Vol. 11, No. 11: November 2001


Table of Contents

Cover Story

NEC Picks Up Outsourcing Pace in Japan

World Markets

Asian Market Spawns New Competition

Market Data

IDC Weighs In

Surge in Pipeline Deals

News

Flextronics To Gain Control of Swedish Group

Another deal in Sweden

Kimball To Acquire VDO Facility

New alliance

New facilities

New programs

Q3 and Nine-Month Results for 21 EMS Providers


NEC Picks Up Outsourcing Pace in Japan

For about two years now, Japan has been the promised land of outsourcing (Dec. ’99, p. 1). The potential was huge, and the penetration minimal. But at the same time, EMS providers were not holding their breath waiting for Japanese OEMs to outsource big chunks of business. After all, Japanese OEMs were not known for speedy decision making. Not only that, they would be violating the Japanese belief in lifetime employment. But a sick domestic economy followed by weakening world demand are pressing Japanese OEMs to restructure. And restructuring usually leads to outsourcing, one way or another.

For those who would question whether Japanese OEMs will outsource work from their factories any time soon, NEC has leaped to the outsourcing forefront. Indeed, the company has in short order become a poster boy for divesting manufacturing assets in Japan. Not only does NEC intend to outsource a computer-related operation in Ibaraki, Japan, to Solectron – as announced late last month – but NEC also plans to transfer two domestic telecom operations to an EMS provider.

The latter deal, in particular, is no small potatoes. NEC will outsource manufacturing activities at NEC Miyagi and NEC Yamanashi. NEC is currently negotiating this deal with several EMS companies and expects to reach a definitive agreement by the end of the year. Closing is anticipated by March 2002.

The Miyagi and Yamanashi operations develop and manufacture advanced optical transmission systems including wavelength division multiplexing and SONET/SDH as well as network access systems such as xDSL. NEC will form a new company combining manufacturing assets and processes of the two units along with 800 people from NEC Miyagi and 400 from NEC Yamanashi. The new company will be transferred to the winning EMS provider.

Design and development activities at NEC Miyagi are not part of the deal. Nor are development and manufacturing at NEC Yamanashi’s plant in Otsuki City, one of two plants that make up the Yamanashi unit. The Otsuki plant is involved in manufacturing optical devices and optical submarine cable systems. NEC Yamanashi’s other plant, located in Yamanashi City, is included.

NEC Miyagi and NEC Yamanashi employ a total of about 2300 people, of which 1200, as detailed earlier, are expected to join the successful bidder. The Miyagi unit had sales of 85 billion yen, or about $699 million, for the fiscal year ended March 2001. NEC Yamanashi accounted for fiscal year sales of 73 billion yen, or about $600 million.

Because some manufacturing at NEC Yamanashi is being retained, a good estimate of EMS revenue potential cannot be made at this point. But the Miyagi facility alone may have a revenue potential of about $500 million. That’s based on fiscal 2001 sales and a cost of goods factor of 0.73. (This factor is an average for Japanese OEMs, and it comes from a Japanese market report by First Union Securities, whose name has changed to Wachovia Securities as a result of a merger.)

The Solectron deal, while not as large, becomes another milestone for outsourcing in Japan. This announcement marks the second time that a large Japanese OEM has decided to sell a domestic operation to a global provider. Sony paved the way by selling its Miyagi plant to Solectron last year (Oct. ’00, p. 5-6).

Under a letter of intent, Solectron plans to acquire the manufacturing business of NEC’s facility in Ibaraki, Japan. In taking over that business, Solectron will provide manufacturing services for server, workstation and storage products at the site. The companies expect to nail down a final agreement in Q1 2002.

For NEC’s fiscal 2001, NEC Ibaraki contributed sales of 31.5 billion yen, or about $259 million. The Ibaraki unit employs some 650 people, of which about 500 are slated to go to Solectron. Unit operations other than manufacturing, such as product development and data centers, will remain with NEC. The Ibaraki facility has capacity of about 660,000 ft2, and Solectron will lease some amount of space there. But Solectron will not purchase property or buildings.

Solectron will gain capabilities to perform build- and configure-to-order, final test, and fulfillment in Japan for the server and workstation market.

