PCB007 Interview with Travis Kelly: Isola Responding to the Market

Feature Interview by the I-Connect Editorial Team in July, 2021.

Interview with Isola’s Travis Kelly overviewing many the important topics that the industry is facing, like how the global supply chain is being strained by materials, and what companies are trying to do to best manage the items within their control.

 

Barry Matties: We scheduled this interview to get an update on how things are going with Isola and your new facility, but with what’s going on in the copper market and supply lines, we feel there’s more to talk about. Travis, can you start with an update on the new facility and how that is coming online?

 

Travis Kelly: Thank you, Barry. The new facility in Chandler, Arizona is up and running. We have our R&D lab, which started many months ago. It houses many of the corporate executives, as well as shared services, such as human resources, finance, and IT. Also, we went live with our quick turnaround facility several months ago. So that’s going well, but as you can imagine, there’s a launch curve to that facility as we have tested the run-at-rates on the equipment. Now we are producing revenue-generating orders. It’s no longer just qualifications for customers, it’s producing and fulfilling orders that are coming in from our customers primarily in the United States.

 

Matties: That’s great timing; just as the market demands are increasing.

 

Kelly: Correct. It came to fruition at the right time. We have the other facility in Ridgeway, South Carolina, which is also extremely busy, but with having the QTA on the West Coast, we can service the West Coast more efficiently. We still have to go through several more qualifications for customers, but we’re beginning to see many orders being transitioned from Ridgeway over to our new QTA.

 

Matties: With the shortage of copper and the demand increasing, do you think that the qualification process is going to be more efficient or expedited?

 

Kelly: In terms of other qualifications for the new facility, some of the supply chain constraints that everyone is recognizing haven’t really impacted that facility. That facility does not treat materials, so it is primarily pressing and finishing. We have ample room to move materials around, so when we think about Isola’s global footprint, one way we can leverage that is by making sure that we have the right raw materials in the right places at the right time. It’s less about the supply constraints that the industry is facing and more about just getting into the new facility and qualifying our products on new equipment. That’s happening very quickly. We expect to have most of the qualifications done over the next couple of months.

 

Matties: Travis, what are some of the lessons that you’ve learned, or surprises that came along, during that process?

 

Kelly: Ultimately, it is an advanced facility relative to the technology that’s being utilized. A lot of the pressing capability is much nimbler. As opposed to having large presses with many openings, these are smaller presses that we can do a high mix, low volume. We made a really good decision with the equipment we’re utilizing. Some of the lessons learned relate to the automation of that facility. If you

look at some of our other facilities, you will see a lot more labor as opposed to what we have in Chandler because so many operations in Chandler are fully automated.

It takes a lot of time to debug. If you think about all the programmable logic control (PLC) on the machines, it takes a lot of time to debug those, especially as you get into high mix. You’re looking at different panel sizes, prepreg sizes, and the finishing line. Ultimately having that knowledge and working toward having flexibility as it relates to such a high mix would benefit us in the future. We continue to roll out more automation amongst all our facilities.

 

Matties: With the price demands on copper now, that automation is certain to give you some advantage.

 

Kelly: Yes. Ultimately the goal is to be more efficient for our customers and have the optimal setting. Although we haven’t realized any copper shortages, hyperinflation is happening right now, and hopefully, we can pull some levers by having more automated facilities to take some of that labor content out to remain competitive in the industry.

 

Matties: Now we’re hearing from manufacturers that material lead times are growing. Are you experiencing that? Are your customers feeling that from Isola?

 

Kelly: Lead times are growing across the board, not just in the U.S., but across our global footprint. Europe is extremely busy right now. Lead times have been stretched very far out. Although the QTA is running in North American, it’s a launch curve, so we are still qualifying current products for customers as well as putting in commercial sales into that facility. It’s not at 100% of where we expected it to be by July, so that’s not helping alleviate some of the lead times. Our facility in South Carolina is extremely busy as well as our facilities around the globe. Once we get the QTA 100% operational and have customers qualified by July, we should see some of those lead times coming down.

 

Matties: With the demand for copper in industries that aren’t so demanding in terms of performance and specification, how does that play into our industry? Given the global effect right now, do you expect lead times to come down?

 

Kelly: Copper is a number one topic. We’re seeing inflation on most of the direct raw material inputs into our product. Copper is the biggest focus because it has the most transparency; you can see the price fluctuations on the LME. You can read about copper, almost daily, whether you’re trading copper or using it as an input to manufacturing. We are also seeing increases in woven glass and resin systems, there are cost increases across the board. The interesting thing about copper is the amount of hyperinflation we’re seeing, partly because copper is in high demand for the electrification of vehicles.

