Cover story
Contract Manufacturers Moving to a Brazilian Beat
Market Trend
Vertical Integration: An Expansive Idea
Market Makers
News
Solectron To Add IBM Repair Center
It has long been an industry maxim that to sell into the Brazilian market you must manufacture there. Restrictive duties have seen to that. And so one by one, top-tier CMs have set up or acquired operations in Brazil to support OEM customers that need to reach this market. For the EMS industry, perhaps the key attraction of Brazil has been country's investment in telecom infrastructure. Recent developments, though, have raised the temperature of Brazil's telecom market. As a result, telecom heavyweights such as Nokia and Nortel are expanding their manufacturing operations in Brazil. That spells good news for Celestica and possibly other top-tier CMs.
What's more, the EMS industry's mid-tier is now starting to see OEM requirements for Brazil. At least one mid-sized CM, Pemstar, has opened a facility there.
Wireless has been and continues to be a major force in the growth of telecom manufacturing in Brazil. According to Nortel, Brazil is one of the fastest growing wireless markets in the world. Citing data from Brazil's telecom regulator, Bloomberg News reports the number of cell-phone users in Brazil is projected to surge from 15 million in 1999 to 29.2 million in 2001. Helping to fuel this expected growth is the upcoming sale of nine PCS licenses associated with the 1800 MHz band.
Nortel reports that GSM will be the technology of choice for those who buy these licenses. As a result, both Nortel and Nokia will be starting the manufacture of GSM infrastructure equipment in Brazil. Nokia has announced that local production of GSM base stations will begin in cooperation with Celestica.
Although Nortel will expand manufacturing operations at its Systems House in Campinas, Brazil, for GSM equipment and optical Internet products, the company would not say whether this expansion will involve contract manufacturers. Nortel is also starting to ship Access Network equipment from Campinas and will add two models next year. Other products supplied from Campinas includes TDMA wireless infrastructure equipment, where the large volumes are, and PBX systems.
The company tests and integrates equipment at the Systems House, while manufacturing is mostly outsourced. According to a Nortel spokesperson, Nortel in Brazil outsources to the usual CMs that it works with around the world. Solectron and SCI Systems were the two names cited.
Another CM positioning itself for wireless growth in Brazil is Flextronics International. The company recently opened two buildings out of 11 planned for its new industrial park in Sorocaba, Brazil. One is a 161,000-ft2 facility, while the other is an R&D center. According to Reuters, Flextronics is banking on the growth of Brazil's mobile phone market to justify this expansion. In addition, the CM has opened a plant of about 88,000 ft2 in Manaus, located in Brazil's Amazon region where OEMs can receive tax breaks. Reuters reports this plant will start by focusing on consumer electronics.
Then there is Pemstar. This newly public CM has opened a Brazilian facility in the IBM Tech Town facility, a business park in Hortolandia within the Campinas region. At least six customers have asked Pemstar to support their projects in Brazil (see article on p. 4-6). The company says these requests have come especially from the telecom sector.
That sector is also seeing what Nortel describes as the exploding growth of the Internet in Brazil. Nortel, for example, has put together a strategy that combines its Wireless Internet and Optical Internet solutions for Brazil.
Vertical integration remains a controversial topic within the EMS industry. Some providers have embraced the concept; others have not. But to argue for or against vertical integration, one needs to define it. Problem is: the scope of vertical integration continues to expand. To see how far a contract manufacturer can go with vertical integration, consider the case of Flextronics International, one of the most aggressive practitioners of this strategy. Besides the company's well-known positions in design, ASICs, board fabrication, large enclosures and telecom installation, Flextronics has been working behind the scenes in at least two other areas - plastics and logistics.
Plastics are old hat at Flextronics, but the company's global approach to them is new. Logistics, on the other hand, are a brand new capability for Flextronics and perhaps the industry at large.
Plastics injection molding and contract manufacturing generally take place in separate companies. But don't tell that to Flextronics. The company is presenting itself as the only multibillion-dollar CM that is vertically integrated with a global capability in plastics.
Earlier this year, Flextronics quietly gave its plastics operations a name - Flextronics Plastics. No announcement was made nor explanation given. Until now, that is. In an exclusive to MMI, Flextronics has taken the wraps off its strategy for Flextronics Plastics, which the company believes offers a new paradigm for the supply of plastics.