“We are pleased to expand our relationship with NEC, the Japan market leader in servers and workstations,” states Koichi Nishimura, Solectron’s chairman, president and CEO. “This is another positive indication that Japanese companies are utilizing our supply chain model to help them compete more effectively in the global marketplace.”

As of Sept. 30, NEC operated 49 manufacturing companies outside of its NEC Electron Devices business.

Another Japanese OEM with outsourcing plans is Toshiba. In August, the company announced that it intends to expand outsourcing. Also, by FY 2003 Toshiba will rationalize 21 domestic manufacturing plants by 30% and reduce 98 domestic manufacturing and engineering companies by 25%.

Then there’s Sony. The company has already cut 13 plants since 1999 and intends to get rid of two more by March 2003, bringing its total to 55. But according to a company spokesman, Sony at present has no plans to divest plants beyond the two that were acquired by Solectron. Nonetheless, multibillion-dollar outsourcing potential lies in Sony’s PlayStation 2 game console. Last month, MMI published an unconfirmed report that Sony is expected to outsource production of the PlayStation 2 to two Taiwanese companies (Oct., p. 2). Since then, Sony has told MMI that although Sony is studying the possibility of manufacturing the product overseas, nothing has been decided.

How large is the outsourcing potential from Japanese OEMs? According to the aforementioned report by the former First Union Securities, now Wachovia Securities, the EMS revenue opportunity from the top 35 Japanese OEMs is $276 billion. “The Japanese OEM market opportunity represents the single largest incremental revenue opportunity over the next five years,” writes William Cage, author of the report, which is entitled Japan Electronics & IT: The Revenue Tsunami for EMS.

The veteran EMS analyst also states, “The addressable market from the Japanese electronics industry nearly doubles the revenue opportunity for the EMS industry and, combined, gives a total worldwide untapped and available market to the EMS industry of approximately $576 billion.”

Moreover, the study finds that the top 35 Japanese OEMs have a total of about 1415 facilities worldwide. Of those, the report identifies 259 facilities that would be candidates for some form of outsourcing.

What’s more, Technology Forecasters of Alameda, CA, projects EMS demand in Japan will rise from $5 billion in 2000 to $31.2 billion in 2005. This increase amounts to compound annual growth of 44%.

Mindful of this opportunity, at least five of the largest providers have set up sales offices in Japan, with Flextronics being the latest to do so. Business development efforts in the Japanese market have also included partnerships with Japanese companies (see table below).

For an increasing number of providers, serving the Japanese market now means manufacturing there. Solectron started this trend with its acquisition of a Sony facility. Now SCI is joining in through an agreement to acquire an IBM operation in Yasu, Japan (Oct., p. 1). What’s more, Michael Marks, Flextronics’ chairman and CEO, recently told analysts that the company wants a factory in Japan.

But tier-one providers are not the only ones pursuing business in the Japanese market. With that goal in mind, Singapore-listed CEI Contract Manufacturing has signed a joint venture agreement with TOYO i TEC Co Ltd, an EMS provider based in Osaka, Japan. Under the agreement, the two parties will set up a separate company, tentatively called CEI-TOYO Singapore Pte Ltd, to market contract manufacturing services to Japanese customers. CEI will hold 53.3% of the new company’s share capital, and TOYO will have the rest.

TOYO’s key customers include Agilent Technologies, the Matsushita Group, Sony EMCS, Sanyo Electronics and Toshiba.

But is it possible to win programs from Japanese OEMs without a partner or facility in Japan? As shown in the next article (see p. 4), a number of emerging Asian providers have done just that. These providers offer manufacturing in low-cost geographies such as China, which Japanese OEMs have already exploited to some extent.

Take Surface Mount Technology, Ltd. (SMTL), a Hong Kong-based provider that is publicly traded in Singapore. One of SMTL’s latest major wins is Clarion, a Japanese manufacturer of car audio systems and a member of the Nissan keiretsu. SMTL is building controller boards for Clarion CD decks. With Nissan’s stamp of approval, SMTL is talking to three other Japanese suppliers of car audio systems.

