In October, Syntax-Brillian Corp. opened what is believed to be the first facility in the United States for assembling high-definition flat-panel televisions.

Located in Ontario, CA, some 50 miles east of Los Angeles, the facility spans 50,000 square feet and includes a Class 10,000 clean room. The facility is capable of producing more than 200,000 televisions annually on a state-of-the-art semiautomatic assembly line. The facility will initially employ 120 people in one shift, but a second shift is expected to be added next year.

Syntax had been making its televisions in Taiwan, where the plastic parts and printed circuit boards for the sets are made. The assembled sets were then packaged and sent on container ships to Long Beach, CA. In 2005, the company decided to shift assembly to North America, where it expects demand for wide-screen LCD televisions to soar. Locating the plant in Southern California will allow Syntax to react to changing demands more quickly, better control inventory, and save the 5.3 percent duty it had to pay on each imported set. These savings will add 5 to 7 percentage points to the company's gross profit margin, says Syntax CEO Vincent Sollitto.

"Now we don't have the inventory of completed TVs sitting on the water for three weeks," Solitto says. "And we use about one-tenth as many containers to send the raw materials across."

While the troubles of the Big Three automakers and their suppliers have made national headlines this year, the opening of the Syntax facility came with little fanfare. In fact, the new Syntax facility could very well represent the comeback of television manufacturing in the United States, and it's just one example of how assemblers nationwide are still investing in new assembly technology.

Across the country, manufacturing engineers and managers at new assembly plants and old ones are plugging numbers into spreadsheets and planning their capital equipment budgets for 2007. ASSEMBLY magazine's 11th annual capital equipment spending survey strongly suggests that the managers at Syntax will have plenty of company cutting checks for assembly technology next year.

According to our survey, U.S. assembly plants will spend $2.83 billion on new equipment in 2007. That's an increase of 3.6 percent compared with the $2.73 billion projected to be spent this year.

All totaled, more than three-fourths of assembly plants will allocate at least as many dollars to new assembly technology next year as they did this year. Specifically, 30 percent of respondents will spend more on assembly technology in 2007 than they did in 2006. That's not quite as large a percentage as in past years, but it's hardly the lowest either. In addition, a little less than half our respondents (47 percent) plan to spend about the same next year as they did this year.

On the other hand, 23 percent of respondents will spend less in 2007 than they did in 2006. That's the highest percentage since 2003, and it could represent some scaling back in investment, particularly among assemblers of tractors, presses and other machinery (NAIC 333) and transportation equipment (NAIC 336).

Two promising signs for the economy can be found in manufacturers' motives for buying assembly equipment. Nearly half of respondents (48 percent) are buying equipment next year to increase capacity. That's an increase of 10 percentage points compared with last year, and it's the highest percentage since 2000. In addition, 39 percent of plants will buy equipment next year to assemble a new product. That compares with just 30 percent in 2005, and it's the most since 2002.

Actual budget figures also point to an increase in spending next year. For example, 25 percent of respondents will spend at least $250,000 on assembly technology in 2007. In 2006, only 20 percent expected to spend that much. The median equipment budget for 2007 is the same as it was in 2006: $50,000. However, the average budget for 2007, $431,103, is nearly twice the average budget for 2006, $239,988.

If assemblers do increase spending next year, they may very well be tapping into funds leftover from this year's capital budgets. In August-when most of our surveys were completed-just 43 percent of assemblers had spent 70 percent or more of their 2006 equipment budgets. That's the lowest percentage in 11 years. By way of comparison, 50 percent of plants had spent at least 70 percent of their budgets in 2005 and a whopping 84 percent had done so in 1997.

What Assemblers Want-And Why

Ironically, the assembly technology that appears on the most wish lists for 2007 doesn't actually fasten, join, test or position parts. It's computers and software. Half our respondents will buy computers and software for their facilities next year, up from 46 percent in 2006. All totaled, assemblers will spend $231.9 million next year on technology such as programmable controllers, industrial PCs, manufacturing execution systems, process monitoring software, simulation software and design software.

