Cover story
Industry Growth Pains Intensify
Market Measures
Market Trend
EMS-RSP Merger Signals New Type of CM
News
Smartflex Bids For Tanon Assets
For some EMS companies, 'tis not the season to be jolly. In recent weeks, no less than five providers have announced plant closures. This year, the EMS market may well have maintained its historic growth rate of better than 20% a year, as suggested by the public sector (Nov. issue). But such overall growth has not prevented some companies from ending up with plants they do not need. As you will see, each case is different. Still, there are lessons to be learned.
AVEX Electronics. This Huntsville, AL-based company has announced that will close its 227,000-ft2 plant in San Jose, CA, by the end of the year. As a result, about 285 full-time AVEX employees will be laid off in California.
"We're looking to be more competitive and redeploy our assets to better utilize them on a global basis," explains Niall Mulkeen, AVEX VP of Human Resources.
Some of the plant's equipment will be moved to AVEX's operation in Guadalajara, Mexico, which continues to expand. Another location where growth is expected is Hungary, where the company plans to open a leased facility and have it operational in February.
One customer no longer needing the San Jose plant is General Instrument. Though AVEX reports its requirements to support GI have increased, all GI work within AVEX has been assigned to the company's Pulaski, TN, plant.
Opened earlier this year to replace a smaller facility in Fremont, the San Jose plant had capacity for ten double-sided SMT lines, although the actual number has not been confirmed.
AVEX says it took this action based on the needs and requirements of its customers. "Customers are going to be deciding -- not just for us, but others in the contract manufacturing industry -- where you operate," says Mulkeen.
The company's design and engineering facility in Hudson, NH, will also be closed.
In addition, AVEX is cutting back in Huntsville, with is a net loss of about 145 jobs. "We did have excess overheads here in Huntsville," says Mulkeen.
EFTC Corp. The EMS company, which is headquartered in Denver, CO, plans to close its Greeley, CO, operation early next year. About 210 people will be affected by this action. EFTC has made relocation offers to an unspecified number of these employees.
The company expects to save $5 to $8 million on an annualized basis after this plant consolidation is completed. EFTC expects to incur restructuring charges of up to $10 to $12 million in Q4.
According to EFTC, the decision as to which plant to close was based on customer regional preferences and plant profitability. "In both instances, the arrow pointed toward the Greeley operation," says Jack Calderon, EFTC chairman and CEO.
The company believes this action will improve its prospects for increased profitability. Other benefits include improved asset utilization and reduced capital expenditures from redeploying assets to other locations.
A 14% decline in revenue from Q2 to Q3 1998 created some unused capacity. "The revenue drop was primarily in Colorado and the Northwest," says Calderon. "This basically fills the bucket, if you will. Some [of the Colorado work] will go to the Northwest, and some will go to our new Kansas operation."
IEC Electronics. In August, IEC of Newark, NY, announced that it would shut down its 104,000-ft2 plant in Arab, AL, within 90 days (Sept., p. 9). As a result of closing the facility during Q3, the company recorded a restructuring charge of $3.2 million after taxes. Although the company made operational improvements at the plant, IEC was unable to build a customer base for the plant to make it profitable. In August, IEC said the closing of the facility, which had contributed to recent losses, was an important step in returning IEC to profitability over the next few quarters. This move would also put the company in a better position to utilize capacity at other plants.
For the fiscal year ended Sept. 30, IEC reported a net loss of $6.2 million on sales of $248.2 million. Without the above restructuring charge, the net loss would have been $3.0 million.
However, the Alabama closure has not prevented IEC from planning expansion elsewhere. The provider recently disclosed plans to put a plant in Mexico and utilize some the equipment from Alabama in the Mexico plant. (See News.).
K-Byte Manufacturing. Tampa, FL-based K-Byte, the contract manufacturing division of Reptron Electronics, is closing its Gaithersburg, MD, site. A small K-Byte facility in Saline, MI, was also sold. Reptron said these actions were among the cost reduction measures taken last quarter (Nov. issue).
The Gaithersburg operation became part of K-Byte through Reptron's acquisition of Hibbing Electronics (Hibbing, MN) this year. In March 1997, Hibbing took over the 27,000-ft2 Gaithersburg facility from Access Beyond. MMI has learned that Access Beyond went into bankruptcy, leaving K-Byte without enough time to fill the facility with new business. The bankruptcy also forced K-Byte out of the building, which it shared with the customer.