Charging stations also require a lot of copper, as well as the microelectronic market, PCBs and laminate. We’re seeing the price increase on copper almost daily, but there is concern about supply constraint as well as copper grows in demand. We must continue to work closely with our suppliers to ensure that we have that continuity of supply to satisfy our customer demands.

 

Matties: You’re putting a lot of effort and focus on it, no doubt?

 

Kelly: 100%. We’re in South Carolina today, visiting Ridgeway. We had a team go out to some of our copper suppliers, and they’re working as diligently as possible to keep up with demand and make sure that we have the ample supply to satisfy our customers,

 

Matties: Where do you expect pricing to go? What should the fabricators be prepared for?

 

Kelly: I wish I knew because then I could trade the commodity, but ultimately, every day you’re reading new projections around copper. I read an article saying that it could go up to $20,000. Right now, I think we’re hovering around $10,000. I don’t think anyone knows. People are very familiar with the increasing demand for copper, especially with the focus on the electrification of vehicles. That’s only part of the equation, so I don’t know where it’s going to end. I think a lot of people wish they did. However, all we can do is focus on the things we control. We focus on automation, looking at some of the ways we can at least offset some of the cost increases, using different manufacturing strategies. We do a lot of value stream mapping, Kaizen exercises thereby removing waste out of our systems to try to offset some of those cost increases that we’re all experiencing.

 

Matties: When you look at the efforts that you’ve made, do you have a percentage of gain that you’d share with us?

 

Kelly: Yes. We use a lot of different key performance indicators (KPIs) to look at where we’re able to become more optimal. I don’t have it quantified, but we see a reduction in overall lead times as it relates to certain product groups. However, once again, as we’ve experienced lead time increases, it’s overshadowed by some of the other macro challenges that this industry is facing. We may see an improvement on our specialty line, but what does that improvement mean? We have industrial engineers look at work cells, and maybe we can expedite or reduce the takt time of a certain product group, and then we can see a reduction there.

However, it’s overshadowed, especially right now, by some of the global supply chain issues. Think about what happened in the Suez Canal, and the container shortages that the entire global economy is facing when we can’t get a container to ship material

 

Matties: You’re saying the lead time issues are supply chain and not capacity issues.

 

Kelly: It’s all of the above. Ultimately, the industry is growing more than anticipated six or 12 months ago. There are macro issues relative to container shortages. If you can get a container, there’s a lineup at the ports on both the East and West coasts to get your material into the country. It’s an accumulation of numerous issues that are driving some of the lead times. It wouldn’t be fair just to say it’s one aspect of it.

 

Matties: Obviously during a period like this, fabricators may look to stockpile material as much as possible. Are you seeing that behavior?

 

Kelly: It’s hard to have visibility into who’s stockpiling for inventory vs. who has an increase in demand. The velocity of orders coming in has been on a steady increase for many months, so that’s a positive sign. To say how much of its stocking inventory vs. how much is true demand gets a little bit blurry. We have seen consistent growth month over month, quarter over quarter, and year over year, so it’s probably a bit of both. There is high demand for our products for different applications, and some people could be out there looking at stocking some of the inventory with the expectation that copper will become in short supply or that the cost increases will not go away anytime soon. It’s probably a bit of both.

 

Matties: When you look at the market and your projections, what do you see in the next year to two? Is Isola still projecting steady growth, or do you see sharp increases?

 

Kelly: We are still planning on steady growth and that’s why we’ve had the investments both in Arizona, new treaters in Taiwan, and future growth capital deployment over the next 24 months in the United States. We continue to see and forecast growth; we’re preparing and planning for it.

 

Matties: From a technical standpoint, Travis, it’s the high-end specialty materials that might have the greatest amount of lead time right now. Is that the case?

Kelly: It all depends on what high-end specialty material you’re referring to. Some of it depends on where it’s being shipped. As mentioned earlier, those lead time issues may be because it’s going into certain countries where there are container shortages or the ports are full; for the most part, it’s just across the board. Right now, our issue is the ports are full. A ship was supposed to land five days ago, and it’s out in the ocean waiting for a spot. So, I wouldn’t just say it’s HSD material or high specialty products.

 

Matties: In past conversations, you were referencing new products for some higher-end applications from Isola. Give us a quick product update of your portfolio, how that’s going, and where you’re at?

