Components Taped and Delivered

Guilherme: Thank you, Diesley. It's great to have this chat here. We have been talking a lot about the opportunities and changes we have seen here over the years. It's a pleasure.

Guilherme: This is a really nice story to share. I have been at EPS for 13 years, and I will complete 14 this coming September 2024. Over these 13 years, it has been a very good journey. We started with a small unit in Manaus, and in Manaus, we served that electronics hub that was heating up and bubbling at that time, now well developed, but going back 13, 14 years, it was still growing. So EPS came in with a big goal. That goal was to help the electronic industries that were doing outsourcing, outsourcing of electronic component programming. From there to today, EPS continues in Manaus, strong and firm, it's a big industry today, with more than nine automatic machines serving that market in the area of tape and reel, and some other activities that range from the production of pocket tapes, we'll talk a little about them, they are here behind me, and the market has changed a lot.

So we had there big changes and we continue to follow. Now here in São Paulo, Americana, we have a unit, and I see that these changes are still bubbling and will start to increase, but mainly in the area of electrification, automotive, or what we talked a little more before, the change that we come from the mechanical, any mechanical component, any mechanical machine that is turning electromechanical, then enters a software that today makes a Bluetooth connection, IoT, a security item, which later will perhaps become 50% electronic, and it is there that EPS is a safe, reliable, and fast solution for industries.

Guilherme: EPS has been in the global market for almost 30 years, so it is initially an Irish company, privately owned, the owners are still in control, and today it has two units here in Brazil, Manaus started there 13, 14 years ago, São Paulo, we are going into the second year of big challenges, but also today has ten units in Mexico, two units in the United States, six units in Europe, going to Asia has approximately eight large units. And these units, again, are very close to automotive and electronic clusters, so where there is a large cluster, a high-scale industrial production, EPS is there.

Whether by an invitation from a client who understood that EPS is a good solution, safe, reliable, and with a track record of more than 300 million components recorded, kilometers of tapes produced, and I bring back the word security, reliability, because that's what technology demands today. So going back to EPS, EPS has been expanding there in the global territory, and here in Brazil the challenge is precisely that, to be close to the industries, whether with a solution for the electronic part, in software programming, in software encryption, in the security of semiconductors, or in the part of the production of these tapes that today make the transport of components. All that process that was formerly 100% manual, the operator was there putting a tape, putting it on the board, on the product, today that process can be done on a tape to be packaged and assembled in a 100% automatic SMD process.

Guilherme: Right, and I see a lot when we talk to customers, a change in mentality. First, there is a very large pressure today in the market, any industry. We are talking about cents, productivity. So, I see the word Lean Manufacturing or EE very close. So, it's all optimization. So, EPS enters very much in that sense, to be able to let, first, the customer focus on his core business. And what is the core business of the customer? It's not doing taping, it's not doing programming, it's assembling his product, doing the development, perfecting, maybe serving his customer. And where does EPS come in? It comes in everything that is not core business. So, programming. Man, programming, sometimes, does not add direct value to the customer. So, pass it to EPS. EPS enters today making all the investments.

So, the customer will not worry about buying machine, algorithm, spare parts, doing development. And then, open a parenthesis to remember an interesting number. Today, there is an absurd amount of electronic components entering the market every day. Every day. There is a number that I spoke of 20 to 30 new programmable components entering the market. So, today, the customer cannot keep up with that. And we can keep up, because we have our development team, we can bring that solution to him. That is, he will worry about his core business and we worry about everything else.

Guilherme: Interesting you mention that, Diesley. And then, I'm going to take a trip back in time here. Let's go back 13 years in time. When we started here in Brazil, specifically, Brazil is a gigantic territory. We started serving contract manufacturers. So, those companies that outsource the assembly process. The final customer does not want to assemble, he looks for this company. And this company looked for us.

And we observed a very big change over time. We started electronic, 100%. Then, we started to enter with mechanical solutions. So, answering your question, today, we have a portfolio that ranges from electronic, mechanical, electromechanical industries, and industries that are working in the area of security.

Guilherme: Wow, Dias, that's that million-dollar question that we could do ten podcasts. What I see there of big changes, the main one, I will list three. The change that today is continuous from the product that was 100% mechanical, it has transformed into electromechanical. It is starting to become electronic. And when it becomes electronic, it is divided into some pillars. A security pillar, a connection pillar, an IoT pillar.

