Vol. 9, No. 7: July 1999

Table of Contents

Cover story

Consolidation Hits the Mid-Tier and Above

Benchmark Makes a Play for the Top Tier

Saturn Electronics To Acquire Smartflex

SMT Centre and HTM Merge

Feature article

Jabil Deal Reflects Growing Focus on Repair Services


MSL Acquires 2nd Design Firm in Mass.

New Entity Emerges

Two OEMs divesting

More deals done

Deal disappoints

Alliances Gaining Traction

New DII Group programs

Other new programs

More Sq. Ft. in Malaysia

New facilities in the U.S.

New Roles for Solectron Execs

Some financial news

EMI Targets $100M in Switch to Turnkey

More company news

EMS Companies in Y2K Consortium

Consolidation Hits the Mid-Tier and Above

Predicted for years, consolidation has yet to take a large bite out of the EMS industry. But recent deals show consolidation is starting to take its toll on the mid-tier and upper ranks of the EMS industry. And the rate of such deal making has increased.

Two acquisitions — one of them large– and a merger appear in these pages. At least one deal is closed. Add to them four acquisitions of mid-tier CMs since the start of the year, and you have a total of seven mid-tier or larger players being absorbed in the first seven or eight months of this year. That’s one a month or close to it — well above last year’s rate. For all of 1998, MMI reported six acquisitions of mid-size CMs, or one every other month.

More and more mid-tier players are giving up their independence to join a larger organization. The philosophy of bigger is better not only has captivated top-tier players, but also has convinced growing numbers of CMs below. It forces them to be either sellers or buyers. And at least one CM is hurrying to reach the top tier before it’s too late.

Benchmark Makes a Play for the Top Tier

To Buy Larger AVEX

Benchmark Electronics (Angleton, TX) has reached an agreement to acquire AVEX Electronics (Huntsville, AL), a larger EMS provider than Benchmark, from family-owned J.M. Huber Corp. The two companies reported combined revenues of 1.37 billion for 1998, which would have given Benchmark a claim to tier-one status last year.

Under this agreement, Benchmark will purchase AVEX for $255 million in cash and one million shares of Benchmark stock, worth $37.6 million on July 2 when the deal was announced. In 1998, AVEX brought in sales of $841 million and says it is currently profitable. The provider employs about 4440 people and operates nine facilities totaling about 918,000 ft2 with 60 SMT lines. Its customers include Ericsson, General Instrument, IBM, Motorola, Philips, Pitney Bowes, and Sun.

“This transaction provides a tremendous opportunity for Benchmark to recognize the benefits afforded by scale and global presence in the electronics manufacturing services industry,” states Don Nigbor, president and CEO of Benchmark.

Internationally, the AVEX purchase will put Benchmark in Asia through AVEX’s Singapore facility as well as give Benchmark a presence in Guadalajara, Mexico; Campinas, Brazil; East Kilbride, Scotland; Katrineholm, Sweden; and Csongrád, Hungary. Both companies operate in Ireland. In the U.S., Benchmark will gain a plant in Pulaski, TN, as well as in Huntsville.

According to AVEX, Huber is selling the CM because it is not a strategic fit. Huber looked at the fit and thought the best thing for AVEX was to become “part of a company whose focus is electronics. And their [Huber’s] focus is not electronics,” says Niall Mulkeen, AVEX VP of human resources. Huber’s other business are in energy production, minerals, chemicals and wood products.

Benchmark recently completed a public offering that netted the company about $93.6 million.

Saturn Electronics To Acquire Smartflex

Under a new agreement, privately owned Saturn Electronics & Engineering (Auburn Hills, MI), which provides electrical, electromechanical and electronics manufacturing services, intends to buy all of the outstanding common stock of Smartflex Systems (Tustin, CA), a publicly held CM with a specialty in flex circuit-based packaging. Saturn is making a tender offer for $10.50 per share of Smartflex stock, followed by a merger in which remaining shares of Smartflex stock will be acquired for the same price. Smartflex will end up as part of a private company.