By utilizing plastics operations from around the world, Flextronics Plastics has begun to offer a global launch capability in the US for the plastics portion of an OEM's product. What's more, Flextronics can supply plastics as part of its total solution for an outsourced product.
This offering, says Flextronics, changes the way plastic parts are normally bought and sold. Under the traditional method for supplying these parts, an injection molder sells plastics to engineers and buyers, who treat them as just so many items on a bill of material. Usually serving a local market, the molder is taking what could be described as a tactical approach to the supply of plastics.
Flextronics, on the other hand, believes plastics should be treated differently. "We think it ought to be a strategic aspect of the total product management. So we're trying to change the way people perceive plastics," says Paul Santina, VP of business development and Global Plastics. "So I go to a large company that does laptops, for example. And I say, 'What we ought to do is put together a program where we're going to injection mold and paint plastics for you all over the world to support your global needs for that product.' So no longer are you selling plastics parts to buyers and engineers. You're doing strategic deals with VPs of large groups."
While there are plastics suppliers with global locations, even they will find Flextronics a formidable competitor. The company is going beyond designing and capturing a plastics part to supplying an entire product. Still, plastics companies may want to even the playing field by expanding into contract manufacturing. Santina pooh-poohs this strategy. "You can't be a plastics company and easily transition into the electronic assembly world. That's like going upstream," he asserts.
Flextronics Plastics already has the global locations to back up its strategic pitch. The plastics group counts six locations in China including a new one in Tianjin, two in Thailand, two in Hungary as well as an operation in Mexico, Singapore, Malaysia, Taiwan, Texas, Colorado and Italy. What's more, the group is setting up plastics operations in Nyiregyhaza, Hungary, at a new industrial park, and in Brno, the Czech Republic. Flextronics also plans to mold plastics in Brazil. At present, Flextronics Plastics operates more than 670 molding presses and about one million ft2 of floor space. The group employs over 460 toolmakers in six locations.
The group's Texas facility also serves as its Plastics Technology Center, being developed as a program management command center to launch plastics and tooling programs worldwide. For example, this new activity can provide quotations, tool design, part design, sourcing and program management for a plastics program being launched either serially or in parallel at global sites. For industrial and mechanical design work, the plastics center can call upon Flextronics' design center in Palo Alto, CA, which is part of Flextronics Design and a former location of Palo Alto Products before Flextronics acquired it. In addition, Product Introduction Centers in Colorado and Italy offer design services for plastics programs.
Essentially, Flextronics Plastics supports two kinds of customers: those for whom plastics are part of an outsourced product solution and others who just buy the plastics. Take the first kind. Flextronics supplies the plastics and then manufactures Internet access devices for Sony and Mitsubishi, mice for Microsoft, single-use cameras for Kodak, and inkjet printers for HP, to name some examples. Microsoft's much-awaited X-Box will also fall into this category.
As for plastics-only customers, consider this example. The group supplies plastics for an IBM laptop that is not assembled by Flextronics. What's more, Flextronics' EMS competitors can also be plastics customers. For instance, in Mexico Flextronics ships plastic parts to Solectron to build HP DeskJet printers.
The percentage of external plastics customers versus Flextronics clients who outsource a product and its plastics varies by region. For diversification, Flextronics will reserve a portion of its plastics business for sales to outside customers.
Plastics can be used to penetrate a customer. "We're now using this plastics strategy to open doors and create new relationships in accounts where we weren't successful before," says Santina. "So we kind of use plastics as a weapon to compete with." He tells the story of an unnamed company in the computer industry. Flextronics will be providing this company with injection molding and related services in Mexico, Hungary and China. Before this, Flextronics had not done any business with the company. "As a result of going strategic with them as opposed to tactical, they have invited us to meet with the VP and all the directors of worldwide procurement.... And we are talking to them about doing the entire assembly of this product," says Santina.
