CMMC Needs Fixes if Small- and Medium-Sized Businesses Are to Remain in Defense Industrial Base, Say U.S. Electronics Manufacturers

IPC Survey Finds Many May Exit the Defense Market Due to High Costs Associated with Cyber Certification

Today, John Mitchell, president and CEO of IPC, a global electronics manufacturing association, released the following statement in advance of the U.S. House Small Business Subcommittee on Oversight, Investigations, and Regulations hearing on the Department of Defense's (DOD) Cybersecurity Maturity Model Certification (CMMC):

"Cybersecurity is a must for U.S. national security, but the CMMC is an insurmountable hurdle for many small and medium-sized electronics manufacturers that do business with the Department of Defense. A recent IPC survey found CMMC may weaken the U.S. defense electronics industrial base even as it seeks to bolster the security of those that remain in it. The high costs and compliance burdens will push many companies out of the defense market unless DoD takes steps to support the industry's assessment and compliance. Even more worrisome, the risk to industrial base resiliency may be greater than currently realized as most companies are not fully aware of the heavy costs associated with CMMC compliance.

"IPC thanks Chairman Dean Phillips and Ranking Member Beth Van Duyne for carefully evaluating the impacts of CMMC on the small business community. We urge the DoD to continue its ongoing efforts to provide the DoD supply chain greater clarity, support, and opportunity to leverage existing standards to help reduce the costs and burdens of CMMC compliance."

On June 8, IPC released an industry survey and report, which found that one-quarter (24 percent) of electronic manufacturers say the costs and burdens of compliance with CMMC may force them out of the DoD supply chain. The survey also found that 33 percent of respondents said the CMMC would weaken the U.S. defense electronics industrial base, while 18 percent were unsure, highlighting the uncertainties involved. And 41 percent believe applying the CMMC clause to their suppliers will create other problems in the supply chain.

Most suppliers expect and are willing to spend upwards of $50,000 on CMMC readiness, and nearly one-third (32 percent) report that it will take them one to two years to prepare to undergo CMMC assessment. However, more than half of the suppliers say implementation costs of more than $100,000 would make CMMC readiness too expensive. DoD's own cost analysis estimated the cost of a CMMC Maturity Level 3 (ML3) certification to be more than $118,000 in the first year. This means DoD's own estimate of CMMC compliance costs is too high for 77 percent of the IPC survey respondents.

IPC APEX EXPO Expands Technical Conference Award Categories

New awards include NexGen and Student Research contributions, increased honoraria

IPC APEX EXPO, the premier international event for electronics manufacturing, showcases a technical conference that is one of the largest educational events in the industry. IPC APEX EXPO 2022, to be held January 22-27 in San Diego, California, offers new and expanded best of conference awards, with increased honoraria.

Awards include:

  • Best of Conference (Three Awards) – USD 1,500
  • Top three papers representing the very best of the technical conference
  • Eligibility: Open to industry and academic submissions
  • NextGen Best Paper – USD 1,000
  • Top paper from next generation industry technologists
  • Eligibility – Primary author with less than five years industry experience
  • Best Student Research Paper – USD 1,000
  • Top student paper from academia
  • Eligibility: Primary author enrolled student
  • Best Technical Poster – USD 750
  • Eligibility – Open to all poster submissions

“We are looking for the best technical content from across the globe,” said Matt Kelly, IPC chief technologist. “Presenting at IPC APEX EXPO provides increased visibility for attendees and the companies they represent, and we’ve expanded the awards to include the next generation, encouraging their participation in IPC APEX EXPO for years to come.”

Expert papers and presentations are being sought in the following areas: factory of the future implementation; PCB fabrication and materials, enabling future technologies, meeting extreme requirements, circuit design and component technologies; quality, reliability, test and inspection; assembly processes, electronics materials, and  conscientious engineering. For specific topics within each technology  area, visit www.ipcapexexpo.org/CFP.

Technical paper deadlines:

  • Abstracts due: August 6, 2021
  • Acceptance of papers: August 20, 2021
  • Papers due: October 8, 2021
  • Presentations due: November 12, 2021
  • Recordings, if needed, due: December 10, 2021

Germany Latest EU Country to Introduce Due Diligence Rules 

Jun 11, 2021

On 11 June 2021, the German Supply Chain Act was adopted by the German Parliament by a large majority, introducing binding human rights and environmental due diligence obligations for companies. After lengthy and difficult negotiations, the political groups found compromises on several key aspects of the law ranging from the scope of companies covered to the question of liability. The aim of the law is to foster responsible business conduct and remove illicit practices such as child labour from supply chains.