As of July 6, Smartflex had 6,493,994 shares outstanding, which will be worth $68.2 million based on the tender offer. SEC form 14D-1 lists a value of $70.6 million, which includes payments to holders of stock options.

In 1998, Smartflex earned net income of $1.5 million on sales of $107.6 million. According to form 10K for 1998, hard disk drive customers included IBM and Samsung Electronics, while among non-disk drive customers were Iomega, Quantum and HP. In an effort to reduce dependence on disk drives and other data storage products, Smartflex earlier this year acquired EMS assets of Tanon Manufacturing in West Long Branch, NJ, and Fremont, CA (Dec. ’98, p. 4). Other manufacturing facilities are in Hudson, NH; Cebu, Philippines; and Monterrey, Mexico. Smartflex also operates a vendor in-house program in Guadalajara, Mexico; a design location in Santa Clara, CA; and Technical Centers in Tustin, CA, and Singapore. In addition to the data storage segment, Smartflex serves medical, communications and multimedia markets.

Saturn, on the hand, is primarily an automotive supplier, and according to its web site, 87% of its sales come from that market. Commercial and military/hi-rel markets represent 7% and 6% respectively. Sales for 1999 are projected at $200 million. Saturn operates three plants in Michigan plus factories in Rocky Mount, NC; Marks, MS; and Juarez and Monterrey, Mexico. The company also has an engineering center at its Michigan headquarters and a joint-venture facility in Beijing, China. Saturn reports 1544 employees. Historically, electronics has contributed less than 20% of sales, compared with electrical and electromechanical work.

Gene Smith, Saturn’s executive VP of business management, says Saturn was “clearly looking for an electronics platform, and Smartflex is that platform.”

“The acquisition fits our strategic plans of product diversification, global growth, and expansion into other markets,” states Wallace Tsuha, founder, president, CEO of Saturn. “Our combined strengths will provide opportunities for new technologies, exceptional engineering capabilities, expanded global presence, and expertise in a more diversified marketplace.”

“Now with the combination, we’re…really an EMS company with strong product realization capabilities,” says Smith.

SMT Centre and HTM Merge

The Surface Mount Technology Centre, a privately held CM based in Toronto, Canada, has merged with Hi-Tech Manufacturing (HTM) of Denver, CO, another private CM. The combined company, now called SMTC Manufacturing Corp., is expected to have annual sales of about $500 million.

In addition to HTM’s Denver facility, the new company includes SMT Centre plants in Toronto; San Jose, CA; Austin, TX; Charlotte, NC; and Cork, Ireland. SMTC Manufacturing is listed with more than 625,000 ft2 of manufacturing capacity. The new company combines SMT Centre’s turnkey services in PCB assembly, system-level configuration, build to order and order fulfillment/warranty repair with HTM’s specialty in PCB design, testing and assembly.

“This transaction confirms our position as a premier player in the mid-tier market,” comments Paul Walker, president of the new company.

“We have long respected SMTC and view them as an ideal partner in pursuing consolidation in the EMS industry,” states Ed Johnson, president of HTM.

The new company’s investor group is led by Bain Capital and includes Celerity Partners and Kilmer Electronics. Bain says the group plans to increase its investment as consolidation opportunities arise. Last year, Bain and Celerity bought about 80% of HTM as a platform to pursue a consolidation strategy (July ’98, p. 1).

In the MMI Top 50, SMT Centre listed its 1998 sales as $258 million, while HTM previously reported 1998 sales of $89 million.

back to TOC

Jabil Deal Reflects Growing Focus on Repair Services

To provide customers with a complete solution, EMS providers are paying more and more attention to the back end of the product cycle. Not only are more of them fulfilling orders to end customers, there is now a movement afoot to take over the OEM’s depot repair work. Two of the largest providers have made moves to acquire repair businesses, while a third has announced a new contract for after-market service.

