Surface mount technology (SMT) machines are the biggest investments when starting an electronics manufacturing services (EMS) company. Hence, many firms are considering the idea of investing in second hand SMT machines, which are the best alternative to costly new SMT machines
By Baishakhi Dutta
The current market cost of SMT machines ranges between US$ 50,000 to US$ 300,000, which is a massive amount to invest for a startup. With the uncertainty of the returns on investment (RoI), a lot of thought has to be given to such high expenditure. Many EMS companies, therefore, opt for second hand SMT machines which are available for just 30-40 per cent of the price of new machines, thus cutting down their initial expenses considerably.
Another option is to buy re-serviced machines. These used machines are taken back by the vendor and stripped down, all the worn out parts are replaced, and the machine is re-assembled. But this process is generally more expensive than purchasing used SMT machines.
Second hand equipment in demand
The most common second hand equipment being sold are pick-and-place machines, reflow ovens, screen printers, etc. Some pre-owned test equipment are also sold, such as AOI or SPI, but their quantity is less as they are more technology-dependent and one needs updated software. Again, while the price of new pick-and-place machines is high, one can get some really good deals on pre-owned equipment. The demand for other used SMT machines is relatively low. Alok Gupta, director of Prosem Technology India Pvt Ltd, says, “Today, when the pressure is to reduce manufacturing costs, sometimes it is a good idea to explore the option of pre-owned equipment.”
When it makes sense to buy second hand equipment
The biggest benefit of purchasing used SMT equipment is the lower cost. Especially for new entrants into the industry, buying a second hand SMT machine is a big boost, as they can enter the business with lower capex.
Suresh Nair, director, Leaptech Corporation, says, “The main reason customers look for used machines is to keep the initial capital investment low. The other reason is that some customers look for machines for a small project, which may run for only a few months.”
Before deciding to buy an SMT machine, it is important to evaluate the pros and cons of going in for a used machine. So let’s have a quick look at what the second hand manufacturing equipment industry comes with.
- The lower price slashes the initial investment.
- Using a second hand SMT is the best idea for startups, given the all-round benefit and budget control.
- No financing options/loans are available as the risk factors associated with these machines are high.
- They come with a very expensive annual maintenance contract (AMC).
- Second hand SMT machines do not come with any warranty, which leads to higher risk factors. Therefore, bigger companies tend to avoid these machines. Instead, they go for AMCs, which provide a much easier maintenance scenario.
Nair acknowledges that, “Occasionally, it is very difficult to get spare parts for second hand equipment.” He adds, “The annual maintenance contract is also expensive for used machines. Machine distributors like us provide complete after sales support for the machines being sold by us. Non-distributors (brokers) will not be able to provide any such support. They just sell, and there ends their relationship with the customer.”
Alok Gupta also believes that the model should not be too old, else spare part availability can become an issue.
What to keep your eyes open for
Whenever one plans to buy an already used product, a lot of factors need to be considered. The year and version of the product, its compatibility with modern technology, the condition of the machine and the vintage – all these parameters are to be thoroughly examined before going in for a used machine.
Says Nair, “Buyers should check whether there is support available for the machine from the manufacturer and whether there is support available locally, because used machines always need support more frequently than new machines. Also, the source of the machine needs to be considered.” He suggests, “A good idea is to buy a used machine that is currently still in production with the original manufacturer.”
According to Alok Gupta, “The equipment should be sourced from a reliable partner. Nowadays, there are a lot of freelancers offering pre-owned equipment. These people just want to make money by selling one or two machines. They sell any brand and hence people should be very careful about who they are buying from.”
He adds, “Sometimes, customers directly buy equipment from unauthorised vendors and then find that there is no local support. Sometimes the buyer gets cheated as well—having paid the money to a vendor but the machine never arrives.”
Where to buy from
Used machines are mostly purchased through third party brokers from the international market. But, this comes with a lot of risk. Until the machine is physically and functionally inspected directly by the buyer, one is never sure what one is buying. However, it is recommended to go through a local, authorised representative to procure such equipment to get an assurance on the machine’s performance upon arrival and also for hassle-free service and spare parts support. Most of the agents in India also deal with the used or refurbished machines of their respective principals. Many international names like Adopt SMT, SMTnet and Tekmart International offer used SMT machines via the Internet. On the other hand, a company like Leaptech Corporation offers pick-and-place machines and reflow ovens mostly from ex-stock.
Gupta says, “Normally, reliable partners offer some service contract along with the machine. If one is buying from the agent of the original equipment supplier, then you can get good support.”
What will these machines cost?
Generally, used SMT machines come at almost half the price of new machines. Used machine prices purely depend on the year of manufacture, number of hours run, overall condition of the machine and the country it is being sent from. The price difference between a new and used machine is also influenced by the particular model and its configuration. Says Gupta, “The condition of the equipment, e.g., is it being sold on an ‘as is, where is’ basis or is it reconditioned, what accessories come with the machine, the hours it has run and the year of manufacture are the key factors that generally determine the price of a machine.”
When should you scrap a machine?
SMT machines often lose their utility value due to the fast advances in technology. Every electronic product is bound to get obsolete once more advanced, compact or more maintainable models appear in the market. SMT machines are no exception. Old models are not compatible with the new miniaturised components that have slowly taken over the market, thus rendering these machines useless.
Nair of Leaptech Corporation acknowledges the fact that startups and companies with small budgets prefer to buy second hand manufacturing equipment, rather than avail government subsidies. According to him, even though the government has introduced various subsidy schemes for equipment installation, applying for and availing these involves tedious time-consuming procedures. The low expenditure yet quicker process of acquiring second hand equipment encourages startups to avoid the government’s monetary aid, even though it is available for new equipment – mainly because of the lengthy bureaucratic procedures involved in getting it.
According to Goyal, “Those who are targeting government subsidies like MSIPS are not the target market for second hand machines. These are suitable for new entrants into a particular industry, enabling them to start off with low investments. Second hand machines are also useful for low cost products like LED lights, etc, to remain competitive.”
Subhash Goyal, MD, Digital Circuits Pvt Ltd
Second hand equipment that is in demand
The main SMT manufacturing equipment are automatic stencil printers, pick-and-place machines, reflow ovens, PCB loaders and unloaders, automatic online inspection equipment, X-ray inspection machines, rework stations, solder paste height measuring machines, solder paste mixers and conveyers. According to Subhash Goyal, all these machines are in demand even in the second hand market since they continue to give reasonably good performance.
What to keep your eyes open for
The budget, usage (load), in-house capability to maintain second hand machines, location (whether in a major city or a small town – a factor that impacts service availability), quality and the sophistication of the product to be handled.
Where to buy from
Most of the second hand machines are imported. These machines are marketed and serviced by the manufacturers’ Indian branches or agents. Generally, Indian branches of the companies are better equipped and offer better service than the agents. The higher the installed base of a particular machine/model in India, the better the service for it will be, both in terms of skills as well as availability of spares.
Factors determining the cost
In the case of all second hand machines, certain factors determine their price. You can compare them with automobiles. While buying a second hand machine, its vintage, usage, model, condition, spares and service availability in India and the credibility of the seller should be kept in mind.
“The second hand SMT model should not be too old else availability of spares parts can be an issue.”
Alok Gupta, director of Prosem Technology India Pvt Ltd
“All major PCB assembly equipment like stencil printers, pick-and-place machines, reflow ovens, wave soldering machines, ICT, AOI, SPI and conveyors are in demand.”
Suresh Nair, director, Leaptech Corporation