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CM News
December 31, 1969 |Estimated reading time: 11 minutes
Large CMs Continue Impressive Growth
ALAMEDA, Calif. Reported fiscal revenues for the world's 12 largest contract manufacturers (CM) grew an average of 42 percent in 1999 compared to 1998, according to Technology Forecasters Inc. (TFI). This growth is within a few percentage points of the company's predictions, which called for a 39 percent revenue growth.
Individual growth rates ranged from essentially "flat" growth by SCI Systems to 111 percent growth by Singapore-based Natsteel. "Our industry forecasts tend to be conservative," said TFI's COO Eric Miscoll, Ph.D., "but we remain very bullish for the long term growth prospects of these leading companies."
According to TFI, this growth is fueled by name-brand electronic equipment companies' decisions to outsource more of their design, supply chain management, manufacturing and distribution functions. "The top 12 suppliers have accomplished this remarkable growth by acquiring customers' manufacturing facilities to run them at lower costs; acquiring competitors, such as Jabil Circuit's purchase of GET Manufacturing during 1999; acquiring companies in the supply chain, such as SCI Systems' purchase of TAG Manufacturing; and 'organic' growth generating more business from existing and new customers without acquisitions," said Pamela Gordon, TFI president.
Impressive growth rates were achieved in 1999 by some of the world's approximately 3,000 CMs not among the largest 12 but this medium- and small-sized group of suppliers did not grow as quickly as the largest. "This disparity of growth rates will continue," said Gordon, "as the largest companies tend to have better access to capital for acquisitions. Medium- and smaller sized [CMs] will continue to serve customers who want to constitute a larger percentage of its suppliers' revenues and therefore attention. Unlike the automotive industry, this service industry will not eradicate the medium- and smaller tier companies."
Looking ahead, Miscoll believes that impressive growth rates for the CM industry will come from outsourcing decisions by name-brand electronic equipment companies in the wireless communication, automotive electronics and consumer electronics industries. "This growth in outsourcing owes to heated demand for these electronics-intensive products and the necessity to minimize cost of goods sold in these price-competitive markets," Miscoll said.
For more information, visit www.techforecasters.com.
MCMS and Avail Partner
ANN ARBOR, Mich. and NAMPA, Idaho Avail Networks and MCMS Inc. announced a strategic partnership for manufacturing services. Under the agreement, MCMS will act as the sole-source provider for Avail's new Frontera broadband products, which enable delivery of integrated data, voice and video services to subscribers over unified access networks. MCMS will provide Avail with a full range of manufacturing services, including complex board-level assembly, system integration, final test and end-order fulfillment.
"We are pleased with this opportunity to support Avail's growth," said Rob Subia, president and chief sales and marketing officer for MCMS. "Through this strategic partnership, Avail can leverage MCMS' technology and proven experience with complex assemblies and global distribution to successfully meet the demands of a growing broadband market."
Don Taylor, vice president of operations and engineering at Avail, commented, "[We were] seeking a [CM] with world-class manufacturing capabilities and a reputation for high quality. We wanted to develop not just a customer/vendor relationship, but a partnership with a company whose business model and objectives fit well with our objectives to become an industry leader in an emerging market space. MCMS, whose strength lies in its people and in its commitment to the success of our new products, is the perfect match for Avail."
SMTC to Acquire Pensar
TORONTO SMTC Corp. plans to acquire Pensar Corp., Appleton, Wis., an electronics design and manufacturing services provider. Pensar offers turnkey electronic product development, application-specific integrated circuit (ASIC)/field-programmable gate array (FPGA) design, firmware development, mechanical design, design for manufacturing (DFM)/design for test (DFT), product verification and electromagnetic compatibility (EMC) testing. The company operates in a 75,000 sq. ft. design and manufacturing facility in Appleton and a design center in Minneapolis.
"We are very excited to have the Pensar team join our group of companies," said Paul Walker, SMTC's president and CEO. "We believe that both our customers and our organization will benefit from Pensar's engineering depth and front-end design experience. Their Midwestern manufacturing site fits well within our plan to expand our global presence in strategic markets."
Stan Pizak, Pensar president, commented, "We believe the joining of our firms offers all of our customers a much broader suite of services and the opportunity to enjoy the benefits of a company with a global reach. In addition, SMTC's size and scalability will allow us to capitalize on the large manufacturing opportunities that are being created from our robust product design and development services."
International Expansion Continues
MILPITAS, Calif. Solectron Corp. signed a definitive agreement for the acquisition of Bluegum Group, an Australian CM. Upon receipt of the proper legal approvals, Solectron will offer employment to all of Bluegum's approximately 700 manufacturing, engineering, customer service and related support employees, and will add approximately 317,000 sq. ft. of manufacturing capacity.