In the latest repair deal, Jabil Circuit has signed a letter of intent to buy EFTC’s repair/warranty business, EFTC Services. This move follows news of Solectron’s intent to acquire Sequel, a privately held company in repair services and support (June, p. 9). That deal has now closed. Adding fuel to this trend is Dovatron’s new contract to provide prerepair screening and testing of spare parts for Compaq’s products in Asia.

The practice of outsourcing depot repair, however, did not begin yesterday. Firms specializing in depot repair services have been around a long time. Indeed, depot repair was one of the first activities that many OEMs farmed out.

In the past, though, depot repair was often an afterthought in the EMS industry. But now, as outsourcing begins to span entire product cycles, a case can be made for the EMS provider that builds a product to repair it. The case becomes even stronger if the EMS company is also involved in product design. Field failure and returns data can then be fed directly back into design and manufacturing. Furthermore, large providers typically have global operations that can or could serve as platforms for repair activities in world markets.

Jabil plans to pay about $30 million in cash for EFTC’s repair/warranty business, with locations in Memphis, TN; Louisville, KY; and Tampa, FL. One repair center is connected to the Federal Express hub in Memphis, while a second is located near the UPS hub in Louisville. Jabil will obtain not only hub-based repair centers offering fast turnaround, but also a build-to-order operation using the Memphis hub. The EFTC business employs about 500 people.

Some of the larger customers of that business are Compaq, Dell, Hewlett Packard, Apple, Gateway, Fore Systems, Nortel’s Bay Networks acquisition, IBM and Fujitsu. The latter is both a repair customer and the only company using the hub-based BTO service. Jabil says there is significant overlap between its customer list and that of the EFTC business.

“The repair and warranty service business is a natural extension of our virtual manufacturing model and an enhancement to our total global solution. There is strong interest from our current customer base, and this is an excellent opportunity to acquire an experienced and successful capability as a stand-alone business,” states Timothy Main, Jabil’s president.

“Customer demand drove the decision by Jabil to enter the repair warranty business,” says Beth Walters, Jabil’s VP of communications.

EFTC cited several reasons for selling this business. First, “our customers increasingly wanted global platform solutions in repair/warranty, something we could not offer in the short term,” explains Jack Calderon, EFTC’s CEO. Second, volume OEMs more and more are seeking one-stop solutions for manufacturing and repair. But EFTC, a high-mix CM, was not in a position to offer manufacturing to the volume OEMs it served on the repair side. Third, recent industry moves “made by Solectron most notably created a situation we would not be able to optimize. Certainly, Jabil could optimize,” says Calderon, referring to the need to offer global platforms and manufacturing for repair customers. Finally, the sale will strengthen EFTC’s balance sheet and protect the company’s ratio of debt to total capital during expected growth.

For Q2, EFTC is warning of greater than expected softness in its Services business. According to Calderon, this softness “is clearly temporary” and has nothing to do with selling the business.

In the past, Services revenue was in the $40-million range. According to Jabil, the business is profitable. EFTC acquired the business in 1997 as the Circuit Test Inc. group of companies.

The sale is expected to close by August 31. Upon closing, the acquired operations will continue to offer repair services to EFTC customers. Calderon says its has always been EFTC’s intention to help its high-mix customers move from complex repair arrangements to hub-based solutions.

As for Solectron, it signaled a greater focus on after-market services with the formation of its Support Services division, announced earlier this year (March, p. 5-6). The Sequel acquisition followed. With Sequel, Solectron can offer end-user support through call centers and the quick turnaround of a hub facility in Memphis.

Then there’s Dovatron. Its spare parts contract with Compaq is Dovatron’s first significant program with the computer company. Although not expected to be a top-ten program in terms of sales, it expands Dovatron’s offerings in the after-market service niche, while establishing a relationship with a key target customer. Spare parts screening and testing will take place in Dovatron’s facility in Malacca, Malaysia.

back to TOC


MSL Acquires 2nd Design Firm in Mass.

Manufacturers’ Services Ltd. (Concord, MA) has acquired Ronlin Design Company Inc. (Tewksbury, MA), which specializes in SMT board design. This deal follows MSL’s April purchase of another Massachusetts design firm, Electronic Systems Packaging (May, p. 8).