And it starts to become more electronic. So the industry that was 100% mechanical, ten years, and let's talk there, wow, there are industries that made air conditioners, for example. Although it had electronics, it was simple electronics. Now you take an air conditioner, it is connected with Bluetooth, it has a security system. From your home you connect it, turn it off, turn it off, it is on your cell phone. It starts to have features that go from embedded electronics, security. That is, this industry is starting to put a foot, or has already put in electronics.

So I see this very big change. I gave this example of the air conditioner, but I can talk about products that go from hair straighteners to more complex products, which are today cell phones, TVs, security cameras inside your house.

Guilherme: I love talking about automotive. I worked seven years in an automotive industry, and what I find very curious and important in the automotive industry? The automotive industry has some numbers that are public.

Among them, 20 years ago there was an average of 400, 300, 500 electronic components in the cockpit of a car. Today, jumping to 2023, 2024, we talk about more than 1,500 electronic components, only in the cluster, in the cockpit of the car, which are complex components, expensive components, and then we have another part, which is the software part.

In the past, the software that was embedded in a car, it was small, it was simple, it was perhaps to make a connection with another part. Today not, today you have operating systems with GPS, which are connected via satellite, along with your cell phone, which have great security behind. So today automotive looks at this and says, am I going to make an investment to handle all this part of the car's security, or do I have a company today that can help me. Whether just in programming or in development, because in automotive we talk about developments that we start today, to implement in one, two years.

Guilherme: The data, I think there, from the issue of how data control is done today, today data is the new oil. So, security banks, firewalls, all these devices to ensure that the customer's software is secure, today I know that the customer has and we also have. Second point, how to work this software inside the car? Or the vehicle itself, because we are going to talk about motorcycles there, motorcycles are also not far from that. They are very heavy, in the past a software, I'm talking about 10 megas, 20 megas, today I'm talking about 20 gigas. So, the way it was treated before changed, in the past there was a way there, maybe secondary, tertiary.

Today it is primary, today it is top one priority for these companies, to have secure software. Again, as it became something big, complex and expensive, companies ask a question, which I think is a change in mentality that I have seen in recent years. Should I invest and put my CAPEX in assets to do that, or am I going to do an OPEX and look for a solution, be it an EPS, some other solution in the market, which is a specialist in that and will absorb the costs.

So, I see this slow change, last year it was very verticalized, today companies say, no, I'm going to distribute to those who know how to do it. So, this person here is a specialist, this partner is a specialist, this one too. So, I see this very big and strong change.

Guilherme: You said the key word, impacts, bottlenecks, reduction of OEE, all that today is catastrophic within an industry. In the past, some industries did this in circuit, that test with needles that touched the board, did a test, recorded software. It was possible, because it took 2, 3 seconds, so it was not a big production bottleneck. Today, what do we observe? Going back 20 years in time, perhaps the recording time of an electronic component was on average 3, 4, 5 seconds. Today, going back again to 2023, 2024, we have complex memories like an MMC, an MCP, where the recording time can turn into 20 minutes.

So, you imagine Jazzly today, an industry, managing this in her production process. Either she will have several test platforms, and then, again, she starts to deviate from her core business, or she will have a big production bottleneck. So, yes, today this, in some specific industries, is a production bottleneck.

Guilherme: I see today, Jazzly, industries increasingly considering outsourcing, and then it is a very individual account. Some companies see this as a benefit. I'm not going to be investing, again, capex, I'm not going to put 2, 3, 4, 5 million there to implement a secure area to do this process, or not. I'm going to do the following, I'm going to take this here, I'm going to put a part, I'm going to pay a monthly amount to EPS, which is a unit cost, to do the recording process.

And how we work today in this process, and I'm also very proud to talk about this, are 100% automatic machines, with electrical tests, EOI tests, coplanarity tests on the component terminals to ensure that they are not misaligned, this will generate a problem, be it a field return, or even a more complex recall. We will add encryption, if necessary.

We will develop with the customer. So, today EPS of Asley, is not just today a supplier that you deliver the solution, she receives, she will accompany you in this process. She will develop together with the engineers, say this process here is robust, the security algorithm is this way, and even if the customer already has, sometimes, the ready solution, what does our development team there in the Czech Republic do? There they have several engineers, electronics, automotive, mechatronics, software and security, they will say, look, our recommendation is ABC, or then, guys, this one is ok.

