns since they went into effect, or is it more of a matter of having to communicate and reassure customers that there will be material available and there will be some kind of cost containment if possible?
JP: We haven’t seen changes in buying patterns, but you must remember that the US is mostly prototypes, so a lot of our customers have had a very difficult task in forecasting. We try to look at their usage history and we can clearly see patterns, but a lot of customers don’t have the bandwidth and capability to forecast what they’re going to need in the future.
MB: To your point, multiple designers have told me they had switched suppliers because lead times had gotten too long and some OEMs have started to buy material directly and then drop-ship what they need to the fabricator.
JP: I could definitely see that, probably from the signal integrity market especially where the OEMs are a bit concerned. One of the things that we have found is, manufacturing in Taiwan is more expensive than in China. So far Ventec has been able to absorb most of that pricing. We’ve worked hard to mitigate the tariff situation for our customers in terms of material availability, lead times and keeping pricing down. Again, this is where Ventec has a clear competitive advantage because we own and fully control our distribution channel. So far, the US market has not had an appetite of absorbing all the increased costs, whether it’s the tariffs or increased costs of manufacturing. There’s not enough margin for a small company to absorb the higher costs of manufacturing or the costs of the tariffs. And remember that the tariffs and duties are due within 10 days of import, so it’s really quite a large cash flow hit for customers. That’s the other thing where Ventec was able to help customers manage their cash flow, because we have the resources available that smaller companies don’t have. We wouldn’t have done that if we weren’t committed to the market.
MB: I understand that some Chinese laminate manufacturers that produce only in China are finding ways to circumvent the tariffs, perhaps illegally. Do you know anything about that?
JP: There are always stories from all around the world of companies that try to play the system. We advise all customers to undertake due diligence to ensure their materials come from a reliable, trustworthy and fully traceable source.
MB: So, the last thing. You’ve been on move and taken Ventec with you.
JP: Well, we’ve always been in California. I’ve moved to California. [laughs] I really loved the mainly administrative Amesbury [MA] office, but was barely there, so I have moved my desk to Fullerton [CA]. The reason for that is we have a very strong and growing mil/aero business out here, and I’ve come out to oversee the factory expansion plans to move into a new building. We’re also growing our US sales and technical support team and currently have a vacancy for an OEM sales manager based out of Chicago. For the next year or two, I’ll be out here to oversee our expansion into the Southern California market. I have an apartment in Anaheim, and I’m doing two weeks out here, one week at home in Massachusetts.