According to MSL, the Ronlin acquisition expands MSL’s portfolio of engineering tools and services for product development. Ronlin uses design and layout tools including Allegro and PADS PowerPCB for a wide range of complex design needs.

It was incidental that the two acquired design firms are located in Massachusetts, says MSL. Still, the company has stated its intention to expand engineering and design services in the Northeastern U.S.

Founded in 1982, Ronlin serves more than 50 customers in networking, telecom and electronic automation. They include 3Com, Visual, Avid, Cabletron, Brooks Automation, Innovate Networks, Dome Imaging Systems, Natural Microsystems, Brooktrout Technologies and Analog Devices.

Ronlin will remain as it is and will operate as Ronlin Design, an MSL Engineering and Design company. This recently formed MSL unit focuses on product development services. Ron Vezina, Ronlin’s founder, will become Ronlin’s technical director reporting to Ed DeJesus, VP of engineering and design services for MSL.

New Entity Emerges

Global Electronics Manufacturing (Los Angeles, CA), a new name in the EMS industry, has acquired about 90% of Electronics Components & Systems (ECS), a Tuscon, AZ-based CM with facilities in the U.S. and Mexico. Traded on Nasdaq, Global Electronics plans to use ECS as a platform company to make other acquisitions in the EMS industry. ECS had been a wholly owned subsidiary of The Hartcourt Companies (Los Angeles, CA).

Founded in 1988, ECS specializes in contract manufacturing for PCB assembly, phone and cable wires, coil winding and plastic injection. ECS’ main manufacturing facility at 65,000 ft2 is located in Nogales, Mexico. The company operates other production facilities in Chandler, AZ, where activities include BGA repair, and Fremont, CA, where EMS is offered under the name of Elan Manufacturing. ECS employs over 600 people.

ECS’ revenue increased from about $14 million in 1997 to about $17 million last year. Customers include General Instrument, Belden, NEC, Raytheon Systems, WMS Industries and Litton Industries, with the last three being added recently.

Global Electronics could be described as a publicly traded shell company. It’s a company “with not very many other significant assets other than ECS,” explains James Pruzin, president and founder of ECS. “The intention is to make ECS and some other contract manufacturing firms its focus.” An investment bank, American Equities, was involved with the ECS purchase.

Pruzin will remain president under a three-year employment agreement.

Two OEMs divesting…Last month, Evans & Sutherland Computer Corp. sold a small PCB assembly operation in Salt Lake City, UT, to Sanmina (San Jose, CA). Sanmina is leasing space within an E&S facility and took less than a dozen people from E&S. The 3D imaging company says this transaction will lead to lower product costs, especially in simulation, when fully implemented in the second half of the year….Plexus (Neenah, WI) has reached an agreement to acquire a circuitry products manufacturing facility in Wheeling, IL, from Shure, which makes wireless microphones and personal monitor systems. Plexus will assemble boards within the facility for Shure’s wireless and digital signal processing products. Subject to completion of final agreements and other conditions, production under Plexus is expected to start on September 1. Privately owned Shure is an existing Plexus customer, and this production will add to the work Plexus already does for Shure in Neenah.

More deals done…Flextronics International (San Jose, CA) has completed the acquisition of Ericsson’s facility in Visby, Sweden, a deal that was announced earlier (May, p. 2). The two companies have also entered into a new global supply agreement. Also, Flextronics has added the Finnish contract manufacturer Kyrel EMS Oyj to Flextronics’ Western European operations. Flextronics will issue up to about 1.8 million shares, worth about $108 million on July 15, for this previously announced acquisition (June, p. 8)….Solectron (Milpitas, CA) has closed on its acquisition of Sequel, a provider of repair services and support. Financial details were not disclosed. See article on p. 2-3.