The example of Clarion shows that the outsourcing trend is reaching not only big names in the Japanese market, but also companies in lower tiers of the market. “Now the third or fourth tier – $5-billion companies – are also outsourcing. And those are not small companies,” says Dr. K.B. Chan, managing director of SMTL. “One of the recent ones that we are working with is Daikin, the number-one air conditioning manufacturer in Japan.” He adds that in the Western part of Japan, domestic appliance manufacturers with sales of $2 to $3 billion are also outsourcing.

To reach prospective customers from Japan, SMTL conducted a series of three seminars this year, two of which took place there. From the first seminar in March through August, SMTL picked up about 10 customers in Japan.

The Japanese market may be opening up to outsourcing, but OEMs such as NEC, Sony and Sanyo are still retaining manufacturing capabilities. Not only is Sony planning to keep 55 plants through March 2003, 11 domestic assembly plants were combined into an engineering and manufacturing arm called Sony EMCS. Established in April, Sony EMCS provides services to Sony Group business units, but has no external business at present, according to a Sony spokesman. Sony EMCS may provide its services to external customers in the future, says the spokesman, but that activity “will be very limited.” At the moment, Sony has no immediate plan to do so, the spokesman points out.

Sony has subsequently turned EMCS into a global concept, and EMCS structures are being set up in the US, Europe and Asia including China. Sony has also created a semiconductor production unit from a number of device manufacturing facilities.

Similarly, NEC has formed NEC Custom Technica Ltd., which includes PC design and manufacturing facilities in Gunma and Yonezawa, Japan. With about 2000 employees, this new company will provide development, manufacturing, parts procurement, and customer service for the domestic PC market. When this structure was announced in April, NEC said the new company will eventually expand its business outside NEC Group and expects to achieve external sales of about 60 billion yen (about $493 million), or 10% of total sales, in fiscal 2004 ending March 2004.

Meanwhile, another NEC facility, NEC Negano, is believed to be preparing to offer EMS (see also May, p. 3).

If these NEC sites are at the starting blocks, at least one Japanese OEM has reportedly taken the plunge into the EMS business. According to Dr. Chan of SMTL, his company competes against Sanyo, which has turned “their factories into one of the largest EMS [providers] in Japan.”

Don’t be surprised that some Japanese companies have set up separate businesses to develop and manufacture their products. In the early stages of outsourcing, it is not unusual to find OEMs that create separate manufacturing arms to make them compete for business on a stand-alone basis. This also shows it is unlikely that a wave of major Japanese OEMs will suddenly abandon all manufacturing in Japan.

Yet what occurs outside Japan may ultimately be of greater significance. When outsourcing has run its course among Japanese OEMs, a “fraction” of it will end up in Japan, said Eugene Polistuk, Celestica’s chairman and CEO, during a recent conference call. The rest will be spread around the world with a bias toward low-cost sites, he added.

Still, NEC’s willingness to divest three domestic operations sets a new benchmark for outsourcing among Japanese companies. Not only that, these moves involve system build and medium- to large-sized enclosures. This combination is commonly found in US and European deals, but not often in Japanese-style outsourcing. So NEC sets the stage for outsourcing that is larger in scale and broader in scope than what has taken place before in the Japanese market.

This new phase of outsourcing in the Japanese market will likely depend not on the names that have announced deals, but on those that have remained quiet. Toshiba has committed to do something, but the company has yet to specify what that will be. Other key companies yet to be heard from include Fujitsu, Hitachi (other than an optical program that went to SCI), Matsushita and Mitsubishi.

In this new stage, the question is not whether Japanese OEMs will outsource, but when and to what extent.

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World Markets


Asian Market Spawns New Competition

The recent surge in outsourcing to low-cost Asian sites, particularly China, not only puts the spotlight on tier-one EMS players, but also creates interest in Asia-based providers on the industry’s lower rungs. While a number of Asian providers have been gobbled up, others are emerging. Some have already made the MMI Top 50. But there are others who have received little or no coverage in these pages. MMI has discovered at least five providers that are not well known in the global EMS industry, but are well endowed with Asian capacity. (See table, below)

Four out of the five Asian providers are not pure EMS companies. They have built businesses that offer both EMS and ODM (original design manufacturer) services. So the Asian market has not only spawned more providers seeking a piece of the global pie, it has also created a hybrid model – an EMS/ODM provider.