System integrators could have a pretty good year in 2007. Twenty-eight percent of our respondents plan to invest in high-speed, multistation automated assembly systems next year. That's up from 16 percent in 2006 and it's the highest percentage since 2003. All totaled, assemblers should spend around $565.6 million next year on automated assembly systems, a 4 percent increase from 2006 spending.

Suppliers of electronics assembly equipment won't be nearly as lucky. Only 15 percent of our respondents will buy pick-and-place machines, paste printers, reflow ovens and other circuit board assembly equipment next year. That's the lowest percentage in 11 years. In all, our readers will spend approximately $127.3 million on electronics assembly equipment in 2007, or slightly less than the 2006 total of $128 million.

An unexpected result from this year's survey is the soaring demand for motion control equipment. Some 24 percent of assemblers will buy indexing tables, linear slides, pneumatic cylinders, electric motors and other gear for moving and positioning parts next year. That compares with 14 percent in 2006 and 17 percent in 2005.

Perhaps this is an indication of the growing popularity of building some assembly equipment in-house. Next year, manufacturers will fulfill approximately 40 percent of their assembly system needs with equipment built in-house. A decade ago, that ratio was only 34 percent. All totaled, assemblers will spend $73.5 million on motion control equipment next year, up 22.5 percent from 2006.

Whether they're buying multistation automated assembly systems or power tools, manufacturers don't anticipate a quick return on their equipment investments. Since our survey began, the percentage of plants that expect a return on investment (ROI) of less than 2 years has gradually diminished. In 1997, 60 percent of plants expected to pay off their investment in less than 2 years. Next year, just 50 percent have so short an ROI period. That's an all-time low for our survey.

The No. 1 reason for buying equipment in 2007 is, as always, cost reduction. Other reasons include:

• increase capacity, 48 percent.
• assemble a new product, 39 percent.
• replace worn-out equipment, 46 percent.
• reduce cycle time or eliminate a bottleneck, 26 percent.
• implement lean manufacturing, 20 percent.
• improve product quality, 17 percent.

The No. 1 target for cost reduction in 2007 is, as usual, direct labor. Other targets include:

• indirect labor, such as setup, maintenance and material handling, 37 percent.
• scrap and rework, 36 percent.
• materials, 27 percent.
• warranty and field service, 14 percent.

Size Matters

On the surface, the largest manufacturers seem to be leading the way in capital spending for next year. For example, 42 percent of companies with 500 or more employees and 38 percent of companies with 250 to 500 employees will spend more on equipment in 2007 than they did in 2006. That compares with 28 percent of companies with less than 100 employees and 30 percent for the nation as a whole.

Of all the assembly plants with equipment budgets of $1 million or more next year, 41 percent have at least 500 employees. In comparison, only 12 percent of companies with million-dollar budgets have less than 100 workers. On average, plants with at least 500 employees will spend more than $3 million on assembly technology in 2007, while plants with 250 to 500 employees will spend $322,306. Facilities with 50 to 100 employees will spend $241,415 next year, while companies with 26 to 50 employees will spend $97,417.

That said, the nation's largest manufacturers have not been contributing as much to total equipment spending as they once did, and next year will be no exception. Companies with more than 500 employees will account for just 24 percent of total spending on assembly technology in 2007. That compares with 30 percent in 2006 and 65 percent in 1999, and it's the lowest percentage for companies that size in the history of our survey.

In contrast, the amount of total spending that can be attributed to companies with fewer than 100 employees has gradually increased over the years. Companies with fewer than 100 employees will account for 31 percent of total spending in 2007. That's up 9 percentage points from 2006, and it's fully 10 times the percentage for companies that size in 2001.

And, though a greater amount of large companies than small companies will spend more on equipment next year, fewer small companies expect to spend less next year than do large companies. Just 15 percent of plants with fewer than 100 employees will spend less on assembly technology in 2007 than they spent in 2006. That compares with 23 percent for all U.S. plants and 21 percent of plants with more than 500 employees. In fact, large companies have outnumbered small companies in this regard for 11 straight years.