Still, Michael Walsh, K-Byte's marketing manager in Minnesota, reports business has picked up. "We're starting to see some customer pull-ins," he says. What's more, K-Byte is forecasting 20% growth for its operations in 1999, according to Walsh.
Mack Technologies. This EMS provider has decided to close its 126,000-ft2 facility in Marlborough, MA, and consolidate operations into its Westford, MA, facility. Mack expects to complete the transfer of assets, which includes three SMT lines, next year in the February-March time frame.
"A customer decided to move their production to the West Coast. The customer made this move as part of a consolidation strategy," explains, Ronald Jellison, president of Mack Technologies. "Also, we executed the purchase of the Westford facility. That now made it logical to invest in that facility and make leasehold improvements, which would allow us to consolidate into one facility."
Despite the loss of this customer, Jellison remains upbeat about company prospects. "Mack continues to grow its existing customer relationships with new programs and is adding new customers as well," he declares.
It would be unwise to make generalizations about the EMS industry from the above cases. Plant closures can and do happen even in a growth industry. Nor would it be fair or accurate to make negative inferences about a company solely based on a plant closure. However, these cases perhaps can teach a few things.
IPC (Northbrook, IL), the trade association in board fab and electronics assembly, projects that the U.S. EMS market will increase 25% to $22.5 billion this year. This and other data appears in the IPC study entitled 1998 Market for Electronics Manufacturing Services Industry
Participating in the study were 66 companies with combined sales of $7.9 billion, representing 35% of the IPC's estimated EMS market size for the U.S. The report finds that the computer and telecom industries continue to represent the largest markets for EMS and account for 42.4% and 18.7% of total sales respectively.
Companies responded that 56% of their sales came from existing business, 25% came from new business, and 18% from new customers.
IPC estimates that growth for EMS companies $5 to $20 million in size and even those below $5 million will still average 17% this year (see table).
According to IPC forecasts, U.S. market growth for EMS will continue to exceed 20% annually, as it has since the late 1980s. In 2000, EMS sales are expected to top $35 billion in the U.S.
For more information, call (847) 790-5317.
In the outsourcing space of the electronics industry, the term contract manufacturing has always meant contract electronics manufacturing. But the recent merger of RSP Manufacturing of Fremont, CA, and Electronic Manufacturing Systems (EMS) based in Longmont, CO, introduces another type of CM.
This merger creates a $330-million+ company on the electromechanical side of contract manufacturing for electronics OEMs. RSP and EMS specialize in electromechanical assembly for low-to-medium volume products of a complex nature. Typical products supported range from complex servers to large-scale data storage systems. "The bill of material could be up to 2000 individual line items, but would not include the actual boards," says Kevin McShea, the current COO of EMS who will become president and CEO of the merged company.
Value-added services are key for both companies. Indeed, McShea points out, "We don't provide any metal-only solutions." These services include enclosure design, prototyping and metal fabrication; supply chain management; system assembly; and testing. RSP also brings to the party hard tool capabilities and high-volume stamping, while EMS adds design and manufacture of cable and harness assemblies.
McShea says the merger benefited both companies geographically. EMS has facilities in California, Colorado, Maine, Virginia, Northern Ireland and England, to which RSP adds its manufacturing space of about 150,000 ft2 in Northern California. "We have a significant presence now in the major technology corridors in the U.S. and Scotland-Ireland, the international manufacturing gateway," he notes. What's more, RSP plans to have a presence in Guadalajara, Mexico, in Q1 1999, while EMS could potentially expand into Scotland next year.
Both companies are promoting the merger as offering interchangeable plants. "The mission of the merged companies is to assist our customers with product design and engineering at any of our company sites, and then execute product delivery at any one or a combination of our facilities in the world," states Judy Koch Buchanan, who will remain president of RSP.
"In the electromechanical space, there are few players that can offer that [capability]," McShea remarks.
The combined company, which has yet to be named, will encompass more than 1,000,000 ft2 of manufacturing space and employ nearly 2000 people. RSP's key customers include Cisco Systems, Sun Microsystems, Solectron and Silicon Graphics. Included on EMS' customer list are EMC, Data General, Storage Technology, Nortel, Bay Networks, Lucent Technologies and Fore Systems.