Here are brief profiles of five Asian providers looking to make a name for themselves and win business outside Asia. Two more are mentioned as well.

Alco Electronics. Conventional wisdom says an EMS provider should not operate a branded product business. Otherwise, one might end up competing with one’s EMS customers. But don’t tell that to Alco. The publicly held company manufactures home entertainment systems, DVD players, boom boxes and the like for its Venturer subsidiary, which markets them to retail outlets in the US and Europe.

For Alco, its branded business is an advantage, not a drawback, in relation to its outsourcing business. “If the business goes down a bit, we can pick it up with the branded business,” says Mario Boltri, VP of OEM marketing at Alco. Developing products for its own label also shows the extent of Alco’s capabilities.

Also unlike a typical provider, Alco offers both EMS and ODM services. About 55% of sales comes from the EMS side, while about 45% is derived from ODM work and the Venturer subsidiary.

Alco opened US sales offices just over a year ago in Melville, NY, and San Jose, CA. But the company has been offering EMS and ODM services since 1968 to Japanese OEMs such as Toshiba, Aiwa, Pioneer, Hitachi and Casio as well as European customers including Grundig and Quelle. For example, Alco produces high volumes of DVD players for Toshiba and Pioneer and does car audio work for the two European companies.

In addition, Intel and Alco just announced that the two companies have jointly developed the Intel Hannacroix concept PC, a system with built-in home entertainment capabilities. Alco anticipates that it will furnish subsystems in accordance with various OEM look designs.

The provider is selling manufacturing in China, which takes place in three Dongguan cities some 1.5 hours from Hong Kong. Alco offers a vertically integrated solution that includes injection molding, wire harnesses, metal enclosures, and a polyfoam factory for packaging. NPI is done in Hong Kong.

Cal-Comp Electronics (Thailand) Public Company Ltd. With Cal-Comp’s successful IPO in Thailand last year, the company has come up on the radar screen for Asian providers. Nevertheless, Taiwan’s Kinpo Group still considers Cal-Comp a subsidiary through Kinpo’s ownership stake in the company.

Also note that Cal-Comp, which does all manufacturing in Thailand, is projecting around 14% growth for this year, not too shabby in the current environment. This growth shows that, despite the EMS buildup in China, there is still demand for low-cost manufacturing in Thailand.

Although Cal-Comp describes itself as a contract manufacturer, the company also does ODM work and even maintains a branded product business. For example, Cal-Comp received ODM programs to build 40 Mhz cordless phones and walkie talkies for Panasonic starting this year. Cal-Comp manufactures products in three areas: communications, computer and peripherals, and consumer electronics. Products listed by Cal-Comp include printers, fax machines, calculators, cable modems, integrated receiver decoders, CD-ROM drives, and CDMA and TDMA cell phones.

Founded in 1989, Cal-Comp became the first overseas production base for the Kinpo Group.

Elite Industrial Group. This EMS provider also offers ODM capabilities. Established in 1978, Elite initially focused on contract manufacturing of industrial products, followed by telephony in the early 1980s. Elite grew rapidly in the 1990s when it added both competencies and customers to manufacture wireless communications products.

In the wireless space, Elite specializes in unlicensed radios, Bluetooth technology and cordless phones. For telephony, the company has expertise in business and residential telephone sets, caller ID adjuncts and digital answering systems. Among other specialties are business machines including electronic cash registers; personal and kitchen appliances; and health products.

Through 11 subsidiary companies, Elite offers vertical integration that includes industrial design, tool making, plastic injection molding, metal stamping, PCBA, DFM and DFT, and design and supply of packaging.

“The location in Southern China since 1978 and the level of vertical integration internally help Elite react to customer requirements quickly and offer continuous cost and process improvement,” says John Constantine, Elite’s GM of the Americas.