As a result of the agreement, Solectron will be gaining new product introduction (NPI), manufacturing, systems assembly and services capability in Liverpool, New South Wales; Wangaratta and Melbourne, Victoria; and program offices in Sydney, North Melbourne and Singapore. The acquisition was expected to close by the end of July.
"We are pleased that this acquisition will bring Solectron into a new geography," said Ken Tsai, Solectron's senior VP, Solectron Corp. and president, Solectron Asia. "Strategically, this announcement is very significant for us as we will be the only global electronics contract manufacturing organization to have a direct major presence in Australia and New Zealand."
In a separate announcement, Solectron signed a definitive agreement with IBM Corp. to acquire the company's manufacturing operations in Hortolandia, Sao Paulo, Brazil. Solectron will assume responsibility for the systems configuration and assembly of IBM's Personal Systems Group, Retail Systems Solutions Group and Enterprise Systems Group products sold into the Brazilian, Mercusol and Andean markets.
As part of the multiyear agreement, Solectron will provide IBM with an extensive range of integrated services, including NPI support, printed circuit board (PCB) and systems assembly, product configuration services, repair, and end-of-life product support. By acquiring IBM's manufacturing operations, Solectron gains 140,000 sq. ft. of manufacturing capacity, and will offer employment to approximately 220 IBM employees. The agreement was expected to close by the end of June.
"We started working with IBM 22 years ago and are excited by the opportunity to further expand our strategic global supply chain partnership with IBM while also expanding our capacity and capabilities to serve the fast-growing Brazilian electronics market," said Walt Wilson, senior VP of Solectron's business integration and information technology, and president of Solectron Americas.
Finally, in other company news, the National Conference for Community and Justice (NCCJ) granted Solectron chairman, president and CEO Ko Nishimura, Ph.D., its Community Service Award in recognition of his distinctive and honorable leadership.
"I am honored to receive this award," said Nishimura. "I believe that integrity should be at the heart of any enterprise, whether it is a company or a personal undertaking. I would like to accept this on behalf of my family and all the 47,000 associates of Solectron who embody the principles that this award stands for."
EMI Expands Headquarters
SANTA ANA, Calif. Express Manufacturing Inc. (EMI) expanded its operations to include a new 30,000 sq. ft. facility adjacent to its Santa Ana headquarters. The new building will house turnkey management personnel and provide additional production space reportedly needed to meet customer demand.
The increased production space is predicted to boost turnaround time by 20 percent, especially in the area of box build. Much of the building's capacity will be devoted to box-build programs, from initial design concept through the finished product. Additionally, the stock room will be relocated from the current facility, allowing for a twofold increase in inventory capacity.In the next several months, EMI reportedly will be hiring engineering support, distributors and material management personnel to be housed in the new building. Research and development of in-house technology and equipment also will be conducted at the facility.
"As the electronics industry advances, production schedules and the quality of turnkey services become much more critical," said C.P. Chin, president of EMI. "This new building will allow us to optimize our manufacturing capabilities and staff resources, so that we can continue to exceed our clients' time-to-market expectations with defect-free quality."
SCI Orders More Software
HERZILYA, Israel Tecnomatix Technologies Ltd. received a follow-on order for software and services from SCI Systems Inc., one of the world's largest CMs. These orders follow the original $3.8 million order received last summer for combined Tecnomatix and Fuji Machine Manufacturing Co. Ltd. software and services, from which Tecnomatix received $2.1 million from the order.
Reportedly, SCI will implement Tecnomatix eMPower software to generate assembly instructions and shop-floor documentation at its newly acquired Israel plant for manufacturing telecommunications equipment. SCI also is expanding use of the software in its Thailand plant to include production control and monitoring (PCM) tools for assembly.
"Tecnomatix has continued to earn our business by consistently striving to understand the business opportunities in the market and then delivering solutions that allow us to capitalize on those opportunities," said Chuck Richardson, corporate engineering manager, SCI. "[Our] operating philosophy combines quality products, competitive prices and customer responsiveness to achieve a proven foundation for success, and the Tecnomatix solutions have taken an active role in helping us accomplish these goals."
CM Produces POS System
WESTERVILLE, Ohio Micro Industries Corp., a CM providing electronic engineering, manufacturing and system integration resources to OEMs, introduced a new point-of-sale (POS) system comprised of a highly integrated personal computer (PC)-compatible computer with a liquid crystal display (LCD)/touch-screen display. This announcement officially marks the company's entry into the PC systems market.