Deal disappoints…The board of directors of Albatronics (Far East) Company Ltd., an Asian CM and distributor, have decided to voluntarily wind up the company as a result of its inability to pay its debts. Last year, Nam Tai Electronics (Vancouver, Canada, and China) bought slightly more than 50% of Albatronics shares for about $10 million, which was written off in 1998. Nam Tai has commenced legal action against Albatronics.

back to TOC

Alliances Gaining Traction

Three more alliances have been struck in the EMS industry. So acquisitions, while all the rage in the EMS business, do not provide the only way to tap the capabilities of another company (see also May, p. 4). Sparton Corp. (Jackson, MI) has formed a business alliance with EMS provider OCM Technology (OCMT) of Ottawa, Canada. XeTel (Austin, TX) has entered into a design and prototype partnership with DDI Design, a division of board fabricator Dynamic Details. And NatSteel Electronics Ltd. (Singapore) has engaged Taiwan-based Shuttle Inc., a motherboard supplier, in a strategic alliance cemented by a 10% stake in Shuttle.

For Sparton, the alliance with OCMT adds another company to Sparton’s well documented Alliance Program, by which Sparton is seeking to expand market coverage in North America (May, p. 4 and Oct.’98, p. 6). The two companies says this agreement will strengthen the presence of both in Canada. Sparton already operates a 58,000-ft2 facility in London, Ontario.

According to Sparton, this alliance allows it to meet the front-end manufacturing needs of current and future customers in Ottawa, a major telecom center in Canada.

For OCMT, the alliance provides a North American presence through Sparton and the resources necessary to serve an expanded customer base. OCMT is a turnkey provider, whose services include product design and development, PCB design and prototyping, board assembly and total/subsystems assembly.

Meanwhile, the partnership of XeTel and DDI Design will offer joint customers the combined services of DDI’s nationwide Design Centers and XeTel’s advanced card assembly services. The benefit of this partnership is said to be reduced cycle times from concept through production prototypes.

XeTel also points out this arrangement provides its customers with a wide range of design layout applications without the need to invest in software, hardware and manpower.

With time to market in mind, DDI will set up an Austin Design Center adjacent to the XeTel campus.

XeTel joins DDI’s list of contract manufacturing partners.

Finally, NatSteel Electronics Ltd. (NEL) has formed an alliance with Shuttle, which designs and manufactures motherboards and related products. Through this alliance, NEL will gain access to Shuttle’s ODM, or design, capabilities. NEL says adding these capabilities will complete its global supply chain offering.

To forge the alliance, NEL has agreed to purchase 10% of the share capital of Shuttle. This stake is valued at about S$21.2 million ($12.5 million), which will be funded from NEL’s recent sale of $250 million worth of convertible bonds.

Publicly traded in Taiwan, Shuttle has manufacturing locations in Tao Yuan, Taiwan, and regional business units in Silicon Valley and Los Angeles as well as Hamburg, Germany.

New DII Group programs…The Dii Group has added two new manufacturing programs to support DVB Holdings Ltd., Dii’s partner for set-top boxes in China (April, p. 5-6). In the first, Dii will provide set-top boxes for digital video delivery of educational materials as well as Internet access to about 40,000 schools throughout China. Multek China will supply raw boards, and Dovatron China will provide board assembly, box build and distribution. Both are Dii operations. It is estimated that over 100,000 set-top units will be delivered in the first three years of the program, with initial deliveries expected in September. Dii will also manufacture “web boxes” to support DVB’s new subsidiary, SilkOnNet.com Co. Ltd., which plans to launch an Internet-based media service for the Chinese-speaking market. DVB Holdings was formerly known as Capetronic International Holdings Ltd. Dii’s contract manufacturing subsidiary, Dovatron, has landed eight new programs totaling more than $200 million in annualized revenue. They involve seven new customers and one existing customer. New customer programs include PCB assembly in China for privately held Matrox, a Canadian maker of graphics accelerator cards, and PCBA and box build for Tut Systems, a Nasdaq-listed company in home networking products.