Once formally signed, the law will require large German companies as well as foreign companies with branches in Germany to identify and address human rights and certain environmental risks in their own as well as in their direct suppliers’ operations. While the due diligence obligation is limited to direct suppliers, companies will have to take measures if they are made aware of potential abuses in any part of their supply chain, for example via a complaint. Companies will have to regularly conduct a risk assessment, implement preventive measures where needed and annually report on their due diligence processes. 

The due diligence duty builds on the UN Guiding Principles on Business and Human Rights. Its thematic scope encompasses human rights and labor rights as expressed in ILO conventions as well as the following environmental conventions:

  • The Minamata Convention on Mercury;
  • The Stockholm Convention on Persistent Organic Pollutants; and
  • The Basel Convention on the Control of Transboundary Movements of Hazardous Waste

In case of violations, companies will face administrative fines of up to 800 000 EUR or two percent of annual revenue and potential exclusion from public procurement for up to three years. 

The German Supply Chain Act does not create a liability regime for companies – an important aspect that was clarified in the political negotiations. It does, however, enable trade unions and NGOs to initiate legal proceedings against companies on behalf of victims. 

The law will be implemented in two phases: from January 2023, companies with more than 3 000 employees will have to abide by the new rules; and as of January 2024 the threshold will be lowered to companies with more than 1 000 employees. 

For Germany, the law presents a paradigm shift, away from voluntary CSR initiatives towards binding due diligence obligations. Several other Member States already have due diligence laws in place or are contemplating introducing such laws. In parallel, the pending EU proposal on Sustainable Corporate Governance (SCG) and Due Diligence legislation is expected in the second half of this year. With this pending proposal, the European Commission aims to create legal certainty across the Union by introducing a harmonized set of rules applicable across Member States.

IPC continues to engage with policymakers on this topic to advocate on behalf of the electronics industry for a framework that is feasible and workable for industry while protecting human rights and the environment. For additional information, please contact me at AlisonJames@ipc.org. 

IPC and Chemical Watch Co-Organize Webinar on China’s MEE Order 12

Jun 11, 2021

By Fanyu Zhang, EHS Fellow for IPC Global Government Relations

On May 26, 2021, Chemical Watch and IPC co-organized a webinar, “China’s MEE Order 12: An Update for the Electronic Industry.” MEE Order 12 is the China’s Ministry of Environment and Ecology Order No. 12, Measures of Environmental Management and Registration of New Chemical Substances, which has registration and filing requirement for manufacturers and importers of new chemical substances.

Sydney Xiao, president of IPC Asia Operations, provided welcoming remarks and introduced IPC and its recent activities to provide useful information on RoHS- and REACH-like chemical regulations in the Asia-Pacific region. Heng Li, a senior associate at Mayer Brown, presented a summary of MEE order 12 and focused on its impact on the electronics industry sector.

“Is the electronics industry affected by this law? The key point is the role a company plays within the supply chain,” Li said. If a company is considered a user or importer of new chemical substances – they use new chemical substances for production or import new chemical substances into China for further use – then their business activities may be affected by MEE Order 12. However, if a company only imports or uses a product that contains new chemical substances and there is no intended release of the chemical, then registration and filing requirements do not apply. MEE order 12 also establishes significant post-registration obligations for chemical users, such as the provision of information down the supply chain, establishment of an activity record-keeping system, and submission of hazard and exposure information to MEE, if requested.

With the implementation of MEE Order 12, what will be the next step of China’s chemical legislation? The answer might be “new pollutant” -- a hot topic that emerged in China within the last year and is expected to be a priority in the next five years. Although China’s MEE has not provided a clear definition of “new pollutant,” it is recognized that endocrine-disrupting chemicals, persistent organic pollutants, antimicrobials and micro-plastics are four major types of “new pollutant” that are getting more attention around the globe. “As China is still at the initial stage in designing a management strategy for new pollutants, MEE Order 12, along with other chemical control legislation, will serve as the starting point. What we are facing today in the EU or U.S. will probably happen in China in the near future,” Li concluded.

IPC provides more Asia Pacific Environmental Regulation Whitepapers at: https://www.ipc.org/asia-pacific-ehs-policy-landscape-2

Official version of MEE Order 12 is available at: http://www.mee.gov.cn/xxgk2018/xxgk/xxgk02/202005/t20200507_777913.html

 

IPC Commends Biden Administration on Its 100-Day Review of Strategic Supply Chains, Including Electronics, Offers Recommendations to Drive Further Progress

Washington, June 8, 2021 - IPC commends the Biden administration for completing its 100-day review of strategically important supply chains and for outlining bold actions to strengthen U.S. semiconductor manufacturing and ensure the availability of minerals critical to electronics manufacturing.