 

Kelly: We’re very excited. I think you spoke to Michael Gay just recently on IS550H; that’s getting a lot of momentum out in the industry. It’s a very exciting product for the commercial sales team. TerraGreen 400G is a platform of products that should be out in the next several months, and we are excited about that one as well. TerraGreen 400G is being qualified and tested at numerous customers and OEMs. They are excited about the capabilities of these products. They are being produced right now and we look forward to seeing the momentum build behind those products, because so far the early adoption even exceeds our expectations, especially on IS550H.

 

Matties: And what do you have in the pipeline? What are you looking to in the future?

 

Kelly: We spend a lot of our budget on R&D and we call it big R. We have research and development, as a lot of our competition does. We must continue to be good business partners as we look at alternative materials. We do spend a fair amount of money on big R, which is looking forward to the next five to 10 years and where we think the industry wants and needs to be. We have scientists not only in Singapore but here in the United States who are working together to develop those materials. We always have at least something in the pipeline; we’re asking, “What do we want to do in the next two years? Where do we want to be in four?” And then we have a couple of scientists that look out five-plus years to determine where the industry is going to be and what it will need.

 

Matties: That must be interesting. And what do they see five years out?

 

Kelly: I can’t tell you that, but I will tell you it is interesting for two reasons. There are different processing techniques, so we stay abreast and try to anticipate, “Will there be significant changes to the way material will be processed in the future?” Obviously, there are characteristics, such as signal integrity and thermals that we constantly look at based on where we think the technology is going, Isola also works closely with a handful of OEMs, on what their needs will be over the next five-plus years, to ensure that we’re staying on the cutting edge of technology.

 

Johnson: Travis, regarding the pressures from copper, as we were discussing earlier, how do you see that pressure influencing what happens with materials? We hear about the need to move to materials that don’t have copper attached, for example.

 

Kelly: Constraints spark innovation, right? Anytime you have a constraint in an industry that’s not going to alleviate soon, that typically sparks innovation. We have spent a lot of time talking about the next material if copper continues to be constrained, what processes could be unique, where you don’t have to use the same amount of copper that we’re using today. Those discussions are happening and that it is going to spark innovation. There must eventually be some changes if copper continues its current constraints; if we continue to see hyperinflation, it’s going to cause innovation.

 

Matties: It seems like there’s new opportunity for base materials specifically for that additive process. Obviously, you guys are paying attention to the additive process, so what’s your take on that?

 

Kelly: It’s very interesting. Actually, I worked with some people that are very close to that technology. Once again, with what’s happening right now from a macroeconomic standpoint relative to copper and potential shortages and hyperinflation. Companies need to look at new technologies as it relates to material processing techniques. That technology and others are being discussed very closely with the team we have here at Isola.

 

Matties: Now, with possible copper substitute materials, like graphene, are you looking at that sort of material at this point?

 

Kelly: We do have an alternative materials group. I don’t want to call it a department, but we have several individuals who are tasked with looking at alternatives. It’s not just a focus on copper; it can be a focus on woven glass or a focus on different resin systems and chemicals. So, that’s exactly what we’re constantly doing to challenge one another on what the next five to 10 years will look like. Alternative materials, across the board right now, are the number one topic. Once again, it’s not just focused on copper. There are a lot of different materials that can not only be more widely available but can also enhance the characteristics of our products, especially some of the future products.

 

Matties: You’ve been with Isola now for going on three years?

 

Kelly: Almost three years.

Matties: And when you came in, what sort of transformation did you effect? Is R&D something that you really were passionate about and brought in, or was that already in place? What changes have you made since coming to Isola?

 

Kelly: I’ve made several changes. First and foremost, we must have manufacturing excellence, so we spent a lot of time and investments optimizing manufacturing. We focused on investments in the quick turnaround facility, understanding that the market is shifting from low to high mix and shorter run cycles. Building and generating that QTA facility with a state-of-the-art R&D lab in the United States was a big investment; I believe it will pay dividends in the future.

We’re also focused on R&D by looking at innovating new products, new process improvements to create products, as well as alternative materials. And then, ultimately, getting with our customers on the marketing side. Focusing on the needs of OEMs and Fabricators. and how can we support them. Those

three aspects of the business are where we spent a lot of time. And based on our growth and what we’re seeing now as an organization, it’s paying dividends.

 

Matties: Great. We recently did an interview with a major manufacturer of automotive and consumer electronics, and the topic was future demands for fabricators. One of their big concerns was materials. Nolan, you probably have some thoughts around that as well, but the materials was a big area of concern for Bosch. A lot of it was driven around the thermal if I recall correctly. Was that the case, Nolan?

 

Johnson: Yes. The extreme thermal issues for automotive, coupled with the humidity variations—tropical vs. Arctic conditions, for example—and the demand that their product be robust and reliable in both environmental extremes, was a major concern. Automotive is looking for new developments in environmental robustness, including the materials they specify.