Flextronics did not become a global plastics supplier overnight. In late 1996, the company made its first plastics acquisition, a 40% stake in FICO, which gave Flextronics plastics capability in Asia. Flextronics later increased its ownership to 100%. The company's 1997 acquisition of Neutronics included a plastics company, Ecoplast, which had molding operations in Hungary. Also in 1997, Flextronics bought DTM Products, a Colorado-based injection molder. DTM was responsible for setting up a plastics operation on Flextronics' campus in Guadalajara, Mexico. Early on, Flextronics identified plastics as a commodity that it wanted to control in the supply base for its industrial parks located in low-cost regions of the world.
This year, the company acquired Palo Alto Products, which brought with it plastics operations in Thailand, Taiwan and Texas. More recently, Flextronics announced a definitive agreement to acquire Li Xin Industries, a plastics company with about 1700 employees and operations in Singapore, Malaysia, and Northern China. The deal is expected to close in February 2001.
Flextronics Plastics consists of three geographic units, each run by a general manager. The plastics group does not have its own P&L, but Santina expects that it will in the future. Flextronics is in the process of tying the three units together, and this effort includes IT systems. Nevertheless, the plastics group can launch programs globally today, Santina points out.
One of six operating groups, Flextronics Plastics focuses on small to medium-size plastic enclosures along with value-added processes such as painting, decoration, and the loading of metal parts. This focus contrasts with that of another operating group, Flextronics Enclosures, which specializes in value-added enclosures for large, rack-mounted products that run in lower volumes.
Doubters would argue that a provider such as Flextronics can't be world class in plastics and all the other capabilities that it has vertically integrated. Santina responds, "Why not? They used to say you can't be world class in Mexico. Then they told us well you can't be world class in China. And now it's you can't be world class in plastics. You can be whatever you want to be."
Another industry rule says contract manufacturers use other companies to handle logistics. Flextronics is breaking that rule too, but is doing it quietly.
Without issuing a press release, the company recently acquired Irish Express Cargo (IEC), which describes itself as Ireland's largest freight forwarder and logistics solutions provider. This move puts Flextronics in the logistics business and extends its capabilities on the postmanufacturing side.
The acquisition of the Dublin-based company was reported in September by The Irish Times.
As of September, IEC listed five facilities in Ireland, ten facilities in the UK and one each in the Netherlands and the US. Facility space totaled 2.2 million ft2. IEC employs over 1120 people in Ireland, 1160 in the UK, 80 in the Netherlands, and a US work force expected to reach 100 within about six months. The company opened a 406,000-ft2 logistics facility in Nashville, TN, last year. IEC also manages a distribution and logistics business for the Nordic region from a base in Sweden.
Among IEC's customers are Dell, IBM, Nortel, Apple, Gateway, 3Com, Compaq, Motorola, HP and Acer.
Logistics solutions include inventory management, supply-chain management, vendor hubs, remote merging, reverse logistics, turnkey programs including manufacturing, and direct-ship distribution. Regarding the last service, IEC says it's the largest provider of physical distribution services in the UK and Ireland for the computer industry.
IEC's sales last year amounted to 170 million Irish pounds, according to The Irish Times.
When people think global, they often confine their attention to the largest contract manufacturers. But one mid-tier player, Pemstar (Rochester, MN), not only reaches the three major world markets but also has facilities in places such as China, Thailand and Mexico. What's more, Pemstar employs more than 500 engineering professionals out of a total work force of about 4000 people. Starting with a single operation in 1994, Pemstar has grown into a public company with 12 facilities in ten locations worldwide. This month, Deloitte & Touche ranked Pemstar 159th out of the 500 fastest growing technology firms in the US.
The man who has guided Pemstar from day one through its rapid rise as a global player is Al Berning, the company's president, CEO and chairman. Berning, who put together Pemstar's founding group of IBM managers, continues to plot the company's course into the 21st century. In recognition of his achievements at Pemstar, Berning was named the 1999 National Ernst & Young Entrepreneur Of The Year in the Emerging Entrepreneur category.
How can a mid-tier CM combine a deep engineering staff and global manufacturing capabilities? The following interview with Al Berning will provide some answers. Not only that, you'll learn about a company that has targeted the optical and wireless sectors and succeeded.
MMI: Pemstar has been able to grow its communications business to 55% of sales for the first half of its fiscal 2001, compared with 31% for the year-earlier period. How did the company accomplish that change in business mix?