The results of the 100-day review are captured in an 11-page White House fact sheet and a 250-page report, released today. IPC believes the review has been helpful in bringing key issues into focus, including the importance of strengthening the entire electronics manufacturing ecosystem. The entire supply chain includes printed circuit board (PCB) and PCB assembly manufacturing; access to raw materials; and next-generation “advanced packaging” of substrate-based multichip modules.

IPC’s recommendations to the administration – many of which are reflected in the documents published today – are summarized in a recent letter to U.S. Commerce Secretary Gina Raimondo.

“For far too long, the U.S. Government has neglected its important role in strengthening the nation’s manufacturing base and instead has watched passively as other countries around the world invested in their manufacturing capabilities,” said IPC CEO John Mitchell. “U.S. electronics manufacturers appreciate the Biden administration’s decision to highlight the longstanding and significant challenges facing the U.S. electronics manufacturing base as a result.”

“This report outlines important, initial steps to address the current crisis and reaffirms the President’s commitment to preserve and extend U.S. leadership in innovation and advanced manufacturing. But addressing America’s manufacturing capacity decline will be a long process,” Mitchell added. “We look forward to working with the Executive Branch, Congress, and an array of stakeholders to reverse the erosion of the U.S. electronics industrial base and related risks to economic and national security.”

IPC and the electronics manufacturers it represents support the following actions being taken or proposed by the Biden administration:

  • Address semiconductor shortages by expanding U.S. production of chips; creating a task force to address supply chain challenges in several electronics-dependent sectors; and investing in domestic “advanced packaging” capabilities, of which printed circuit boards (PCBs) and PCB assembly manufacturers are critical components.  
  • Adjust federal acquisition policies to identify and support procurement of critical products like PCBs and printed circuit board assemblies.
  • Bolster investment in domestic and international production of critical minerals, most notably though the Defense Production Act.  
  • Strengthen U.S. apprenticeships programs to ensure a skilled workforce.
  • Promote international cooperation to support supply chain resiliency, which will be critical because no nation in today’s world can be completely self-sufficient in electronics and manufacturing.
  • Ensure a level playing field by addressing long-standing trade disputes.

In addition, IPC supports other efforts outlined by the Biden administration as part of this announcement to strengthen the U.S. industrial base, including:

  • Appropriation of $50 billion in dedicated funding for semiconductor manufacturing and R&D;
  • Establishment of a new Commerce Department Supply Chain Resilience Program, backed by no less than $50 billion in federal funding;
  • Funding under the Defense Production Act to support manufacturing resilience in critical industries;
  • Creation of sector-specific workforce education and training programs; and
  • Support of the R&D and capital needs of small- and medium-sized businesses that that are the foundation of the U.S. electronics manufacturing base.

 

 

 

 

 

Industry Survey Finds U.S. Electronics Manufacturers May Exit the Defense Market Due to High Costs Associated with CMMC

 

Washington, D.C. – June 8, 2021 – In a new IPC industry survey and report, one-quarter (24 percent) of electronic manufacturers say the costs and burdens of compliance with the Cybersecurity Maturity Model Certification (CMMC) may force them out of the U.S. Department of Defense’s (DoD) supply chain.

The survey conducted by IPC, the global electronics manufacturing association, also finds that for many small- to medium-size businesses (SMB), the costs and burdens of CMMC compliance may outweigh the benefits of doing business with the DoD.

In addition, 33 percent of respondents say the CMMC will weaken the U.S. defense electronics industrial base, while 18 percent are unsure, highlighting the uncertainties involved. And 41 percent believe applying the CMMC clause to their suppliers will create other problems in the supply chain.

“Cybersecurity is a must for U.S. national security, but the costs and burdens of achieving CMMC compliance under the current approach will likely force many small and medium-sized manufacturers out of the DoD supply chain, negatively impacting national security,” said John Mitchell, IPC president and CEO. “The objectives of CMMC are well-intentioned, but they must not be achieved at the expense of other key aspects of supply chain health.”

Most suppliers expect and are willing to spend upwards of $50,000 on CMMC readiness, and nearly one-third (32 percent) report that it will take them one to two years to prepare to undergo CMMC assessment. However, more than half of the suppliers say implementation costs of more than $100,000 would make CMMC readiness too expensive. DoD’s own cost analysis estimated the cost of a CMMC Maturity Level 3 (ML3) certification to be more than $118,000 in the first year. This means DoD’s own estimate of CMMC compliance costs is too high for 77 percent of the IPC survey respondents.