Machinery Manufacturing

For the first time since our survey adopted the North American Industry Classification System, machinery manufacturers (NAIC 333) will not rank among the top three industries in terms of overall spending on assembly technology. Machinery manufacturers will account for just 15 percent of total equipment spending in 2007, putting this industry above only Miscellaneous Manufacturing (NAIC 339) at 6 percent. All totaled, machinery manufacturers will spend $424.2 million on assembly technology in 2007, some 44 percent less than what the industry spent in 2006.

Just 5 percent of plants in NAIC 333 will spend more than $1 million on assembly technology next year. That compares with 7 percent for all U.S. plants, and it's less than half the percentage for this industry in 2006. Twelve percent of machinery manufacturers will spend between $250,000 and $1 million, and 83 percent will spend less than $250,000. In 2006, those figures were 8 percent and 80 percent, respectively.

On average, assemblers of hay balers, bulldozers, band saws, vending machines, gun sights, tripods, air conditioners, ball joints and boring machines will spend $172,460 on assembly technology in 2007. That's the lowest average for this industry in 3 years. The median budget figure is $25,000. That compares with $40,000 in 2006, and it's the lowest such figure of any industry.

Still, it's not all doom and gloom in NAIC 333. In September, Stihl Inc. (Virginia Beach, VA) broke ground on a new manufacturing facility near its corporate headquarters. The facility, which will make chain saws, will span 60,000 square feet and cost $20 million. And in October, Cummins Inc. (Columbus, IN) announced plans to add 600 to 800 jobs as it begins production of a new light-duty diesel engine.

Fabricated Metal Products

In October, Mueller Water Products Inc. (Tampa, FL) announced that it will close its manufacturing facility in El Monte, CA, by June 2007. The facility makes brass hydrants, valves and other products for water service and fire protection. The casting operations will be done at the company's new lead-free foundry in Decatur, IL. The assembly operations will be transferred to the company's facility in Albertville, AL.

The move is one example of how manufacturers in the fabricated metal products industry (NAIC 332) are modifying their operations to cut costs, increase efficiency and implement new processes. They're also investing in assembly technology. Indeed, just 12 percent of plants in NAIC 332 will spend less on equipment in 2007 than they did this year. That's half the percentage for the nation as a whole, and it's the lowest percentage for this industry in 11 years.

All totaled, manufacturers of windows, cans, fasteners, valves, bearings, guns and other fabricated metal products will spend $707 million on assembly technology next year, or slightly less than the industry spent in 2006. NAIC 332 will represent 25 percent of total spending next year. That's a bigger share than any other industry, and it marks the first time in the survey's history that NAIC 332 has held that distinction.

Six percent of plants in NAIC 332 will spend more than $1 million on assembly technology next year-twice the percentage in 2006. On the other hand, only 6 percent will spend between $250,000 and $1 million, which is considerably less than the 2006 figure of 19 percent. Some 88 percent will spend less than $250,000. That compares with 78 percent in 2006 and 77 percent for the nation as a whole.

The average equipment budget for NAIC 332 is $226,429, while the median budget is $100,000. In 2006, those figures were $199,541 and $75,000, respectively.

Quality is a growing concern in this industry. Since 2001, NAIC 332 has consistently posted a greater percentage of plants investing in equipment to improve the quality of their products than the nation as a whole. Next year, for example, 29 percent of plants in NAIC 332 will buy equipment to improve product quality. In contrast, only 17 percent of all U.S. plants will do so.

Computers and Electronics

In September, Gateway Inc. (Irvine, CA) opened a new configure-to-order assembly facility in Nashville, TN. The plant is expected to employ more than 300 people by the end of its first year of operation. Coming on the heels of the opening of Dell Inc.'s (Round Rock, TX) new assembly plant in Winston-Salem, NC, it's emblematic of the sharp increase in technology investment among manufacturers of computers and electronic products (NAIC 334) during the past 2 years.

Eighteen percent of manufacturers in NAIC 334 will spend $1 million or more on assembly technology next year. That compares with just 5 percent of machinery manufacturers, and it's more than twice the percentage for the nation as a whole. In addition, 23 percent of plants in NAIC 334 will spend between $250,000 and $1 million. In 2006, that figure was just 6 percent.