Al Berning: About three years ago we made a decision to put a specific focus on the communications business, in particular, the optical and wireless segment of communications. Fortunately for us, we've been involved in optical projects going back almost four years. So we recognized that trend was coming and started putting the specific processes and people in place to handle that business.
MMI: How much of this communications business comes from optical and wireless companies? Can you discuss a few of these customers as examples of what Pemstar can do?
Al Berning: We're estimating that this fiscal year a little over 50% of our business will come from communications. Within that, we expect the optical and wireless component to make up over 30% of our total business....So a majority of our communications business is optical and wireless.
On the optical side, we're doing fiber channel optical components for IBM as part of their fiber channel optical solution. We also are dealing with a couple of very exciting companies on the optical systems side, one being Optical Solutions. They're currently rolling out a fiber-to-the-home product. Then there is ONI Systems with a metro-area network switch. So we have a good mix of products at the component level as well as the module level and the system level.
On the wireless side, we're dealing with companies like Motorola in the handset arena. Then on the infrastructure side, we're supporting customers like Repeater, Western Multiplex and Interwave with some very exciting projects.
MMI: So as far as capabilities go, you're able to manufacture on the component level, the subsystem level and the system level for optical products?
Al Berning: Correct. We're fortunate that we have a very strong automation and test design group. As part of that, we are able to design and replicate automation systems that build optical components. Since the tolerances and requirements of doing an optical component are very tight by any standard, having our test and automation group has been a big strength for us in making inroads in that business.
MMI: Pemstar maintains a large engineering staff for a provider of its size. Is this a key part of Pemstar's business strategy?
Al Berning: Pemstar has a large engineering staff by any definition within the industry. That's by design. We created Pemstar with equal focus on product design, test and automation design and manufacturing. We started doing projects and building a customer base from day one doing all three of those things. And our vision is: As the EMS industry evolves, there will be a requirement for companies serving the industry to be able to provide more and more engineering support both on the product side and, as importantly, on the test and automation side.
We're fortunate that we were able to start out with a large base of very strong engineering talent. And we've been building on that every day we've been in business. So it is a key part of our strategy and what we consider are the four pillars of our service. They are product design, test and automation design, a complete set of plants around the world, and the ability to do build-to-order and supply-chain management.
MMI: Has Pemstar benefited from top-tier players being limited in the number of start-ups and emerging companies that they can afford to take on?
Al Berning: Pemstar is in a very, very unique and strong position now in being able to serve both large multinational OEM customers as well as many exciting start-ups. Since we have the full international scale in place, we're able to do projects around the world for large, medium-size and small customers. As a result of that, we're a very attractive service provider, particularly to small and mid-size start-ups that need to move quickly and have someone put a high-level team in place to focus on their particular needs and requirements. We're benefiting from that and working hard to put a model in place that continues to refine the services that are needed to support that very important customer base.
MMI: What is this model you're alluding to?
Al Berning: Many of our new optical and wireless customers, even though they may only be two or three years old as a company, need to be able to deploy internationally and worldwide very quickly. So we have the perfect formula in that we have the right size and engineering focus. We can zero in and support them with the services they need as a start-up. But on the other hand, we have the international scale so we have the ability to ramp and scale pretty quickly. It's really a perfect combination of the right size on our part to match up with them, but having the international footprint to scale quickly as needed.
MMI: As we know, Pemstar was started by a group of eight senior IBM managers, including yourself. How has Pemstar's IBM heritage influenced Pemstar's culture and business philosophy?
Al Berning: We initially launched Pemstar from a large IBM disk drive storage systems facility in Rochester, Minnesota. And we're certainly proud of our heritage in what we accomplished when we were running the IBM facility. We certainly learned a lot about good quality controls, fast introduction of tough technology and having a culture in place that works hard to take care of the customer. That part of our heritage we obviously brought with us. It certainly served us well in being able to grow as quickly as we have.
Our IBM facility in Rochester had won the Malcolm Baldrige Award in the early '90s. Many members of our team participated in that. So we have a very deep quality culture, and we work hard to continue to improve on that. We certainly recognize that the world keeps changing every day, and we must keep improving every day. That's an important part of our culture....