Electromechanical contract manufacturers have caught the eye of one EMS analyst. "We believe a new and emerging segment is being rapidly expanded to participate in the fast growing electronics manufacturing services industry. Enclosure companies -- most notably Applied Power; Pentair; EMS/RSP, which were recently merged; Trend Technologies; and Chatham Industries -- are quickly expanding their capabilities and rolling up the industry to create the scope and breadth of reach and services to meet OEM needs," comments J. Keith Dunne, senior analyst and managing director at BancBoston Robertson Stephens (San Francisco, CA).
McShea says barring unforeseen changes, the merged company does not intend to expand into contract electronics manufacturing. Though the company does not assemble boards, it does integrate them into units.
RSP was acquired by McCown De Leeuw & Co., a private investment firm, in October 1997 to execute a buy-and-build strategy in the contract manufacturing industry. As a result of the merger, McCown De Leeuw becomes the majority shareholder of the combined company. The merger transaction valued EMS at about $122 million.
"We're in receipt of some substantial awards as a result of this platform company that independently neither [party] would have qualified for," remarks McShea. "That kind of activity seems to substantiate the company strategy."
According to press reports from France, Groupe Bull, the French IT company, is looking for a partner to take a stake in Bull's EMS subsidiary, Bull Electronics (Angers, France). Electronique International Hebdo, a trade publication covering the French electronics industry, quotes Alain Keryhuel, Bull Electronics' managing director, as saying that the Bull unit needs sites near OEM decision centers in the U.S. and that a partner would allow the unit to obtain a global presence. Bull is said to be exploring both minority and majority ownership by an outside partner. The French publication also reports that expansion in the U.S. is Bull Electronics' first goal, with Eastern Europe on the "back burner" until a financial partnership is resolved.
At present, Bull Electronics has one EMS operation in the U.S., a facility in Lowell, MA. A recent article in Electronic Buyers' News reports that Bull desires to expand to the West Coast in the next year.
This move has a familiar ring. In the past, companies such as IBM and ICL sought outside ownership for EMS units rather than fund expansion themselves. Will Groupe Bull withdraw from contract manufacturing as other OEMs have? According to Electronique International Hebdo, no options have been ruled out yet.
The publication speculates that the partner would likely be an EMS provider looking for a stronger position in Europe or a financial player that would back acquisitions in the U.S.
According to Electronique International Hebdo, Bull Electronics' sales are expected to be flat this year at Fr 2.7 billion, of which Fr 2.2 billion come from its Angers operation.
Keryhuel is quoted as saying that once a partner is located Bull Electronics will probably change its name to reflect its diversification into other areas besides the computer industry.
Smartflex Systems (Tustin, CA), a public EMS company specializing in precision manufacturing and flex circuits, is seeking approval to purchase certain assets of Tanon Manufacturing, which has filed for reorganization under Chapter 11 of the U.S. bankruptcy laws. Tanon is a wholly owned subsidiary of EA Industries (West Long Branch, NJ). In addition, Smartflex has bought certain assets, including inventory, of EAI's Methuen, MA, division for $2.4 million in cash.
The Chapter 11 filing resulted from an unfortunate chain of events that left Tanon unable to obtain the working capital it needed.
Smartflex says these two deals are part of a diversification strategy. "We try to emphasize other marketplaces where we haven't been dominant. Most of our lifetime has been in data storage services," explains William Healey, chairman, president and CEO of Smartflex.
He reports that Smartflex's customer base and Tanon's do not overlap. "So it's an incremental customer base for us in non-data storage, which would include communications, medical and automotive," says Healey.
Tanon's business will also give Smartflex more rigid board work. Flex circuit assembly has varied from 80% to 95% of Smartflex's business.
"Of course, we don't want to get into the volume end. We don't want to compete with the top five," says Healey. "We want to get into low-to-medium volume, high mix kind of things."
Tanon appears to fit that profile. With facilities in West Long Branch, NJ, and Fremont, CA, the CM provides services for quick-turn, prototype, and high-mix, intermediate volume products.
To Smartflex, Tanon's locations are strategic. "For example, we believe the Fremont location will provide strong value-chain support to our recently acquired Logical Services subsidiary," states Tony Richardson, Smartflex's COO (Oct., p. 7).