On average, assemblers of clocks, disk drives, video cameras, telephones, radar equipment, thermostats, microchips and other electronic products will spend $593,414 on new equipment in 2007, up from $209,500 in 2006. The median budget total is $50,000, up from $30,000 in 2006.

All totaled, assemblers in NAIC 334 will spend $452.5 million on capital equipment in 2007, an 83 percent increase from 2006 outlays. NAIC 334 will account for 16 percent of all spending on assembly technology next year, or almost double the industry's 2006 ratio.

Electrical Equipment and Appliances

In October, Oreck Corp. (New Orleans) opened a new vacuum cleaner assembly plant in Cookeville, TN. The 310,000 square foot facility will initially employ 100 people and is the company's second major U.S. assembly plant.

As the Oreck Corp. can attest, rumors of the demise of the electrical equipment and appliance industry (NAIC 335) in the United States have been greatly exaggerated. Indeed, assemblers of lamps, stoves, mixers, electric motors, batteries and other electrical equipment will spend, on average, $1.1 million on capital equipment in 2007. That's the highest average of any industry, and it's more than twice the national average. The median budget total for NAIC 335 increased from $65,000 in 2006 to $100,000 in 2007.

All totaled, manufacturers of electrical equipment and appliances will spend $537.3 million on assembly technology next year, or about 19 percent of all capital equipment spending in the United States next year. That ratio puts NAIC 335 on par with manufacturers of planes, trains and automobiles, and it's largest ratio for this industry since 2005.

Transportation Equipment

Focusing solely on the trials and tribulations of the Big Three automakers and their suppliers, it's easy to get a distorted view of capital spending among manufacturers of transportation equipment (NAIC 336). In fact, this industry comprises not only carmakers, but also manufacturers of passenger jets, military aircraft, jet engines, motorcycles, trains, missiles, helicopters, boats, tanks and heavy-duty trucks. And those manufacturers are enjoying booming business.

Moreover, there are many other automotive OEMs in North America today that are more than willing to pick up the slack from the Big Three. For example, shortly after this article goes to press, the first Toyota Tundra will roll off the line at Toyota Motor Corp.'s (Toyota City, Japan) latest assembly plant in San Antonio. Twenty-one local suppliers, employing 2,100 people, will have a hand in the production of that first truck.

In that light, it's not surprising that NAIC 336 will account for 19 percent of total U.S. spending on assembly technology next year. True, NAIC 336 accounted for 26 percent of total spending in 2006, but the industry is still the best place to find big spenders.

Fifteen percent of manufacturers in NAIC 336 will spend more than $1 million on equipment next year, up from 4 percent in 2006. An additional 27 percent will spend between $250,000 and $1 million. That's the highest percentage for this industry since 2002, and it's 11 percentage points higher than the figure for the nation as a whole.

Manufacturers in NAIC 336 will spend an average of $429,772 on assembly technology next year, compared with $221,821 in 2006. The median budget figure for 2007 is $65,000.

All totaled, plants in NAIC 336 will spend $537.3 million on assembly technology, a 24 percent decrease from 2006 spending.

Miscellaneous Manufacturing

In September, St. Jude Medical Inc. (St. Paul, MN) opened a new manufacturing facility in Liberty, SC. The 30,000 square foot plant will assemble hybrid microelectronic circuits for implantable pacemakers and defibrillators. The plant will create 300 jobs over the next 5 years.

According to the NAICS, St. Jude and other medical and dental device manufacturers are classified under Miscellaneous Manufacturing category (NAIC 339). Although this category also includes assemblers of sporting goods, jewelry, toys, pens, mops, musical instruments and caskets, there's little doubt that companies like St. Jude are leading the way in terms of capital investment.

According to our survey, 33 percent of plants in NAIC 339 will spend more on assembly technology in 2007 than they did in 2006. That's 3 percentage points more than for the nation as a whole, and it's the highest of any industry. In addition, just 11 percent of plants in NAIC 339 will spend less on technology next year than they did this year. That's the lowest of any industry, and it's half the percentage for all U.S. plants.