Another key part that has served us well is that most of us had done significant amounts of business internationally, particularly in Asia. That experience gave us a very strong start in already having a good business network in place to work from in Asia, Europe, South America and Mexico. That allowed us to probably move much more quickly because we were up to speed with what was needed to put an operating model in place for high-tech manufacturing in all those areas.
MMI: Does Pemstar plan to offer global capabilities on par with the top-tier players? If so, what can you say about expanding into such areas as the US East Coast, Central Europe and South America?
Al Berning: We're fortunate that we were able to quickly build out a global set of plants and design centers. In terms of operating in specific continents in specific locations, we can match many of the people in the industry. We worked hard to get that in place with multiple locations in Asia - including Tianjin, China; Bangkok, Thailand; and Singapore - in North America including Mexico and in Europe now in the Netherlands and Ireland [see optical article below]. So we have all the major bases covered. We're obviously not going to stop there.
There are other places our customers are asking us to be where we're doing well with them. One area is Brazil, where we're just in the process of setting up an operation [see article on p. 1]. We have at least a half dozen customers who have asked us to support their projects in Brazil. As a result, we are moving ahead with that as a key area we need to support. Our intent would also be to look at opportunities in Central Europe. Several of our customers have asked us to consider supporting operations in Central Europe. So we have made survey trips there and have looked at it. We feel confident that it would be a good spot for Pemstar. Within the US, our intent over time would be to support our customers in key areas where they need local support. The Boston-New England area certainly would be one that we've had our eye on. We do very well with customers in the Boston-New England area. We would keep a constant watch on the main high-tech centers of the US and look for opportunities to match up with what our customers are looking for in those areas.
On average, we've added two operations per year since we formed Pemstar. We can't guarantee anything specific in the future beyond what we've announced. But we'll continue to look at an operating model that matches what we've done in the past.
MMI: Are IBM and Motorola still your largest customers? Have any other customers exceeded 10% of sales?
Al Berning: IBM and Motorola are our two largest customers. Efficient Networks has quickly grown to be our third largest customer and is projected to be about 12 to 13% of our business.
MMI: What other segments are being served by Pemstar, and how much of your business do they represent?
Al Berning: Pemstar is concentrating in five primary industry sectors including communications, computer and peripherals, data storage, industrial and medical. If we look at the split of three categories, industrial, data storage and computer and peripherals are all over ten percent. Medical is just under five percent. We would over time see those all being in the 15 to 20 percent range of our business. We see great opportunities, particularly in medical. We have many design projects that we have launched in medical over the last two years. And many of those will go into production over the next two years. So we do see some good growth within that category.
MMI: Has Pemstar set any goals for itself as far as size or industry ranking?
Al Berning: On your listing last year, we ranked, I believe, number 21. We know with some acquisitions that have happened with folks that are ahead of us we'll be somewhere between number 15 and number 20 for this year.
As we see the industry evolving, we believe that people need to look at the EMS industry like they would the semiconductor industry or the software industry. There will be 15 to 20 multibillion-dollar worldwide EMS companies that are needed to support this industry. The reason is: As we all know, there are over a hundred very large multinational OEMs that are being served by our industry. And then there are literally thousands of mid-sized companies and start-ups that are also being served by our industry in many different industry categories. As outsourcing continues to increase as the popular way of getting manufacturing done, there will be a lot of companies needed to support that. Over time, we believe there will be more specialization needed in terms of companies in the EMS industry zeroing in on certain industry sectors that they're serving, much as the semiconductor and software industries work.
We're very excited to be part of that. We're pleased that we offer very heavy engineering content and a strong set of skills around the world. As technology change happens - optical is a good example - we'll work hard to put the skills in place ahead of time to be able to take care that change in the industry.
Pemstar is manufacturing optical components in Mexico, which is not a place one would normally seek out for optical expertise. These components, consisting of a receiver and a transmitter, mount on an IBM communications card.
The CM has more than doubled the size of its Guadalajara facility from 60,000 ft2 to more than 135,000 ft2 partly to provide for optical manufacturing. This expansion will also make room for high-end system assembly and fulfillment.
How did Pemstar find optical skills in Mexico? The company selected some of its most talented technicians in Guadalajara and sent them to its Rochester, MN, facility for training in optical work. The Rochester facility also manufactures these components for IBM. After completing the training, the Mexican technicians returned to Guadalajara, where they were qualified on the product by IBM.