Guilherme: I'm going to do the following, Diesley, behind me here, not just beautifying our podcast today, I have our carrier tapes. What are carrier tapes? What do they do? How do they bring benefit and advantage to customers? In the past, not too distant, as I told you, there was a manual assembly process that was accepted by industries. So, today, in the past, there was an operator placing an item that perhaps came in bulk to him, he placed it on the board, or he placed it in a station, which in the future passed through a soldering machine and then passed in the SMD, etc. And what did industries see? Time is money, we need to optimize processes, our indicators are under pressure, the end customer wants automation.

What did EPS do? EPS developed, Diesley, what we call today carrier tape. And what is carrier tape? Carrier tape is a customized tape, made in the dimension of the customer's component, which aims to allow today that any item be taped in an SMD reel. So, this tape here in my hand, I'm going to show a little bit of it to you, it is a tape made of antistatic material in the exact dimension of the customer's component, that is, it is customized, the customer's component enters here, then it is sealed and it is sent to the customer already on an SMD reel. That is, that process that was manual, today the customer can easily do it on his SMD line.

So, he can optimize his resources, reduce labor, if it is a strategic value for him, and mainly bring automation and safety to the SMD process. And the interesting thing, Diesley, is that initially we developed this process here in Brazil, which is already active whether in our unit in Manaus, as well as in our unit in Americana here in São Paulo, focused on electronic components, 100% in electronic component. But what did we observe? That there was a customer who had a small PCB, a connector, a metal shield...

Guilherme: And the cool thing is that the customer showed us his need. Then, again, the importance of us being in this value chain close to the customer. When the customer came to us, he said like this, EPS, I have this component here. Can I optimize it? Can I put it on a tape to assemble it in my SMD process? What do we do? Our specialists receive a datasheet, a sample, and return there in 24, 48 hours already a technical feasibility study. That there will say can or cannot, here are the conditions.

Guilherme: Look, I'm going to give two very interesting examples. There are industries today that prefer to do it this way, they send the material to EPS, whether in bulk, tube, tray, and say to EPS, I want to receive it in an SMD reel, I just want to receive it, put it in my SMD and assemble. All right, we do that process, we produce the tape, again, this tape here, we tape it with our automatic machines, we seal it, vacuum pack it with an electronic component, send it with a moisture card, the desiccant gel card, and the customer just mounts it on the SMD. That's the first option.

But there are customers, as you said, who already have the technical capability there, and they say, EPS, I just want to receive this tape, can you just change the QR Tape for me? Yes. We produce the QR Tape on demand, we send it on these flanges to the customer, and there he can do the transshipment the way he wants, and we have those Ashley supplies available for those standard market sizes, both here in São Paulo and in Manaus, and we develop, the customer passes us the challenge and we can put a new tooling. Exclusive for his component.

Guilherme: Yes, Diesley. And you know what happened recently? A case that I found quite interesting, right? A customer approached us, a large industry, and he said, look, I receive this part, it was a metal part, but I don't want it like this, I receive it in a bag, I don't know, 500 pieces together, and his process assembled it. He introduced us to who was his supplier, said supplier of stamped metal part, talk to EPS, that is, we ended up going down in the customer's own chain to help his chain, that is, who produced that metal part did not know that there was a preferable solution for his customer, and we integrated that process.

Guilherme: Excellent question, Diesley. Today, customers always bring us good and new challenges. Some end up being recurrent, I'll list them. For example, when the customer buys electronic material, electronic components, in most cases it comes from Asia. You imagine there the transit from Asia, it can be by air, by sea, there is a transshipment in the middle, it stops at a customs post, sometimes the customs officer has to open it, or the material is damaged, etc. It arrives at the customer with a condition that is the packaging torn.

And remember that electronic components, they have a hygroscopic characteristic, that is, they are sensitive to moisture. And inside each package comes a moisture indicator card. So, the customer looks, my card saturated, or in doubt he says, oops, EPS, this material was opened, I want to remove the moisture. And then enters a specific service of ours, which is baking in an industrial oven. How does it work? The customer sends the material to us in the packaging it is in, we accommodate his material inside shelves suitable for removing moisture, and we follow, obviously, some specific rules of the industry, the GDEC tells us that the component MSL 1, 2, 3, 4, 5 of thickness ABCD must stay in the oven for X period of time. So, we return the material to the customer, already in the correct condition, What does this bring?

Security for when he is going to mount it on his product, pass it in the solder paste, in the reflow oven, it will not have a problem, or even a field problem, because sometimes the customer is assembling the material that is open, exposed to moisture, and has there 0.3%, 1% of field return that he sometimes does not understand, the origin, and the origin is this. In this electronic component that was exposed. A little more moisture.