According to an SEC form 8-K filed by EAI, Tanon has agreed to sell its EMS business to Smartflex for an initial payment of $3 million plus an earnout of up to $3 million, excluding WIP. Also, this agreement gives Smartflex the right to buy Tanon's equipment and materials inventory, for which Smartflex would pay an additional amount. Any equipment or materials not bought by Smartflex would be sold off. Tanon would retain its receivables, which currently exceed $6.1 million. This agreement is subject to approval by the Bankruptcy Court, which must open the Tanon sale to other bidders.
The Chapter 11 filing is the latest in series of misfortunes to befall Tanon. In Q2, the CM lost its largest customer by far, Advanced Fibre Communications. "We had recruited enough customers to replace Advanced Fibre's revenue," says Frank Brandenberg, president and CEO of EAI. But such new business consumes cash up front. "We were in a particularly vulnerable position," he notes. Still, for several quarters Tanon had been able to finance growth internally through better inventory management.
Then Tanon was dealt a severe blow. Three customers were simultaneously unable to pay. Tanon never anticipated such a thing. "To have three customers do that simultaneously just knocked our socks off," says Brandenberg. This shortfall damaged Tanon's ability to fund new orders. The company tried to rescue its business by voluntary salary cuts and other such measures, but its lender began to tighten credit. "That just put ourselves in a death spiral," he says.
Meanwhile, Smartflex has secured substantially all of the assets of EAI's Methuen, MA, operation excluding cash and receivables. Briefly run as a Tanon Express center, the Methuen operation provides high-mix contract assembly for the telecom, medical, automotive and aerospace markets. At the current run rate, this operation is generating $7.0 million in annualized sales and about 10% operating margins. It employs around 70 people in a facility of about 20,000 ft2. A few months earlier, EAI acquired the Methuen operation from the now defunct Tri-Star Technologies.
Like the Methuen operation, EAI's Tanon Express center in Wareham, MA, is also said to be profitable, and it too is for sale. EAI purchased its interest in this site, still operated as Service Assembly, Inc., in March 1998 for about $3.8 million. EAI plans to use the proceeds from the sale of the Methuen and Wareham operations for funding the commercial phase of a supply-chain information management product called Supply Vantage, developed by EAI's subsidiary, SupplyPoint Solutions.
Karavale Enterprises Ltd., a contract manufacturer based in Welwyn Garden City, UK, has acquired a CM called Neltronic, located in Ennis near Shannon, Ireland. The British company made this deal to expand into Ireland.
As part of Karavale, Neltronic will operate under the new name KEL Electronics. This operation gives Karavale a 26,000-ft2 facility and 70 employees in Ireland. Neltronic brought in fiscal 1998 sales of 3 million British pounds.
A full turnkey provider, Karavale maintains UK plants in Welwyn Garden City, Hertfordshire, and Cwmbran, South Wales, with a total of 80,000 ft2. The privately held company recently spent more than 10 million pounds on a new building and SMT equipment in Cwmbran. Karavale employs 210 people in the UK and generated revenue of 28 million pounds in fiscal 1998.
Services include prototyping, board assembly and full box build. Karavale says its niche is hi-tech flexibility.
Karavale's main customers include Landis & Gyr, ABB Kent Taylor, Panasonic, Tetrel, Drake Electronics, Oxford Instruments, Oxford Medical, British Telecom and Rank Xerox.
SMTEK International (Thousand Oaks, CA) has agreed to purchase Prosser Scientific Industries, a quick-turn prototyping CM based in Ipswich, England.
"The acquisition of Prosser represents an important strategic move because it brings our services closer to the European customer base. Prosser will become a SMTEK Express Services center providing front-end design, manufacturability engineering support, prototyping, quick-turn assembly and repair depot services," states Gregory Horton, chairman and CEO of SMTEK.
The company plans to create a global network of high-mix, high-service companies.
This deal will expand SMTEK's EMS operations into England as the company already has a contract manufacturing unit, DDL Electronics Ltd., in Craigavon, Northern Ireland. Since Prosser maintains a sales office in Cambridge, England, SMTEK will also gain a presence in that high-center center of the UK. Indeed, the Cambridge office is expected to serve as the new base of operations for SMTEK's sales and marketing activities in Europe.