Other new programs…Lucent Technologies and Electronics for Imaging are two of the four new customers added by Jabil Circuit (St. Petersburg, FL) during the May quarter….Metricom (Los Gatos, CA) has selected Sanmina to build network equipment for Metricom’s national rollout of a 128 kbps wireless data service. Sanmina will supply turnkey services to produce RF poletop radio transceivers as well as radio components for Wired Access Points, where RF signals are connected to the wired backbone. Delivery will start in Q4….SMTEK International (Thousand Oaks, CA) will manufacture and test electronics assemblies for an unnamed medical device company under a long-term contract expected to reach an annual run rate of $15 million in the first year.

back to TOC

More Sq. Ft. in Malaysia

Another EMS facility for Brazil

Lately, Mexico and Central Europe have been the hot spots for new EMS capacity, but Malaysia is starting to make some noise again. And Brazil is about to add another tier-one provider.

In Malaysia, both Celestica (Toronto, Canada) and MCMS (Nampa, ID) have announced facility projects. Celestica will also open a plant in Brazil.

Responding to increased customer demand in Malaysia, MCMS is quadrupling its floor space there. MCMS expects to move operations from its original 18,000-ft2 facility in Penang to a 118,000-ft2 leased facility by September. The company opened its first plant there in 1996 and recently added a 16,000-ft2 facility. Over the long term, MCMS intends to consolidate that operation into the new facility.

“Expanding the size of our Malaysian operation to this degree is an indication of our commitment to support increased demand from our customers,” states Richard Downing, president and COO. “This will provide the scalability we believe is necessary to support the growing printed circuit board assembly and system assembly requirements for this region.”

Along with this move, MCMS is expanding SMT capacity by 30% with room for future growth in both PCB and system assembly. The new facility will include manufacturing, warehouse, office and cafeteria space.

What’s more, Celestica will start up a greenfield operation in Kulim, Malaysia, located one hour from the Penang airport. The operation will begin with a 50,000-ft2 facility within a technology park, and expansion is expected over time. Celestica says the plant will be operational by Q4.

According to the provider, this facility will complement its other Asian operations and reflects its optimistic view of the business climate and potential in Asia. In fact, Celestica has customers ready to use this facility. Other Asian operations include manufacturing sites in China and Thailand.

Within Brazil, Celestica will open a 40,000-ft2 facility in Hortolandia, located in the Campinas region. Also sited in a technology park, this greenfield operation will be fully operational in Q3. Because of the business environment in Brazil, Celestica is entering the market cautiously. The company also expects to expand this operation over time. Brazil is one of the key geographies that Celestica had targeted for a manufacturing location.

New facilities in the U.S….Jabil Circuit is setting up a 215,000-ft2 facility in Billerica, MA, giving Jabil a manufacturing presence in the Northeast. Plans call for using this facility to support current customers in Northeast, as well as employing it as a mid-volume turnkey site for other opportunities. One well-known customer in the Northeast is 3Com’s New England operation. Jabil is modifying the site for its manufacturing requirements and expects initial production near the end of November. With a GM and some management staff already hired for the facility, initial employment could be 120 to 150 people by the fall. Also, the company expanded its Guadalajara, Mexico, facility during the May quarter to 1300 employees and added two business unit manufacturing lines….To provide a greater level of service to customers in the Southwest, LeeMAH Electronics (San Francisco, CA) has purchased a 14,000-ft2 facility located in the Richardson Tech Center of Richardson, TX. Slated for July production, the facility is being outfitted to support outsourcing from local telecom customers in the Plano/Richardson Telecom Corridor….This month, CBA, Inc. aims to occupy its new 62,500-ft2 facility in Youngsville, NC, where the CM maintains two other buildings. Floor space is slightly more than originally reported because a mezzanine was added for engineering (Feb., p. 6; Mar., p. 11). Employment is up to 170 people.

back to TOC

New Roles for Solectron Execs

Based on a new organizational structure, Solectron has realigned its executive staff starting at the top. Dr. Ko Nishimura, chairman, president and CEO, is handing over much of his day-to-day responsibilities to Dr. Saeed Zohouri, who has been appointed to the newly created position of senior VP and COO. Zohouri will direct the company’s operations in the Americas, Europe and Asia as well as global material services. Having joined Solectron in 1980, Zohouri most recently served as president of Solectron North America and chief technology officer.