“The Pentagon needs to take into consideration that most SMBs do not have dedicated cybersecurity personnel to achieve the prerequisites, and while many commercial electronics manufacturers have considerable business with the defense community, they themselves do not consider themselves a defense contractor,” added Mitchell.

The study’s author, cyber security expert Leslie Weinstein, says the DoD can reduce the costs and uncertainties of CMMC compliance by leveraging existing industry standards and certifications, such as IPC-1791, the electronics industry’s “Trusted Supplier” standard, which was designed in collaboration with the DoD; or the certifications offered by HITRUST or the International Standards Organization.

“The DoD recognizes a variety of respected, industry-driven certifications when it comes to hiring cybersecurity professionals,” says Weinstein. “Taking the same approach to certifying suppliers would allow companies to invest more in security than in redundant audits, and it would quickly create a pool of companies who are able to bid on DoD solicitations containing the CMMC DFARS clause. And importantly, it would prevent further erosion of the U.S. defense industrial base.”    

IPC fielded the survey between February 25 and March 5, 2021 and garnered 108 responses from contract manufacturers, printed circuit board fabricators, original equipment manufacturers and suppliers who self-reported they are planning to undergo a CMMC assessment in the next five years.

About IPC

IPC (www.IPC.org) is a global industry association based in Bannockburn, Ill., dedicated to the competitive excellence and financial success of its nearly 3,000 member companies which represent all facets of the electronics industry, including design, printed board manufacturing, electronics assembly, and testing. As a member-driven organization and leading source for industry standards, training, market research and public policy advocacy, IPC supports programs to meet the needs of an estimated $2 trillion global electronics industry.

 

EMS North America Industry Report, April 2021

IPC Releases EMS Industry Results for April 2021

IPC announced today the April 2021 findings from its North American Electronics Manufacturing Services (EMS) Statistical Program. The book-to-bill ratio stands at 1.62.

Total North American EMS shipments in April 2021 were up 10.5 percent compared to the same month last year. Compared to the preceding month, April shipments fell 11.9 percent.

EMS bookings in April rose 22.6 percent year-over-year and but decreased 14.0 percent from the previous month.

“The North American EMS industry once again hit a new record this month with the book-to-bill ratio hitting another all-time high,” said Shawn DuBravac, IPC’s chief economist. “It is clear supply constraints and other disruptions are stymieing production while at the same time orders continue to be very strong. As a result, backlogs continue to build in the electronics supply chain.”

April 2021 EMS book to bill chart

View chart in pdf format

Detailed Data Available

Companies that participate in IPC’s North American EMS Statistical Program have access to detailed findings on EMS sales growth by type of production and company size tier, order growth and backlogs by company size tier, vertical market growth, the EMS book-to-bill ratio, 3-month and 12-month sales outlooks, and other timely data.

Interpreting the Data

The book-to-bill ratios are calculated by dividing the value of orders booked over the past three months by the value of sales billed during the same period from companies in IPC’s survey sample. A ratio of more than 1.00 suggests that current demand is ahead of supply, which is a positive indicator for sales growth over the next three to twelve months. A ratio of less than 1.00 indicates the reverse.

Year-on-year and year-to-date growth rates provide the most meaningful view of industry growth. Month-to-month comparisons should be made with caution as they reflect seasonal effects and short-term volatility. Because bookings tend to be more volatile than shipments, changes in the book-to-bill ratios from month to month might not be significant unless a trend of more than three consecutive months is apparent. It is also important to consider changes in both bookings and shipments to understand what is driving changes in the book-to-bill ratio.

IPC’s monthly EMS industry statistics are based on data provided by a representative sample of assembly equipment manufacturers selling in the USA and Canada. IPC publishes the EMS book-to-bill ratio by the end of each month.

Economic Recovery Continues Across the Globe

IPC’s May 2021 Economic Report

The economic narrative we’ve been building in recent months continues to play out. First, COVID will be the predominant force defining economic growth in the early months of the recovery. Secondly, as COVID cases decline, economies will reopen, which will help fuel organic economic growth. Thirdly, as COVID recedes and economies reopen, pent-up demand will drive consumer spending, especially for services. Fourth, fiscal stimulus and accommodative monetary policy will be significant accelerants to economic recovery. The economies with the most fiscal and monetary support and stimulus will see the strongest growth rates.

In this month’s economic outlook report from IPC, you will find U.S. and European data on economic growth, employment, consumer sentiment, manufacturers’ sentiment (PMI), manufacturing capacity utilization and end markets for electronics.

On June 8, IPC is hosting a webinar, “Supply Chain Disruption, Economic Recovery, and What to Expect in the Post-Pandemic World.” Chief Economist Shawn DuBravac will look at some of these issues in more depth. Register now for this free event.

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