Interview
A Review of 2022 and an Outlook for 2023
In an interview with RFID & Wireless IoT Global , Thomas Brunner talks about what 2022 was like for Kathrein Solutions, how German companies need to 'rethink' in order to build resilience in challenging times, what new products will be available in 2023, and what new unique selling propositions Kathrein Solutions will soon have.
Thomas Brunner is Managing Director at Kathrein Solutions GmbH. He has worked in various divisions of the Kathrein Group since 1999 and is a sought-after expert for RFID, AutoID and IoT Solutions.
Kathrein Solutions GmbH and its integration partners offer turnkey AutoID solutions including hardware, software, services and support.
1. How was the year 2022 for you?
Brunner: The first quarter of the year was really good. After two pandemic years, a sense of normality had returned. The investment climate in the automotive industry was still restrained at the beginning of the year and many supply processes were under review, but I had the assumption that this would change in the course of 2022. Due to the war in Ukraine, this hope was not fulfilled.
2. What are the concrete effects of the war on German companies?
Firstly, the war has led to uncertainty among the executive levels of companies and therefore, in turn, to a decline in investment. Second, the energy crisis is causing delays in the implementation of projects. In many countries, governments' budgets have dwindled as they are forced to buy "expensive" energy.
Tolling systems in Asia and South America, for example, are only being expanded at a slow pace. In Egypt, for example, there is currently more investment in grain and other goods that are essential for survival. Nevertheless, there is still a considerable need for digitization. As soon as energy costs normalize, I believe the economy will also begin to pick up again.
3. How have the challenging events of 2022 affected Kathrein Solutions?
Not as much as in 2021. As an electronics manufacturer, Kathrein Solutions is not extremely dependent on oil and gas. We are primarily dependent on electronic components such as semiconductors and printed circuit boards, and the situation has improved in this market. Waiting times for semiconductors have dropped from a 40- week wait to 15 weeks, and the trend is downward. The semiconductor shortage has generally affected us less in 2022. Kathrein Solutions has a very efficient purchasing department that pays attention to stocking.
We have therefore always been able to deliver well in the last three years. At times, delivery times have increased from three weeks to six weeks. But production of all parts at the Chemnitz plant has continued.
4. You mentioned in an interview that there is almost no capacity left in Europe for semiconductor and printed circuit board production. How does this affect you in concrete terms?
The status quo after about 20 years of development is that more than two thirds of all semiconductors will be produced in Asia. The largest chip factories are located there, followed by the USA. Although the USA, Europe and Japan are technological leaders in the development and manufacturing of semiconductor components, for cost reasons, the production plants are primarily located in Asia, with potentially fatal consequences for our supply chains if the conflict between China and Taiwan, which is supported by the West, intensifies.
For electronic circuit boards, the situation is even more dire. Nearly all global manufacturing capacities are based in China and Asia. In Europe and the USA, there are only capacities for defense and medical technology. Due to the ongoing trade war between the USA and China, Taiwan and Korea are no longer a secure source of supply. In Europe and the USA, there is simply too little manufacturing capacity for semiconductors and printed circuit boards.
5. What kind of shift in thinking do you think is necessary for electronics manufacturers?
You have to realize that unrestricted global trade also brings risks. It is therefore advisable to store components and build up safety stocks. Relocating production is also a good idea. To the EU, for example, but this can only be implemented at a slow pace. Unfortunately, semiconductor capacities cannot be built up so quickly either.
However, a shift in thinking in all these directions is taking place, and that's good. Fortunately, companies have become more flexible in their changeover. In the future, we will have to avoid dependencies like those in the energy industry and classically have at least two suppliers for the most important components in production. This used to be common, but then the industry moved to the single-source model. This made sense as long as components of a certain design were only available from one manufacturer. This was the case with microcontrollers, for example. There used to be very few manufacturers and types, but the market has diversified considerably. Comparable microcontrollers are now available from several manufacturers in the same quality.
6. What specific changes has Kathrein Solutions undertaken?
Kathrein Solutions has organized the entire production at its plant near Chemnitz in Saxony. In addition, we always try to retain two suppliers for systemically important components.
7. What transformation is necessary for companies in order to become more resilient in the future?
We can clearly see that our infrastructure is not sufficiently protected against threats and damage from inside and outside Germany. Infrastructure protection must be given a higher priority in the future. The Deutsche Bahn has already implemented this: it has a Critical Infrastructure Officer who has absolute veto power on the Board of Management. The Federal Ministry of Interior has set up the Joint Critical Infrastructure Coordination Staff (GEKKIS).
The protection of public spaces with surveillance cameras, for example, will become more important. Self-sufficiency in energy supply is also important. In Germany, we have already come a long way in this respect because of the high proportion of renewable energies. However, we need more solutions for distributing the energy that is generated in the north by wind power and in the south by PV systems – energy that may be needed in the other parts of the country.