For the second straight year, NAIC 339 reported no plants with equipment budgets over $1 million. On the other hand, one out of every four will spend between $250,000 and $1 million next year, which is second only to manufacturers of transportation equipment. The average budget increased from $101,467 in 2006 to $116,062 in 2007. The median budget increased from $25,200 in 2006 to $50,000 in 2007.

All totaled, assemblers in NAIC 339 will spend $169.7 million on assembly technology in 2007, a 56 percent increase from 2006 spending.

Spending Rises in the Northeast

In October, CNH Global N.V. (Lake Forest, IL) announced that it will close its farm equipment manufacturing plant in Belleville, PA, by April 2008. The 540,000 square foot facility, which employs 450 people, had been producing heavy machinery since 1942.

The closing is one of many hits the Northeast has taken during the past few years. However, according to our survey at least, the economy could finally be turning around in the Northeast. Massachusetts, Pennsylvania, New York and the six other states that make up this region will account for 22 percent of total equipment spending in the United States next year. That compares with 12 percent in 2006, and it's the highest percentage for this region in the history of our survey.

One-third of all U.S. plants with budgets over $1 million are located in the Northeast. That ratio is the highest ever for this region, and it marks the first time in 11 years that the Northeast has led all other regions in that percentage.

Thirteen percent of plants in this region will spend more than $1 million on assembly technology, and another 13 percent will spend between $250,000 and $1 million. In 2006, those figures were 5 percent and 10 percent, respectively. The median budget figure for Northeastern plants is $75,000 in 2007, up from $40,000 in 2006. The average budget figure for 2007 is $780,795.

All totaled, Northeastern manufacturers will spend $622 million on assembly technology in 2007.

The South Scales Back

In October, Kia Motors Corp. (Seoul, South Korea) broke ground on the site of its first-ever U.S. manufacturing facility. Located in West Point, GA, the $1 billion facility will be able to assemble 300,000 vehicles per year at full capacity. Scheduled to begin production in 2009, the facility will employ approximately 2,500 workers. Including the five to 10 suppliers that are expected locate nearby, the total number of jobs associated with the new Kia facility could reach 5,000.

With that sort of good news, it's surprising to learn that capital equipment spending in the South will be trending down in 2007. Nevertheless, manufacturing plants in Texas, Alabama, North Carolina, Maryland and the 12 other states that make up this region will spend $566 million on assembly technology next year, down 25 percent from 2006. That figure will give the South a 20 percent share of total equipment spending in the United States next year, an all-time low for the region.

True, 33 percent of Southern plants will spend more on assembly technology next year than they did this year. That's 3 percentage points more than the nation as a whole, and it's about the same as last year's figure of 34 percent. However, 31 percent of Southern plants will spend less on assembly technology in 2007 than in 2006. That's the largest percentage of any region this year, and it's twice last year's ratio.

Actual budget figures confirm diminished spending in the region. In 2006, 9 percent of Southern facilities had budgets of $1 million or more. In 2007, only 7 percent will spend that much. On average, plants in the South will spend $179,089 on assembly technology. That compares with $286,453 in 2006, and it's the lowest average spending figure of any region this year. The median budget figure for 2007 is the same as it was in 2006: $50,000.

The Midwest Stays Ahead

In January, the Ariens Co. (Brillion, WI) announced that it would be making $6.5 million in capital investments this year. The investments are aimed at reducing delivery lead times for the company's line of walk-behind snow throwers, lawn mowers and string trimmers. Among other things, the company is improving its powder-coating systems; revamping its assembly lines to achieve one-piece flow manufacturing; and building a state-of-the-art production and engineering training facility.

It's companies like Ariens that have kept the Midwest as the nation's manufacturing hub despite the woes of the Big Three automakers and their suppliers. Wisconsin, Michigan, Ohio and the nine other states that make up the Midwest have accounted for the lion's share of capital equipment spending for the past 10 years running, and next year will be no exception. Some 42 percent of all spending on assembly technology next year will be done by manufacturers in the Midwest.