Earlier this year, Pemstar said it would open a plant in Navan, Ireland, to serve customers in Ireland and the UK.
As other cell-phone manufacturers have done, Japan's NEC has adopted an outsourcing strategy for its mobile handset business. But in this case, a contract manufacturer must share the fruits of outsourcing with two Taiwanese ODMs (original design manufacturers).
NEC has sold its cell-phone handset manufacturing facility in Telford, UK, to Celestica (Toronto, Canada). The deal includes a supply agreement for NEC's GSM mobile handsets. The supply agreement also extends to repair and support for new product introduction. About 450 NEC employees have joined Celestica as part of this transaction.
Bloomberg News cites Agilent Technologies as saying that CMs will produce 40% of the world's cell phones within 18 months, compared with 15% that is now outsourced.
Celestica says this acquisition gives it a strategic wireless manufacturing presence in Europe.
In addition, NEC has given an ODM contract to Acer Communications & Multimedia, which will supply NEC with its GSM/GPRS entry model handset. Acer will start supplying WAP handsets in Q1 2001 and GPRS handsets in Q2 2001.
A second ODM, Arima Communication, will manufacture European GSM/GPRS terminals and EDGE mobile terminals designed and developed by NEC. Arima will start supplying the terminals in Q3 2001.
Longtime suppliers to the PC industry, ODMs have begun to diversify into other technologies such as cell phones (Aug., p. 4).
Before the sale of the UK plant was announced, Bloomberg News quoted an NEC executive as saying the company is considering selling its cell phone plants in Mexico and the UK. According to the Bloomberg report, NEC will keep its cell phone plants in Japan and China.
What's more, the Wall Street Journal reported that NEC will sell plants in Japan to improve its return on assets. When asked about both reports, an NEC spokesperson in Japan would only confirm the sale of the UK plant.
The UK facility is the third plant NEC has divested this year and the second one sold to Celestica. Earlier, Celestica bought an NEC facility in Brazil (July, p. 6-7), while NatSteel Electronics took over an NEC plant in Oregon (Feb., p. 11).
As of July, NEC had 58 manufacturing affiliates outside of Japan.
Motorola and Celestica have entered into a manufacturing alliance that will bring the CM revenue estimated at more than $1 billion over three years. Under this pact, Motorola will sell its manufacturing operations in Dublin, Ireland, and Mt. Pleasant, IA, to Celestica for about $70 million, subject to adjustment. Motorola will outsource manufacturing of some cell phone handsets, pagers, two-way radio products and accessories to Celestica.
This is the second major outsourcing agreement that Motorola has announced this year. The company inked a $30-billion outsourcing pact earlier in the year with Flextronics (June, p. 1). Motorola has embarked on a long-term, company-wide strategy to improve supply-chain efficiencies, consolidate manufacturing and restructure. These efforts are aimed at improving financial performance and building on company strengths.
The agreement is expected to close in Q1 2001. Celestica will supply Motorola for at least three years from the Mt. Pleasant facility and for two years from Dublin.
At present, the Dublin facility, which is in the 200,000 to 250,000-ft2 range, is not running at full capacity. Motorola will transfer pager manufacturing from its Boynton Beach, FL, facility, which will be converted to other uses, to the Dublin plant. The plant will also continue to manufacture cell phone handsets for Motorola. Celestica will offer jobs to about 650 of the 1400 people employed at the Dublin facility.
Celestica will also move operations from its existing Dublin plant to the Motorola facility. As a result, about 400 Celestica employees will relocate to the Motorola facility, according to Motorola. That will bring employment at the site to around 1000 people. Motorola reports this added capacity in Dublin will allow Celestica to take on more work there.
At Mt. Pleasant, Motorola will close its West plant of about 38,000 ft2 and consolidate operations into its 68,000-ft2 East plant. In addition, Motorola will transfer manufacturing of its new Telario product, which combines a two-way radio with a cordless telephone, from Mt. Pleasant to its facility in Penang, Malaysia. The remaining Mt. Pleasant facility will continue to manufacture two-way radio products and accessories. Celestica will offer jobs to about 550 of the 670 Mt. Pleasant employees.