Solectron says this new structure will strengthen worldwide operations and allow it to optimize its supply-chain offerings.

In addition, the company has named Walter Wilson as senior VP of business integration and information technology, another newly created position. Wilson will be charged with further developing Solectron’s enterprise-wide processes and information systems. The company’s year 2000 program office, CIO, director of IT systems and new business integration group will report to Wilson. Late last year, he had assumed a similar role, which included responsibility for global material services (Feb., p. 8).

Nishimura will continue to oversee all corporate, strategic and emerging business units. They include corporate development, strategic marketing and planning; human resources; the recently formed Support Services unit; executive resources; administration; and the CFO office. Wilson and Zohouri will also report to Nishimura, as in the past. Solectron says this structure will allow Nishimura to better serve in his visionary role.

As part of his vision to develop additional supply-chain solutions, Nishimura has created an executive supply-chain strategy office. This office is intended to redefine the supply chain by developing integrated and optimized supply-chain services beyond what is available in the industry. Nishimura will oversee supply-chain strategy with help from Stephen Ng, executive advisor. Ng, formerly the company’s chief materials officer, had retired due to health reasons.

What’s more, Solectron’s account management teams have been integrated into a single global organization to enhance worldwide responsiveness. Scott Roeth will head this group as VP of account management, a newly created post, reporting to Zohouri. Roeth joined Solectron last year as corporate VP of sales.

Other, less obvious changes have occurred as well. G. Fred Forsyth has emerged as corporate VP and president of Solectron Americas. He had been president of Systems Engineering and Services, which was set up as Solectron’s systems build unit. That unit no longer appears as a separate entity in the new organization, which has all site GMs in the Americas reporting to Forsyth. So, in effect, PCBA and systems build in the region have been combined in one manufacturing organization under Forsyth.

Zohouri continues to act as chief technology officer, but in the new structure this position will also report to him. The chief technology officer will oversee Fine Pitch Technologies and Force Computers, Solectron’s wholly owned subsidiaries. So one can conclude this position will go to someone else.

Moreover, since most operations now fall under Zohouri, his influence within the company has expanded considerably.

The new organizational structure reflects Solectron’s strategy to serve as a womb-to-tomb provider. “Solectron is a very strategic and forward-looking company. A key to the company’s success has been our ability to anticipate our customers’ evolving needs and build an infrastructure to meet those needs. Today’s announcement is part of our long-range strategy to do just that. We are building a company that will enable OEMs to choose Solectron as their strategic supply-chain partner of choice, where we can take their products from the concept stage, to fulfillment, to their end customer, while also providing support services,” states Nishimura.

Some financial news…For the fiscal Q3 ended May 31, Jabil Circuit reported sales increased 69% over a year earlier to $522.5 million, while net income rose 41% to $24.4 million. But the company warned that design delays from two customers could reduce fiscal Q4 revenue and EPS by as much as 10% from prior expectations. Still, Jabil expects any growth delays associated with these new products would be recovered in the fall. Based on booked business levels, the company says growth rates for fiscal 2000 are positioned to exceed its long-term objective of 30% per year….MCMS’ sales for fiscal Q3 ended June 3 amounted to $110.3 million, up 25% versus a year earlier. The company recorded a net loss of $4.5 million for the quarter, compared with a net loss of $2.0 million for the same period of fiscal 1998. According to MCMS, this loss resulted primarily from a higher volume of PCBA sales at lower prices, lower sales and more volatile demand at the Durham, NC, facility, lower prices on consigned memory modules, and increased system-level shipments typically carrying lower gross margins. SGA expenses also increased….EFTC (Denver, CO) expects to show a Q2 operating loss of $0.15 to $0.20 per share primarily due to greater than expected softness in its services business and certain revenue shortfalls in its manufacturing business. The company is cutting about 150 jobs and plans further cost reductions. EFTC also intends to sell its repair/warranty business. See article on p. 3. The provider expects pretax charges of $25 to $35 million in Q3 as a result of the sale and business restructuring. …Celestica has filed a shelf registration with the SEC, allowing the company to offer from time to time debt securities, subordinate voting shares or preferred securities totaling up to $750 million….SMTEK International has received approval from Nasdaq to list the company’s shares on Nasdaq’s SmallCap market. SMTEK shares will trade under the symbol SMTI. The company says it switched from the New York Stock Exchange because of new requirements for listing there.