Like Alco earlier, Elite performs all of its manufacturing in China. US sales are handled in Oakland, CA, and European sales in Karlsruhe, Germany. Last year, the company set up a Technical Center in Holmdel, NJ, to assist customers with system architecture and software. Projects are then handed over to product design engineers in Vancouver, Canada, and Hong Kong. They can take costs into account.

This year the company made an important change in its management team. In May, Paul Murphy was named CEO of the Elite Industrial Group.

GES International Ltd. (GIL). Publicly held GIL follows what may be a unique model for the EMS industry. This company combines EMS and ODM services with its Digiland distribution business, billed as the largest operation of its kind in Asia. So GIL can both manufacture and distribute customer products. That offering includes the use of eight CBTO (configure- and build-to-order) centers in eight Asian countries, among them China and India. Separate from GIL’s manufacturing plants (table), these centers provide local configuration for GIL’s Datamini brand PCs sold through its Digiland distribution channel.

GIL is promoting itself as more than an EMS provider. “We have extensive ODM capability in design and development of electronic and electric hardware, software and firmware, ASICs, LCD and plasma displays, RF and wireless, mechanical and industrial elements, publication writing, and agency approval and testing,” notes Robert Bogutsky, who runs GIL’s US marketing out of a new office in Kannapolis, NC.

The company has 54 design engineers of various disciplines in its ODM group in Singapore and expects to add 64 for its new Shanghai facility due to come on line in June 2002. That facility, GIL’s second manufacturing plant in Shanghai, will provide 215,000 ft2 of additional space. What’s more, GIL is currently adding 30,000 ft2 in Malaysia.

Unlike the other Asian providers profiled here, GIL does have a manufacturing presence in the US. Through its acquisition of Eltech Electronics, GIL obtained a plant in Lowell, MA, as well as Johore, Malaysia (June, p. 2). GIL has low-, medium- and high-volume capability and “will manufacture any quantity the customer requires,” says Bogutsky. “We are not volume sensitive.”

Surface Mount Technology, Ltd. SMTL is involved in producing more than 20% of the world’s demand for 3.5-in. FDDs (floppy disk drives) and more than 10% of global demand for CD-ROM/CD-RW drives. Indeed, 70% of SMTL’s fiscal 2001 sales ended Mar. 31 came from computer peripherals. For example, SMTL builds FDDs for Sony and Samsung. The provider also does PCBA for CD-ROM drives from Lucky Goldstar and has a new contract from LG to provide PCBA for CD-RW drives. In another contract, SMTL is providing PCBA for rewriteable DVD drives made by Pioneer.

Existing relationships are helping SMTL to win business in other product areas. The provider has landed a program from Sony for manufacture of precision magnetic scales. SMTL has also been awarded projects from Samsung for multimedia speakers and microwave oven control. But business is coming in from new customers as well. SMTL has recently picked up a number of new accounts from Japan (see also article on p. 2-3).

To expand the company’s growth rate, SMTL has started to pursue the US market. But rather than setting up a US sales office, SMTL is looking at the use of manufacturers’ reps as well as a potential alliance with one or two US providers. The company believes its ability to satisfy demanding Japanese customers will appeal to American OEMs.

In Europe, SMTL already has “quite a few” customers, reports Dr. K.B. Chan, founder and managing director of SMTL. For example, the company is building automotive electronics for a subsidiary of Fiat. SMTL also plans to step up sales efforts in Europe.

According to Dr. Chan, SMTL’s number-one advantage is quality. The company plans to be at 5.0 sigma (233 ppm defects) by the end of 2002 and at 6 sigma (3.4 ppm) in 2003-2004. On the Sony FDD program, SMTL has achieved zero defects at final QA and no customer returns after 32 million units shipped. The provider also prides itself on its ability to do more than 12 inventory turns a year. On the technology side, SMTL is touting its lead-free soldering process, pilot production for flip chip, and a new 2.4 Ghz lab.

As opposed to many EMS providers, SMTL is in need of space. In Dalinshan, China, the company is about to start construction on its sixth factory, adding about 80,000 ft2. In addition, SMTL plans to start work on a new manufacturing/technology campus in Suzhou, near Shanghai, next year.