Founded nearly 30 years ago, Prosser started out as an instrument maker and in the 1980s moved into contract design and manufacturing services, which have become a major part of Prosser's business. Its ISO-9001 rated facility offers contract design, turnkey production, and SMT capabilities.
Subject to completion of due diligence and a purchase agreement, the deal is expected to close by Jan. 31, 1999. SMTEK plans to pay in cash, including an earnout provision.
Deals done...Sanmina (San Jose, CA) has completed its merger with Altron (Wilmington, MA), which becomes a wholly-owned subsidiary of Sanmina (Sept. issue). Each share of Altron stock was valued at 0.4545 share of Sanmina stock. "With the addition of Altron, we now have more than 1.6 million square feet of manufacturing space and facilities in the United States, Ireland and the United Kingdom. As a result, Sanmina has become one of the largest suppliers of backplane assemblies, subassemblies and electronic manufacturing services in the world. We believe we now have achieved the critical mass we need to prepare for our next level of growth," states Jure Sola, Sanmina's chairman and CEO....In a previously announced deal, Nam Tai Electronics (Vancouver, Canada), which provides manufacturing services in China, has acquired majority interest of just over 50% in Albatronics, a Hong Kong-listed firm that also does contract manufacturing in China (Sept. issue). For the five months ended Aug. 31, Albatronics reported sales of $130 million and a net loss of $31 million, including an operating loss of about $14.2 million. Nam Tai is studying opportunities for restructuring and reduction of overhead expenses within Albatronics.
Vertical integration deal...Publicly held Pen Interconnect (Salt Lake City, UT), whose offerings include contract manufacturing and custom power supplies, intends to merge with Transdigital Communications (Brea, CA), a private developer of entertainment and information systems for markets such as airlines and cruise ships. "Pen's manufacturing and power supply assets will provide vertical integration to Transdigital as it prepares to enter into meaningful production of its systems for commercial deployment," states Steve Fryer, president of Pen.
New programs...According to analysts, Flextronics (San Jose, CA) has disclosed five new customer programs: PC motherboards both for Acer and for Compaq, disposable cameras for Eastman Kodak, modem cards for Rockwell as well as a partnership with an unnamed telecom company. Bear, Stearns & Co. (New York, NY) estimates that annual revenues from these programs will total in the neighborhood of $500 million to $600 million....Solectron (Milpitas, CA) will manufacture development boards and development boxes for Motorola's multimedia-processing platform codenamed Blackbird. Production shipments are due to start in this quarter....Key Tronic (Spokane, WA) has won a contract to manufacture an Enhanced Display Unit for Qualcomm's mobile satellite communications and tracking system. This multiyear program expands Key Tronic's ODM (original design manufacturing) business, which accounted for 16% of its $42.3 million in total sales for the quarter ended Sept. 26. (see Aug. issue)....Norris Communications (San Diego, CA) has awarded a contract to Eltech Electronics, a Singapore-based CM, for production of digital voice recorders and PC-compatible docking stations. This agreement will allow Norris to fulfill an initial $3-million order from its customer Lanier Worldwide. With operations in the U.S., Singapore and Malaysia, Eltech is listed with annual revenue of more than $150 million. Its customers include Telxon, Nortel and Overland Data....EPE Corp. (Manchester, NH) recently signed contracts to supply Markem Corp. (Keene, NH) with turnkey circuit assemblies for marking equipment, Image Data (Nashua, NH) with product build in the fraud protection market, and Real World Interface (Jaffrey, NH) with circuit assemblies for robots....Ziatech Corp. (San Luis Obispo, CA) has introduced a 3U CompactPCI single-board computer using a newly packaged, low-power Pentium processor with Intel's MMX technology. Ziatech's manufacturing partner is SCI Systems (Huntsville, AL).
Outsourcing plans...International Lottery & Totalizer Systems (Carlsbad, CA), which provides computerized wagering systems and services, plans to outsource its manufacturing and lay off 25% of its staff, principally in manufacturing. These actions are expected to save about $1.0 million a year....Hayes Corp., which recently filed under Chapter 11 with the U.S. Bankruptcy Court, has yet to sell its Norcross, GA, manufacturing operation to a contract manufacturer. The company had intended to the sell the operation during Q3.
