Second hand SMT machine:Is it viable?

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Surface mount technology (SMT) machines are the biggest invest­ment for starting an electron­ics manufacturing services (EMS) company. Today, the cost of SMT machines range anything between $50,000 to $3,00,000, which is a big investment while starting a company, when the return on investment (RoI), clientele, etc are all uncertain. Many EMS companies are, therefore, con­sidering with the idea of investing in second hand SMT machines or used SMT machines, which they found to be the best alternative to new SMT machines. Used machine market is about 30-40 per cent of the overall market.

By Jesus Milton Rousseau S

Tuesday, October 15, 2009: Subhash Goyal, managing direc­tor, Digital Circuits Pvt Ltd, says, “Especially for new entrants who don’t have enough orders and have problems with capital investment, buying a used SMT machine is the best option. We tried this method and has been successful.”

Another option is buying re-serv­iced machines that are used machines which are taken back by the vendor and stripped down. Then the vendor replaces all the worn out parts in the machine, re-assembles it and sells it. But this is generally more expensive than the used SMT machines. “We sell few used machines as I­PULSE. Used machines are not easily available in the market,” says Suresh Nair, director, Leaptech Corporation.

Strategic advantages

Buying and using used SMT machines are cost-effective. Adds Nair, “Eco­nomic advantage is the main reason for customers to look for used SMT machines because it can lessen the burden of initial capital investment.”

The cost-saving benefit is espe­cially beneficial for the new entrants. Seconds K M Swaminathan, business manager, NMTronics India Pvt Ltd, “Price is the main advantage for the first timers as they enter business with limited budget.”

Adds Goyal, “Buying used SMT machines also reduces running costs and investments. This is a best op­tion for the new entrants who don’t have enough orders. Generally, Indian manufacturers don’t use full load or use the machine fully, so initially investing a new SMT machine it is not feasible. Later on when business picks up the company can go in for new machines.”

Another strategy for larger EMS companies is to use an SMT machine at one of their plants and later on transfer it to another plant. Jarmo Kolehmainen, managing director, In-cap Contract Manufacturing Services Pvt Ltd, states, “We have one used machine now, which has been trans­ferred from one of our own facilities in Finland. The main advantages are the cost, and in many cases, spares also come along with second hand machines. Also, since we already have similar machines, it becomes easier to use and share the capacity.”

Buying tips

Though there are many advantages yet one needs to check certain pa­rameters carefully while buying old SMT machines. The condition of the machine and also the vintage should be checked. “Especially in the case of SMT machines, old used machines may not have the capability to handle all the components available today,” says Nair. Swaminathan, adds, “Pri­marily, one should check the year of manufacturing, number of hours run, health condition and location (coun­try) of the machine while buying any used equipments.”

Goyal suggests, “The date of manu­facturing of the machine should be taken into consideration. Also, one should check how the machine has been main­tained; whether the model is outdated; whether you will get spares(if the model is obsolete the vendors will support spares only up to nine years); and who will provide after sales service.”

Kolehmainen adds, “One should check for speed, accuracy, and repeat ability as well.” Finally, Nair advices, “A good idea is to buy a used machine which is currently in production with the original manufacturer.”

­Advantages

  • Saves initial cost of investment
  • Saves operating costs
  • Best option for starters

Disadvantages

  • No financing options/loans available as the risk factors associated with these machines are high
  • Annual maintenance contract is very expensive
  • No warranty
  • Difficult to get spares (sometimes)

Where to buy from?

Most of the agents in India deal with used or refurbished machines of their respective brands. Used machines are mostly purchased through third party brokers from international markets. But, this is risky unless and until the machine is physically and functionally inspected directly by the buyer. How­ever it is recommended to go through the local representative to procure such equipments to get assurance on the ma­chine’s performance upon arrival and also for hassle free service and spare parts support. There are many interna­tional players like Adopt SMT, SMTnet, Tekmart International, who offer used SMT machines via internet.

Cost of used machines

Generally, used SMT machines are 50 per cent less the cost of new machines. The price difference between a new and used machine depends on the vintage, model and the configuration of the machine. Used machine prices purely depend on the year of manufacturing, number of hours run, health condition and country where it is located.

Kolehmainen adds, “We prefer new machines because of constant technology changes and customer needs. So, while we buy used SMT machines, we prefer those which are almost as good as a new machine. Hence, the price difference varies from 15 to 30 percent only.”

Some limitations

Used SMT machines come with no guarantee or warranty. Generally, new machines have a warranty of one year; re-serviced machines have a warranty of 3-6 months. The annual maintenance contract is also expensive for used machines. Nair adds, “We do offer warranty and support for all our machines including used machines.”

Swaminathan concludes, “If the machines are refurbished by us, we will offer certain months of warranty. However, warranty adds cost to the equipment. So in this case customer is the best judge to decide for the need of a warranty.”

But bigger companies need to have a risk-free operation and hence depend on AMC. “We have AMC’s with reputed service companies. They take care of the preventive mainte­nance/service,” says Kolehmainen.

When to scrap machines?

The technological developmentsare the main hindrance to the use of used SMT machines. New miniaturised compo­nents like 0201, ball grid arrays (BGA) cannot be handled by old machines.

Goyal says, “Generally clients specify the make of the components, size and shape. After a certain period of time when new size of components come in, old machines cannot handle them. We bought a machine and used it for only three years; we couldn’t use it longer because the size of the components changed.”

Electronics Bazaar, South Asia’s No. 1 electronics B2B sourcing magazine

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