Two more providers to watch. In June, Singapore-based Beyonics Technology Ltd., formerly known as Uraco Holdings Ltd., acquired Seagate’s PCBA operations in Batam, Indonesia. Some 600 people were involved. Publicly held Beyonics also obtained from Seagate a two-year supply agreement estimated to be worth about $300 million in revenue.

For the fiscal year ended July 31, 2001, Beyonics’ Contract Manufacturing division posted revenue of S$182.0 million, up from S$29.5 million a year earlier. That division includes revenue from plastic molding activities. Beyonics’ other businesses consist of precision machining, metal stamping, and distribution. Key customers besides Seagate include HP, Benchmark Storage Innovations, Maxtor, IBM, Agilent and Baxter. Beyonics has manufacturing facilities in Singapore, Malaysia, Indonesia and China.

Also worth a look is Flairis, another publicly traded provider based in Singapore. As of July, the company operated 31 facilities with SMT capacity of 156 lines. In addition to Asian operations in Singapore, Malaysia and Indonesia, Flairis at that point also had facilities in Mexico, Canada, the US and Italy. In the US, this provider maintains a 75,000-ft2 facility in Milpitas, CA, for prototypes and high-mix, low-volume work. Major customers have been predominantly Japanese. Flairis was formerly known as Allied Components International.

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Market Data


IDC Weighs In

Of the recent EMS market forecasts, IDC (Austin, TX) is taking the most conservative view for the current year (see also Oct. p. 2-4). The market research firm is estimating an 8% decline in the EMS market from $98 billion in 2000 to $90 billion this year. This forecast is based on nine months of revenue data for the major public EMS companies plus Q4 median guidance.

“Regarding the 8% decline in the EMS market, we expect the aggregate revenue of the top six players to decline by 7%,” explains Kevin Kane, IDC’s program manager for EMS. “And so the mid-tier and lower-tier players are essentially flat to a slight decline. We’ve seen some are struggling and some go out of business, while others flourish in this tough economy.”

For 2002, IDC is forecasting a 14% increase to $103 billion, with recovery occurring in the second half. These numbers are also below other forecasts.

IDC’s five-year forecast has the EMS market growing at a CAGR of 15.6%, reaching $186 billion in 2005.

The firm has also studied the ODM market and estimates ODM sales this year will amount to $20 billion. According to IDC, the ODM market will hit $34 billion in 2005, for a five-year CAGR of 11.2%. The short-term cycle of ODM contracts has a lot to do with IDC forecasting slower growth for the ODM business compared with EMS. “IDC feels that these short-term contracts mitigate against any precipitous growth within the ODM industry,” says Kane.

In addition, IDC predicts that when combined the two markets will have a CAGR of 14.9% and attain $220 billion in 2005.

For more information, go to www.idc.com.

Surge in Pipeline Deals

Not only is the pipeline of major outsourcing deals beginning to flow, as reported here last month (p. 1), the number of deals in the pipeline has risen sharply in recent weeks. During Solectron’s analyst meeting on Oct. 29, the company reported that it had seen a total of 49 divestiture-type opportunities, up 58% from 31 deals 12 months earlier. But a majority of the increase came in the four weeks leading up to the meeting.

During that month, Solectron observed 10 new proposals versus eight in the prior 11 months. According to Solectron’s tally, the pipeline went from 31 deals 12 months before the meeting to 35 deals six month prior and then to 39 four weeks out. Pipeline inflow surged in the last month from 39 to 49.

What’s more, a recent survey by Merrill Lynch (New York, NY) found that about $7.3 billion worth of outsourcing deals will be done in the second half of 2001. Then some $19.5 billion in deals will follow in the first half of 2002. Another $19-billion worth will show up in the next 12 months through the first half of 2003, predicts Merrill Lynch. Survey results were based on 97 OEMs with about $400 billion in COGS. These and other results appear in Navigating the Next Generation of Outsourcing, published by Merrill Lynch.

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News


Flextronics To Gain Control of Swedish Group

Also tries experiment in Scandinavia

Flextronics (Singapore) intends to buy 91% of the Orbiant Group, a Swedish provider of services for design, operation, maintenance and management of telecom equipment and networks. The seller is Telia, billed as Sweden’s largest telecom equipment and network provider. Orbiant will become part of Flextronics Network Services, Flextronics’ network installation business.