 

Matties: Travis, you mentioned the collaboration with OEMs; it seems like there’s a huge need for more collaboration.

 

Kelly: Yes, and that’s where we can play an important role. It’s bilateral, we learn a lot from not just the OEMs, but also the fabricators, and working hand-in-hand and sharing those viewpoints and the knowledge that they’ve accumulated will continue to pay dividends. IS550H is a good example of working with several OEMs and fabricators to understand heat characteristics and the thermal needs of our customers. Now that’s a good product that can solve a lot of those problems, but the rubber meets the road by working very closely with our business partners

We don’t view our customers as transactional (not just buying and selling) but from a relationship standpoint, understanding where those customers want to be, and what we can do to make sure that we’re innovating to support those customers. Customers mean the printed circuit board fabricators, as well as the OEMs. The material must keep up with the demands of the future, and that’s why we do spend a lot of money on R&D, trying to stay on top of that curve, or at least alongside it.

 

Johnson: Travis, is direct marketing to the OEMs something that Isola concentrates on? To have that sort of conversation, to get the OEMs what they’re looking for, the OEMS are specifying the performance criteria, but the fabs are making the purchase decisions. Does that conversation, that dynamic, need to change? Do different people need to be in that conversation?

 

Kelly: No, I don’t think so. First and foremost, we support the fabricators. We have an OEM marketing team. We hear feedback from the OEMs, but ultimately, we work hand-in-hand with the fabricators to understand what the application needs are, and then go through our suite of products to make sure that we can satisfy those needs.

 

Johnson: What works well for Isola in having a conversation with an OEM about their emerging needs?

 

Kelly: Well, there’s already relationships. As you know, Isola has been around for 100+ years, and one thing I’ve learned over the last several years, it’s a small industry relative to a subset of people that have worked together for a long time. Most of the connections and relationships are already in existence, and that allows us to have a good understanding of what those requirements are today and what they will be in the future.

 

Matties: What advice would you give a fabricator who must manage the material maze out there?

 

Kelly: There is a lot of volatility, especially around the continuity of the supply chain regardless of what country you’re located in. There’s also inflation that we’re all experiencing. Isola is always trying to figure out where we can improve our processes to reduce some of that uncertainty. Then there are other things that we don’t control, such as the Suez Canal and container shortages. You just have to be flexible and focus on what you can control. And the items you don’t control, try to develop contingency plans to the extent possible.

 

Matties: I would think that the greater visibility a fabricator can give to you, to Isola and your sales organization, the better able you are at satisfying their need. The more lead time that they can give you, the better off they will be; we’re living in a quick-turn environment and every day is critical.

 

Kelly: Every day, every hour, is critical. Visibility is the key to success, but we don’t sometimes live in a world that’s structured that way. With the chip shortage, automotive shutting down their plants, and taking potentially longer summer shutdowns, a lot of this information is truly hand to mouth. Yes, visibility would be great, if we could get 30, 60, 90 days visibility, then that would be very helpful. I’m just not sure right now that that would be realistic for a lot of our customers.

 

Matties: Thanks for making time for this interview and congratulations on coming up on three years, that’s great.

 

Kelly: Thank you.

 

Click the link below!

PCB007 Magazine, July 2021 (magazines007.com)

19 July 2021

Related Posts

New Isola Analytical Laboratory 062020
Isola Opens Expanded R&D and Analytical Laboratory at New Global Headquarters & Manufacturing Facility
CHANDLER, Ariz. – Isola, designer and developer of copper-clad laminates and fabrication materials for multi-layer printed circuit boards (PCBs), has a new facility in the Phoenix Valley. Isola’s R&D and Analytical Laboratory has officially opened the company’s new global headquarters in Chandler, Ariz. Nearly doubling the size and capacity…
Isola featured at OEM Forum
Isola featured at OEM Forum “The Heat is On! Finding PCB Materials that Like It Hot!”
    Last week, Isola was featured at OEM Forum as the special guest on Insulectro’s webinar “The Heat is On! Finding PCB Materials That Like it Hot.” Learn from our experts as they discuss the importance of thermal reliable materials.   The session was hosted by Insulectro’s…
5G Suitable Laminate and Prepreg Materials | Isola Groupcement
Isola’s Role in the Deployment of 5G
By now just about everyone has heard about 5G in commercials or on billboards but you may be wondering what it means for printed circuit boards and the materials available from Isola?   5G stands for the 5th generation wireless standard. 5G brings brings faster mobile internet speeds to market…