The POS system reportedly operates on all PC-compatible software. It is configured with highly integrated motherboards, minimizing the number of interconnects in the system and improving system reliability."In order to better serve our customers, Micro Industries offers standard, semi-custom and custom systems for a variety of applications," said Michael Curran, president and CEO. "Some of the largest demand we see for these systems is within the POS, kiosk and industrial control markets. With high-performance PC functionality tightly coupled with a graphical user interface, our new POS system is ideal for companies seeking a solution for these applications."
Taking on Rio
CONCORD, Mass. Manufacturers' Services Ltd. (MSL) was selected by S3 Inc. to provide global manufacturing services for the company's Rio digital audio players. MSL's sites in Salt Lake City; Athlone, Ireland; and Asia will provide a suite of services designed to help S3 bring products to market quickly and cost-effectively, reduce the landed cost of doing business in key markets, and ensure flexibility and responsiveness in meeting market demand.
"The market for our products is growing rapidly each year and we need a manufacturing partner that can scale with us globally to meet the demand," said Mike Nelson, vice president of operations for S3. "MSL's top-to-bottom commitment to driving customer satisfaction ensures that we will get the high-quality support we need to get products to market fast."
MSL will provide NPI services from its Salt Lake City site to help speed the ramp-to-volume production worldwide. Later this year, MSL's Ireland operations will provide high-volume SMT production, systems assembly, test and distribution throughout Europe.
New Indiana Facility Opens
JASPER, Ind. Kimball Electronics Group (KEG) opened a new manufacturing facility in Jasper, Ind. The fully automated facility allows the company to manufacture high-mix and low-volume assemblies as well as have test capabilities to meet the needs of its customers. Initial production runs have already begun at the facility.
Along with the facility, Kimball Engineering Design Services will be implementing a material-handling process that will allow for prototype builds, pilot runs and low-volume production, all executed within a material resource planning (MRP) system. The process is said to provide minimal duplication during critical, early stages of NPI, while not slowing the material procurement process.
According to Don Charron, president of KEG, "This strategic move strengthens our high-mix/low-volume initiatives and provides customers' assemblies to evolve to our high-volume facility located on the same campus."
Nordic CM Acquired
SAN JOSE, Calif. Sanmina Corp. acquired Essex AB, a CM in the Nordic region. Essex has four ISO certified, state-of-the-art manufacturing facilities in Sweden and Finland. Capabilities include engineering design, PCB assembly, system integration and test, as well as distribution and repair. Communication, medical and industry oriented companies represent Essex's key target markets. Products include radio base stations, RF filters, power supplies, ventilators, dialysis systems, industrial computers and control systems.
Essex has approximately 1,000 employees and will be a wholly owned subsidiary of Sanmina. Rune Glavare, the founder and CEO of Essex, will continue to manage the company and report to Mike Landy, president of Sanmina Europe.
"The acquisition of Essex AB further strengthens Sanmina's European footprint, complimenting our operations in Ireland," said Jure Sola, chairman and CEO of Sanmina. "Our global customers are increasingly demanding that their strategic suppliers have the flexibility and service levels to meet their local requirements. We believe Essex provides [us] with the strategic platform to meet these demands, especially in northern Europe, a $6 billion [CM] market."
CM Offers Open House
BOTHELL, Wash. Integrex Inc. held a successful open house on March 22, 2000, to welcome more than 125 representatives of 30 OEMs. Visitors from local established firms, as well as startups in new technology, were in attendance, as well as attendees from California and Western Canada.
Integrex operates in a 53,000 sq. ft. facility with manufacturing lines for automated PCB assembly, systems integration and box build. The company also offers engineering design services and will soon provide order-fulfillment services.
"We seek to develop a partnership," said Ted Volberding, president and CEO, "which means that we get involved with our clients to improve the manufacturability, testability and cost-effectiveness of their products. This close communication is also the key ingredient to successful supply chain management. Being in lock-step with our customers' dynamic production requirements is the best way to [ensure] availability of material without building inventories."
CM Newsmakers
PeopleGroup Technologies Corp. (GroupTech), Tampa, Fla., a subsidiary of Sypris Solutions Inc., appointed William A. Walker vice president of operations. Walker joins the company from Unova Inc., where he was vice president and general manager at the company's Intermec Technologies Corp., Identification Systems Div.
CompaniesCelestica Inc., Toronto, completed the acquisition of IBM's PCB and system assembly operations in Vimercate and Santa Palomba, Italy. For more information, see CM News, May 2000 SMT, p. 100.