New space in low-cost regions...In Timisoara, Romania, Solectron has started construction of a 200,000-ft2 facility, scheduled to open in July 1999. The facility will function as the first phase of a new campus that could grow to 400,000 ft2 in the future. In April, Solectron announced plans to operate in Romania starting with a leased facility, which already employs a work force of 250 people (May, p. 7). To meet the need for low-cost, high-volume manufacturing in Europe, Solectron anticipates increasing its Romanian work force to more than 1000 people in the next two years. The company reports it has been able to attract a highly motivated and well-educated work force. In fiscal 1998, Solectron generated $787 million in Europe, up 56% over fiscal 1997....Elcoteq (Lohja, Finland) has started production within a new plant in Pécs, Hungary. The plant's first product is a subassembly for a Central European automotive electronics supplier. Elcoteq says investments in equipment for the plant will continue, with a large portion of the spending taking place in 1999....Jabil Circuit (St. Petersburg, FL) plans to expand its operation in Guadalajara, Mexico, by 120,000 ft2, and construction will begin immediately. Jabil's current 150,000-ft2 facility there opened in November 1997....IEC Electronics (Newark, NY) plans to locate a facility of about 50,000 ft2 in Mexico within a 20-minute drive of its Edinburg, TX, operation. "We have a customer bringing business here to us only because of Mexico," says David Fradin, president and COO. Another customer is interested in having a Mexico capability. Without it, says Fradin, "we can't compete for this additional account." IEC has earmarked some equipment from its shuttered Alabama plant for use in the Mexico facility, which will offer SMT, through-hole and box build services....Next month, GET Manufacturing (Mountain View, CA) will open a 65,000-ft2 facility in Tijuana, Mexico, with four SMT lines, featuring Fuji equipment, as well as automated through-hole capabilities. GET has just purchased $30 million worth of equipment, 75% of which will be going to the new Tijuana facility. GET's Mexican subsidiary, which also includes a 28,000-ft2 facil-ity in Tijuana, has special expertise in complex RF, electro-optical and electromechanical interfaces.
Investing in U.S. operations....GET is also enhancing its U.S. operations. Last month, the company moved its headquarters and New Product Introduction Center from a 34,000-ft2 building to a new 41,000-ft2 facility in Mountain View, CA. The new facility is receiving more equipment including the high-speed SMT type from Fuji. Capabilities extend through box build. This facility can build prototypes and low-to-medium volumes, with the ability to transfer higher volumes to other GET plants including those in China. In addition, GET recently opened an office in Charlotte, NC, for business development, program management and premanufacturing support on the East Coast....ACT Manufacturing (Hudson, MA) has relocated Southeastern U.S. manufacturing to a new 65,000-ft2 facility in Lawrenceville, GA. The new facility will allow for expansion of new and existing customers in the Southeast. "ACT Manufacturing Lawrenceville, GA, is one of the largest and most established contract manufacturers in the state of Georgia with the new 65,000-ft2 facility," declares Phillip Cope, Southeast regional business development manager....Winland Electronics has broken ground on a 4800-ft2 addition to the company's 53,000-ft2 facility in Mankato, MN. Due to be completed in May 1999, the addition will provide more office space. Winland's sales are up 48% for the first nine months of this year....Flextronics has opened a Product Introduction Center in Niwot, CO
Facility plans...Flextronics also expects to increase its work force in Hamilton, Scotland, to about 300 next year....JIT Holdings Ltd. (Singapore) plans to set up facilities in Europe and Mexico. The company says JIT Europe should be operational in the second half of 1999, and JIT Mexico in the year 2000.
Buying equipment...This month, Agility (Ayer, MA) expects to receive two more Mydata MY19 placement machines for high-speed, high-mix assembly. The CM will end up with three machines of this new model....EJE Research (Buffalo, NY) recently added a GenRad 2286 in-circuit tester as well as a SMT line with a Siemens SIPLACE 80 placer....Gregory Associates, a complex system CM, has installed a high-speed, robotic machining center in its San Jose, CA, facility....Equipment recently purchased by EPE Corp. includes a series three in-circuit tester from Hewlett-Packard.