back to TOC

EMI Targets $100M in Switch to Turnkey

Express Manufacturing, Inc. (EMI) of Santa Ana, CA, aims to triple sales in two years. The company can expect such high growth because it is converting from its long-held position as a consignment CM to the revenue-producing model of a turnkey provider. EMI’s goal is to boost sales from $33 million in pure consignment work for 1998 to $100 million for the year 2000. The company began processing turnkey orders in January and expects the conversion to take place within two years.

By adding turnkey services, EMI plans to market its services globally. At present, 85% of its customers are based in Southern California. Customers include Xerox, Gateway 2000, Kingston Technology, Pairgain Technologies, Lantronix and Newport Electronics.

To round out its turnkey services menu, EMI has added PCB design layout services. The company now promotes itself as a one-stop shop from board design and prototyping to materials management to PCB assembly, box-build and system integration services.

As the EMS world knows, consignment revenue requires far more SMT capacity than does the equivalent in turnkey revenue. So EMI’s history as a consignment house has resulted in a substantial amount of SMT capacity. The company offers more than 17 high-speed Fuji SMT lines and 15 Quad lines. Manufacturing space exceeds 83,000 ft2, and EMI employs more than 1000 people.

EMI continues to enhance its capabilities. The provider is upgrading its existing x-ray and automatic optical inspection equipment. Also, CIM software and flip chip assembly will be added shortly.

But the company is not content to operate just in Southern California. Its goal is to set up a plant in Tijuana, Mexico, in the near future.

EMI was founded in 1983 by C.P. Chin, president of EMI, and three of his brothers. The four brothers continue to own the company.

More company news…GET Manufacturing (Mountain View, CA) has opened an office in Munich, Germany, to handle business development, program management and premanufacturing support for the Central European market. Dietmar Schnabel, formerly with Adaptec, will run the new office….QCI, a CM in Allentown, PA, is forming a new division, QCI Metrics, Inc., as a wholly owned subsidiary offering in-circuit and functional test services. These services include testing, test program assessment, program development, and program and fixture upgrades. QCI recently bought a GenRad 2287 test system….Last month in China, Nam Tai Electronics started production on two chip-on-glass lines with a capacity of 500,000 pieces a month. Nam Tai uses this technology to produce advanced LCD modules. The CM expects to add two more COG lines this year as well as other equipment including ten new SMT lines and eight chip-on-board machines….The Dovatron Colorado division of Dovatron International has been certified to the ISO 14001 environmental standard….For the third year in a row, Laughlin-Wilt Group (Beaverton, OR), a CM based on the U.S. West Coast, has made Deloitte & Touche’s Fast 50 ranking of high-growth technology firms in Oregon.

EMS Companies in Y2K Consortium

A group of high-tech companies including five EMS providers have banded together in a new organization to tackle the Y2K problem. Called the High Tech Consortium (HTC) — Year 2000 & Beyond, the organization was recently formed to reduce the impact of Y2K on the high-tech industry.

Goals of the HTC are to pool resources and share information about the Y2K readiness of suppliers. Suppliers are assessed by representatives from HTC member companies that post their findings on the Data Sharing Service, a secure, web-accessible database. The HTC provides standardized tools and methods to assess, mitigate and plan for potential Y2K disruptions.

When announced last month, the HTC consisted of 27 member companies. Among them are the following EMS providers: Celestica, Jabil Circuit, MCMS, SCI and Solectron. The consortium was started by Cisco Systems and Solectron. See www.hightech2000.com.

back to TOC

Copyright 1999 JBT Communications

MMI June 1999

MMI August 1999

Back to index page