Now that investors have started to realize the full potential of the "GreenJet" soldermask printer, I thought it would be helpful to apply a competitive analysis to the product. To understand why Camtek (NASDAQ:CAMT) can actually compete in the market with this product, we need to go one step further in our understanding of this market.
Current Soldermask Methods
Source: Electra's soldermask presentation.
Dry Film (also called DFSM) is a method of applying soldermask to a PCB as a laminate. Manufacturers use a vacuum laminator to apply the soldermask in a dry film form onto the PCB. After lamination, the soldermask is exposed to UV, developed, and cured.
The duration of the process can be seen in the following table, taken from the DuPont processing guide for its VACREL 8100. VACREL is a DuPont product for laminating PCBs with a dry film soldermask. Here's the process:
As you can see, it's a multi-step process. Even though the laminator itself can laminate product at an impressive rate, when you take into account all of the steps required, you come up with a process that takes more than 2.5 hours from start to finish.
Liquid Photoimageable Soldermask. This is the method of applying the soldermask in its wet form onto the PCB board. There are a few methods of applying the soldermask paint.
- Screen Print - An old method that features low productivity and is semi-manual. Irrelevant to our discussion.
- Curtain Coat - Applying the soldermask paint by moving the boards via a conveyor belt through a liquid curtain with the aim of spreading the paint evenly on the board.
- Electrostatic Spray - Spraying the liquid soldermask and giving it a negative charge. The board is given a positive charge and therefore there is an attraction between the liquid and the board, which improves the coating. Equipment is expensive.
- Air Spray - A pretty straightforward process, using a spray gun to coat the boards.
Here is a basic comparison of the different LIPSM application methods:
Source: Coated Circuit Products
LIPSM also needs to be exposed, developed, and cured. This makes both LIPSM and DFSM, multi-phase, long processes.
These are the main methods for applying soldermask these days. The most common process today is LIPSM by far.
Alignment Is a Big Deal
Laser Direct Imaging is the process of exposing the soldermask directly via a laser imaging tool. An LDI machine gets the plot of the PCB and exposes the board directly. The process can be seen in the following video. To remind you, the exposure step of the soldermask application process is when the PCB board, fully covered with a soldermask, is exposed to UV light through a photomask. The photomask "hides" certain parts of the PCB from the UV light source. Then the UV light hardens the parts of the soldermask that were exposed to it while the "hidden" parts stay dissolvable. When the PCB is placed in a developing tool, a certain chemical solution dissolves those parts. Any slight misalignment of the photomask on top of the PCB will cause alignment issues. As PCBs become more and more crowded (devices are shrinking and you need to fit more electrical components with more links on smaller and smaller boards), alignment must be as close to perfect as is possible.
The following image shows what exactly alignment errors are. The small circles you see are called pads; they need to be exposed out of the soldermask so an electrical component can be installed. As the diameter of the pads and pad spacing shrinks, alignment errors increase and the PCB manufacturer's yields decrease.
Source: Secheng LDI Soldermask white paper.
More and more PCB manufacturers utilize an LDI machine to solve those alignment issues in high-density PCBs. Orbotech (NASDAQ:ORBK) is one of the leading LDI suppliers in the world. For an example, we can look at Dyconex. Dyconex is a PCB manufacturer based in Switzerland; according to its website it has 186 employees and a manufacturing area of 6000 square meters. On October 21, Dyconex announced that it had purchased its third LDI system from Orbotech. Dyconex is moving all of its exposure jobs to direct imaging by LDI machines. An LDI machine is sold for about $1M so you can see the seriousness of alignment issues. Orbotech sells 40-35 LDI machines per quarter. Although the majority of those go to other applications than PCBs, according to an Orbotech Q1-13 conference call, the company sold 40% of its machines to users of the rigid/flex application (a segment in the PCB market). In a Q2-13 call, Orbotech said it sold 39 LDI machines, which means that they sold 15-16 LDI machines to the PCB industry. Although the majority of the LDI machines aren't used for soldermask imaging, this is more evidence that PCB manufacturers are having troubles with alignment issues, the same kind of alignment issues the GreenJet can solve.
In the Eyes of a PCB Manufacturer
Let's try to step into the shoes of a potential customer. Let's call this fictional customer, "PCB King."
Scenario 1: Opening a New PCB Manufacturing Line.
We are an average PCB manufacturer and the industry is growing. We decide to build another manufacturing line to answer increasing demand. We need to choose if we'll use a DFSM process, a LIPSM process, or the GreenJet process. For now we don't have alignment issues. Let's compare these factors:
|Employees Needed Per shift||4-5||4-5||1|
|Consumables||Dry Film||Soldermask ink||Soldermask Ink|
|Capital Costs: Equipment Only||~$2-3M||~$2-3M||$300K|
|Manufacturing area required||3000ft^2||3000ft^2||300ft^2|
"PCB King" tries to be rational. As a rational business, unless we are under some kind of exclusivity agreement to another supplier (which seems unlikely), we will choose the GreenJet.
Scenario 2: Decreasing Yields
In this scenario, imagine "PCB King" is lucky enough to have won a contract to supply high-end, high-density PCBs. Now after a few months of working this contract we have started to notice our yields are decreasing. More and more boards are tossed away because of alignment errors. We stand between two options: one, purchase an LDI system that will solve this problem; two, purchase a GreenJet and solve this problem as well.
|Solves the problem?||Yes||Yes|
|Any External Effects?||Makes the current exposure tool obsolete.||Makes the entire previous soldermask line obsolete, reduces workforce by 4-5|
Again our conclusion is that we will be better off purchasing the GreenJet instead of solely improving our exposure process with the LDI machine.
Of course these two scenarios are completely imaginary but they deliver my point. When competing against existing technologies, there are multiple incentives for a PCB manufacturer to turn to the GreenJet. This product seems to offer great value to many manufacturers.
What Kind of Producers Will Be Potential Customers?
Let's characterize the two kinds of customers:
- High volume/mass production: A PCB company that produces thousands or more boards/day.
- High mix/low volume: A PCB company that produces 100-300 boards/day.
Camtek will, without a doubt, aim the GreenJet to the second class of customers first. These customers can realize a lot more value from implementing the printer than can mass production customers. From Camtek's point of view, it looks like the low-volume customers will bring lower-than-average ink revenues. There are a few hundred producers that can fit in the second class around the world, most of which are in the Western world. To give two examples of such potential customers, I'll suggest looking at Dyconex and Eltek (NASDAQ:ELTK).
I think operations like the one of Eltek are the ones that will benefit the most from using the GreenJet in its current configuration. There are hundreds of Elteks and Dyconexs around the world (although concentrated mainly in the Western part of the world).
After the GreenJet will have established itself with the high-mix/low-volume producers, it will try to penetrate the high-volume market. The low-volume customers are less sensitive to ink prices, so Camtek will enjoy better pricing/lower volume with the first customers and then slowly move to lower pricing/higher volumes.
In this article, I have gone through the reasons that might lead potential customers to purchase a GreenJet printer. I still believe that the GreenJet offers a lot of value to PCB manufacturers. Camtek's market penetration strategy has been slowly unveiled. The next step in my research will be to present a model for estimating ink revenues from any particular customer, which will enable further improvement of Camtek's model for the coming years.
Disclosure: I am long CAMT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.