All totaled, Midwestern manufacturers will spend $1.18 billion on assembly technology in 2007, an increase of 11 percent compared with 2006.

Thirty-five percent of plants in the Midwest will spend more on assembly technology in 2007 than they did in 2006. That's 5 percentage points more than the nation as a whole. What's more, only 20 percent of Midwestern facilities will spend less on equipment next year. That's 3 percentage points less than the nation as a whole.

Five percent of plants in this region will spend at least $1 million on equipment in 2007, or about the same percentage as in 2006. However, 22 percent will spend between $250,000 and $1 million, compared with 15 percent in 2006.

On average, Midwestern manufacturers will spend $360,750 on assembly equipment next year, up from $240,817 in 2006. The median budget figure will increase from $50,000 in 2006 to $85,000 in 2007.

Optimism in the West

The opening of Syntax-Brillian's television assembly plant may be the vanguard of increased manufacturing activity not just in California, but in Utah, New Mexico and the 10 other states that make up the West region.

Thirty-seven percent of Western plants will spend more in 2007 than they did in 2006. That's 7 percentage points more than the nation as a whole, and it's largest percentage of any region. Just 12 percent of plants say they'll spend less next year. That's half the national percentage, and it's the lowest percentage for this region in 11 years.

Thirteen percent of Western manufacturers will spend more than $1 million on assembly technology next year-more than twice the percentage for this region in 2006. Moreover, the ratio of plants spending $250,000 to $1 million has also increased, from 10 percent in 2006 to 13 percent in 2007. The average capital equipment budget for Western plants is $783,889-the highest average of any region. The median budget total is $30,000, which compares with $20,000 in 2006.

Despite those numbers, the West will actually account for a smaller portion of total equipment spending next year, from 21 percent in 2006 to 16 percent in 2007. Western facilities will spend a total of $453 million on assembly technology, or approximately 21 percent less than in 2006.

Survey Method and Demographics

ASSEMBLY magazine would like to thank all the respondents who participated in its 11th annual capital equipment spending survey.

ASSEMBLY magazine is sent to 60,214 assembly professionals in more than 35,600 locations. Questionnaires were mailed July 17 to manufacturing managers and other professionals in similar positions, who hold the highest degree of equipment purchasing influence in a representative group of 2,500 plants. Fifty-three percent of respondents are corporate management, 32 percent are manufacturing management, and 15 percent are design management.

The cutoff date for returning the surveys was Aug 21. Some 257 surveys were returned for a response rate of 10 percent.

For statistical reliability, the survey was only sent to manufacturers in NAIC 339 and 332 through 336, which represent 94 percent of ASSEMBLY's readership. Manufacturers of wood products, plastic and rubber products, and furniture were excluded. By industry, 18 percent of respondents are in NAIC 332, 37 percent are in NAIC 333, 16 percent are in NAIC 334, 11 percent are in NAIC 335, 11 percent are in NAIC 336, and 7 percent are in NAIC 339.

Geographically, 22 percent of respondents are located in the Northeast, 42 percent are in the Midwest, 22 percent are in the South, and 14 percent are in the West.

Thirty-one percent of respondents have 25 employees or less. In addition, 18 percent have 26 to 50 employees, 18 percent have 51 to 100 employees, 17 percent have 101 to 250 employees, 8 percent have 251 to 500 employees, and 8 percent have more than 500 employees.

Thirty-one percent of respondents assemble products that can fit inside a 12-inch cube, 20 percent make products that can fit inside a 24-inch cube, 12 percent make products that fit inside a 36-inch cube, 13 percent make products that fit inside a 6-foot cube, and 24 percent make products that are larger than a 6-foot cube.

Some 16 percent of respondents are high-volume manufacturers, 43 percent are mid-volume manufacturers, and 41 percent are low-volume manufacturers. Twenty-eight percent of respondents are high-variety manufacturers, 45 percent are mid-variety manufacturers, and 27 percent are low-variety manufacturers.

Overall, the survey results have a sampling error of ±6 percent.