Manufacturing restructured... Electronic Components & Systems (ECS), a wholly owned EMS subsidiary of The Hartcourt Cos., has moved manufacturing out of its Tuscon, AZ, headquarters. This action stems from ECS' September acquisition of Elan Manufacturing in Fremont, CA. Since Elan offered a high-tech location in Silicon Valley, "it made more sense to make that our U.S. facility," explains James Pruzin, president of ECS. So the high tech work and lower volumes in Tuscon were sent to the Fremont site, while the rest went to ECS' plant in Nogales, Mexico. Nogales and Fremont each received one SMT line in the process. With two SMT lines now and about 20,000 ft2, the Fremont facility has become a gateway for funneling business into the 65,000-ft2 Mexican operation, which is up to five lines. According to Pruzin, this strategy of starting a program in the U.S. and moving it to Mexico for volume production "has been successful with a few cases already." He reports ECS' sales this year are up about 34% over last year.
Pantronix Corp. (Fremont, CA), a privately-held IC packaging foundry, wants to build an EMS business, but not without borrowing from its expertise in packaging.
The Electronics Manufacturing Division (EMD) of Pantronix is pursuing EMS business in three areas, all of which are connected to IC packaging. In one market niche, Pantronix can act as a one-stop shop, offering to package ICs and then to mount them on boards through EMD. "Because we're in control of two profit areas, we're in a more flexible position to keep cost down," says Will Philips, EMD's new director of marketing.
Since wire bonding is a bread-and-butter process for Pantronix, EMD is also targeting designs that combine SMT assembly with chip on board. And the third niche is burn-in boards. Pantronix already has a large capacity in burn-in ovens for IC manufacturing. "Burn-in boards for the IC industry are a natural fit [for EMD]," concludes Philips.
EMD obtained its SMT capacity by way of acquisition. In April, Pantronix bought Protron, a Bay Area CM with two Fuji lines and a prototype line. Those assets were moved to Pantronix's 87,000-ft2 facility in Fremont, where more than 25,000 ft2 is dedicated to contract manufacturing.
Recent certifications....EJE Research (Buffalo, NY) and Teltronics (Sarasota, FL), a telecom company with an EMS business, have been certified to ISO 9002....DC Scientific (West Bridgewater, MA) has earned the ISO 9001 rating....EPE Corp. (Manchester, NH) recently received FDA registration.
Financial news...Flextronics has completed a public offering at $72.50 per share. The company sold 2.7 million shares, amounting to $195.8 million, while subsidiaries of Royal Philips Electronics sold 1.0 million shares. Flextronics intends to use the net proceeds for repayment of debt, capital expenditures and general purposes. Recently, the company announced a two-for-one stock split....By reducing an acquisition-related charge, Jabil Circuit has increased net income for fiscal 1998 by $2.2 million and increased goodwill by $3.6 million. This change resulted from a reduction of in-process R&D-related expense....According to Bear, Stearns & Co. (New York, NY), Solectron management has set a target of $20 billion in sales by 2001. The company agrees with First Call consensus of $8 billion in sales for fiscal 1999....Reuters reports Sparton Corp. (Jackson, MI) has set a goal of $176.9 million in revenue and $7.1 million in pretax operating profit in fiscal 1999....Bell Microproducts (San Jose, CA) states its Quadrus manufacturing division in Q3 returned to profitability and accounted for sales of $26.9 million, up 32% from Q2 levels.
Stocks up...Based on data from SG Cowen Securities (Boston, MA), the MMI Index of 22 EMS companies rose about 18% in the four weeks from Nov. 13 to Dec. 11. The Index has climbed about 95% since its low on Sept. 4.
Industry news...IPC (Northbrook, IL) has created a used equipment web site. Only IPC members can list equipment they are selling, but any company in electronics assembly or PCB fab can post equipment being sought. The site address is: www.ipc.org/html/equipment.htm.
Executives on the move...MCMS (Nampa, ID) has appointed Richard Downing as president and COO. He had been senior VP, Storage Products Group for Seagate Technology, where he headed operations in Asia and parts of Europe. Downing will report to Robert Subia, CEO of MCMS....GET Manufacturing has named Francis Massera as managing director, Europe. Formerly, he was VP, Europe for Adaptec....Jeffrey Lavin has joined ACT Manufacturing as VP of finance and CFO. He takes over financial duties from Douglass Greenlaw, who has been named VP of strategic development, focusing primarily on merger and acquisition opportunities.