The CM says this alliance will diversify its customer base in communications and Internet infrastructure.
"There aren't any plans on the table right now" to divest more Motorola plants, according to Motorola spokesperson Margot Brown. But Brown says the company "wouldn't rule it out." Motorola will continue to look at ways to make its businesses more competitive and cost effective.
Solectron (Milpitas, CA) has signed agreements to acquire IBM's European Repair Center in Amsterdam, Netherlands. As a result, Solectron will take over IBM's European repair, refurbishment and asset recovery services provided by the center.
The CM will gain a leased 93,000-ft2 facility and will offer jobs to the 102 IBM employees at the facility. Also, Solectron expects to continue using about 100 contract employees. By mid-2001, the operation will move to a new 161,500-ft2 facility nearby. The acquisition is expected to close by year end.
Meanwhile, Solectron has completed its acquisition of Sony's facility in Miyagi Prefecture, Japan, as part of a broader agreement (Oct., p. 5-6). So Solectron gains 126,700 ft2 of capacity in Japan and about 1145 Sony employees.
Viasystems (St. Louis, MO) has reached an agreement to acquire Accutec, a privately held metal enclo-sure house based in Oak Creek, WI.
Located near Milwaukee's airport, Accutec employs 200 people in a facility with more than 300,000 ft2 of manufacturing space. Viasystems believes the facility will readily provide for expansion into additional value-added services.
"This acquisition signals a continuation of Viasystems' strategy of providing a vertically integrated, globally positioned manufacturing solution to the telecommunications and networking equipment industries," states James Mills, chairman and CEO of Viasystems. "Accutec's outstanding capabilities in the 'big box' segment of the enclosure market have completed our global footprint and will now enable Viasystems to provide all aspects of electronics manufacturing in North America, Europe and Asia/Pacific."
This is Viasystems' second enclosure deal since the company purchased enclosure-related operations from Marconi (May, p. 9).
The enclosure industry continues to attract buyers from outside that industry (Nov. p. 7-9).
Deals done...San Jose, CA-based Flextronics International has completed its acquisition of Singapore-listed JIT Holdings (Aug., p. 5-6)....SMTC Corp. (Toronto, Canada) has closed on its purchase of Qualtron Teoranta (Donegal, Ireland), a cable-and-harness house (Oct, p. 10)....C-MAC Industries (Montreal, Canada) has completed its acquisitions of DY 4 Systems (Kanata, Canada), an embedded systems developer, and Kavilco, a supplier of sensors (Oct., p. 10).
New programs...Network Peripherals Inc. (Fremont, CA), a supplier of layer 2/3 Ethernet switches, has outsourced its entire manufacturing operation to Solectron's Everett, WA, facility. NPI's manufacturing operation was in Taiwan. Solectron has also been selected as a manufacturing partner by Lynx Photonic Networks, a developer of planar waveguide photonic switches and subsystems....SCI Systems (Huntsville, AL) has landed contracts to manufacture wireless data products for Sierra Wireless (Vancouver, Canada) and DSL access equipment for Orckit (Tel Aviv, Israel)....Flextronics Network Services, a business unit of Flextronics, will provide Ericsson with network engineering, network installation and other services. Also, Flextronics will supply Proxim (Sunnyvale, CA) with turnkey EMS for its HomeRF-compatible wire-free broadband products....Wireless Online (Los Altos, CA) has selected Sanmina (San Jose, CA) to provide manufacturing services for the OEM's wireless smart base station equipment....Gotham Networks (Acton, MA), developer of a network edge product called the Switchless Switch, will utilize Plexus (Neenah, WI) for engineering and manufacturing services....Kenetec (Naugatuck, CT), a developer of broadband access infrastructure products, has selected IEC Electronics (Newark, NY) as its primary EMS provider....Celerity Systems (Knoxville, TN) has chosen Nextek (Madison, AL) to build a digital set-top box.
Expanding in Texas...XeTel (Austin, TX) is relocating its Dallas operation into a larger 50,000-ft2 facility in response to demand from new and existing telecom customers....Teradyne Connection Systems (Nashua, NH) has also moved its Plano, TX, operation into a larger 50,000-ft2 facility to meet demand for telecom and datacom rack assembly.