The price for this stake is about $100 million, with potential for additional payouts. About 5400 Orbiant employees will join the 1050 workers of Flextronics Network Services. Telia and Orbiant have reached a supply agreement that will remain in effect until the end of 2004.

Also in Scandinavia, Flextronics has formed a separate organization called Flextronics Regional Services to focus on smaller regional customers. “If this initiative is successful, we expect to expand this approach to other regions,” said Michael Marks, Flextronics’ chairman and CEO, in a recent conference call. This group is starting out with three operations in Sweden and Norway.

Another deal in Sweden…Part-nerTech, a contract manufacturer based in Malmö, Sweden, has signed a letter of intent to acquire Vellinge Electronics, another Swedish CM. Vellinge reports annual sales of SEK 500 million. PartnerTech expects to take over in December.

Kimball To Acquire VDO Facility

Kimball Electronics Group (Jasper, IN) has entered into an agreement to acquire a facility in Auburn, IN, from VDO North America LLC (Troy, MI). VDO is in the process of consolidating operations to become part of Siemens VDO Automotive AG, a automotive systems supplier.

Under the agreement, Kimball will manufacture several product lines for VDO in the future. Also, Kimball will take over the business for two product lines, an electronics module for an automotive passenger safety system and a line of small engine ignition products, adding several new customers to Kimball’s portfolio.

New alliance…XeTel (Austin, TX) has announced that a global cooperative of six EMS providers has been formed. Named EMS-Alliance, this cooperative consists of Elem S.p.A. of Italy, LeeMAH Holdings of China, NOTE AB of Sweden, Rangsons Electronics of India, VRI-Industria Electronica Ltd. of Brazil, and XeTel.

New facilities…EFTC (Phoenix, AZ) has relocated its Northeast operations from Wilmington, MA, to a new 75,000-ft2 facility in Lawrence, MA. The move represents an expansion of these operations….Express Manufacturing (Santa Ana, CA) has added a new 35,588-ft2 building, which doubles the size of one of its production facilities. The provider has also set up a dedicated prototype facility.

New programs…ARRIS (Duluth, GA), a provider of broadband local access networks and high-speed data and telephony systems, has decided to outsource most of its current in-house manufacturing to Solectron (Milpitas, CA). When the transition is complete, ARRIS will close its four factories in El Paso, TX, and Juarez, Mexico. The two companies are expanding a prior relationship. Solectron is also reporting program wins from Tivo, Ciena, Extreme Networking, Pioneer, Motorola, Cisco, Compaq and Sun….Plexus (Neenah, WI) will manufacture the system control unit for the Targis Cooled ThermoTherapy system from Urologix (Minneapolis, MN). This system is used to treat a prostate disorder….Elcoteq (Espoo, Finland) is taking over maintenance and repair of Nokia’s communications network equipment including microwave radio links, modules for base station controllers and mobile switches, and broadband modems….Manufactur-ers’ Services Ltd. (Concord, MA) has announced two new customers – Samsung, for whom MSL is doing PCBA for DVD players, and a Philips telecom division, which has chosen MSL to provide PCBA for switching units sold in Europe. Also, MSL has won six new programs with existing customers including Avidyne, Digital Networks Product Group, Eurologic, Sensormatic, and Europe’s Océ….Dell has awarded SMTC (Toronto, Canada) its first server program, which includes motherboards and peripheral cards. In addition, Square D, a new customer win in PCBA, has decided to consolidate the outsourcing of a number of divisions to SMTC….Acumentrics (Westwood, MA) has named IEC Electronics (Newark, NY) a prime supplier of electronic assemblies. Under a long-term agreement, IEC will supply not only components of Acumentrics’ ruggedized UPS systems, which IEC has been supporting, but also electronic assemblies for the customer’s Solid Oxide Fuel Cell systems….Innova Electronics has selected Express Manufacturing to build Innova’s distributorless ignition tester.

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Copyright 2001 JBT Communications

MMI October 2001

MMI December 2001

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