Vol. 11, No. 6: June 2001

Table of Contents

Cover story

Celestica To Acquire Omni and Its Asian Footprint

World Markets

Emerging Competitors?

Flextronics Teams with Japanese Provider

Downturn Hits Mexico

Supply Chain

Solectron Deploys Tradec System

SCI Opts for Chain Measurement Tools


Celestica To Make Czech and Canadian Acquisitions

Solectron Makes Enclosure and Optical Moves

Comtel To Buy EMS Assets from NMT

VisionTek on the Prowl

New programs

Expanding design services

New facilities

New consulting firm

Restructuring update

Lucent update?

People on the move

Celestica To Acquire Omni and Its Asian Footprint

Consolidation in Singapore also seen in GES-Eltech deal

End market demand may still be shaky, but it’s not stopping some EMS providers from expanding in parts of Asia where the attraction of a low-cost manufacturing base, if anything, has increased during the downturn. (See also May, p. 1) Celestica is the latest provider to announce an expansion move there, and it’s a big one. The company has entered into an agreement to acquire all the outstanding shares of Omni Industries Ltd., a diversified Asian provider based in Singapore.

The Omni deal will mark the third time that a top-tier provider has acquired a major Asian player based in Singapore. Earlier, Flextronics picked up JIT Holdings, and Solectron added NatSteel Electronics Ltd. Not only that, Singapore-based GES International Ltd. has just announced its intention to acquire Eltech Electronics Ltd., a provider also headquartered in Singapore. As a result, Singapore offers perhaps the most striking example of consolidation in the EMS industry.

With close to 9000 employees, Omni operates 28 plants totaling about 2 million ft2, most of which is in Asia. Facilities are located in Singapore, Malaysia, China, Indonesia, Thailand and Mexico. Omni reported sales of S$1.684 billion for last year and profit after tax of S$47.3 million. Based on an average exchange rate of S$1.725 per US$ for 2000, sales equated to about $976 billion (or somewhat less if one applies a more current rate of S$1.81 per US$). Omni not only provides PCBA and system assembly services, but also engages in plastic injection molding, production of equipment and organic substrates for the semiconductor industry, and distribution of components and peripherals.

The Omni acquisition is Celestica’s third deal announced in recent weeks (see News, p. 4).

Under the agreement, Omni shareholders can receive 0.045 subordinate share of Celestica for each Omni share, or they can opt to convert some or all of their shares into cash at a price of S$4.25 per Omni share. Cash paid out will be limited to a S$860 million. Including shares, stock options and assumption of debt, the transaction is valued at about $890 million if all the cash is paid out. Certain Omni shareholders, who together own about 32% of Omni’s stock, have pledged their shares in favor of the deal. It is expected to close in early Q4.

In a conference call with analysts, Eugene Polistuk, Celestica’s chairman and CEO, gave several reasons for making this deal. “First, the transaction instantly and materially augments our existing Asian footprint, giving us the ability to further enhance our low-cost capabilities for our current customers and future customers, including those in Asia and, in particular, wave-four Japanese outsourcing customers. On a pro forma basis, using year 2000 results, our revenue mix in Asia would increase from 11 percent to approximately 20 percent. Second, this relationship further diversifies our revenue and earnings portfolio in an environment where diversification is extremely important,” said Polistuk.

In addition, he pointed out that the quality of Omni personnel and the fact that both companies use the same ERP vendor will be advantages when integrating Omni. Both providers run on ERP systems from SAP. Finally, Celestica believes that the acquisition will support its financial goals.

Yet there is at least one more benefit: Omni will give Celestica plastic capabilities for fabricating enclosures in-house. With this move, Celestica joins a number of other top-tier providers that have adopted vertical integration strategies for enclosures. This group now includes Solectron, which has announced an enclosure deal of its own (see News, p. 5). After discussions with major customers, Polistuk believes enclosure capabilities in the mid to low range will be especially important.

Nevertheless, he told analysts that the Omni deal does not mean that Celestica would produce all of its plastics internally.

Some 82% of Omni’s 2000 sales came from contract manufacturing, compared with 11% from the business of plastic injection molding and mold fabrication. Distribution accounted for 5% of the total, while revenue from the semiconductor industry represented 2%. Customers include Agilent, Apple, Creative, Dell, Epson, Hewlett-Packard, Motorola, Olympus, Philips, Quantum and Westell. For example, Omni has recently won business from Agilent for instrumentation PCBA, from HP for servers and workstations, and from Olympus for optical devices.

The largest share of Omni’s business lies in peripherals, including printers and storage, at about 49%, followed by computers, primarily the PC sector, at about 29%. Telecom accounts for about 14%, while consumer electronics contributes about 8%.

Lee Kim Bock, Omni’s CEO, and three senior Omni executives will enter into employment contracts with a subsidiary of Celestica.

Earlier this year in a March 19 statement, Omni said that, barring further deterioration of economic conditions, it expected revenue growth of more than 35% for 2001 with profit margins broadly in line with those of last year. On the conference call, Omni’s chairman, Koh Boon Hwee, confirmed the earlier guidance. He also reported that Omni’s capacity utilization has been increasing each month since February. Its utilization in Asia “is closer to 70 to 80 percent right now,” he said.

This good news notwithstanding, Celestica said the acquisition of Omni is more of a strategic addition. “We believe that the capability and price points in Asia will become more important and represent a larger percentage of the total outsourcing that happens in the world,” said Polistuk. “We have a lot of customers that are asking for more capability. So we didn’t conclude this in isolation. It seemed the right time based on investments that we thought we would have to make in Asia and the investments that Omni was looking at having to make.”

The acquisition will also position Celestica for prospective outsourcing from Japan, as opposed to OEM divestitures in Japan. Although Japanese outsourcing will take both forms, “we’re probably seeing more of the [organic] outsourcing than we’re seeing the divestitures in an environment where we’re seeing a lot of divestiture opportunities in Japan. That’s why we call it the fourth wave,” said Polistuk.

GES Bids for Eltech

A second proposed deal spells more consolidation among Singapore-based manufacturers. GES International Ltd., which has businesses in IT distribution, PCs and ODM (original design manufacturing), has launched a takeover bid for Eltech Electronics Ltd., a contract manufacturer with facilities in Malaysia and the US. Both companies are publicly traded in Sing-apore.

One of the first Asia-based CMs to set up in the US, Eltech maintains its primary US manufacturing site in Lowell, MA. An operation in San Jose, CA, offers prototyping through third parties. In Asia, Eltech manufactures in Johore, Malaysia, while Singapore serves strictly as headquarters. The company employs 1300 people worldwide, and the main sectors of its EMS business are communications, semiconductor and instrumentation.

For 2000, Eltech’s contract manufacturing business earned net profit after tax of S$8.1 million on sales of S$165.8 million. Sales increased 4.5% over the previous year. Total 2000 sales for the company amounted to S$168.7 million, including a real estate business.

According to GES, the acquisition is in line with GES’ strategy of growing its core manufacturing and distribution businesses. The Singapore- based company says the combination of its manufacturing division and Eltech will allow GES to compete more effectively through greater efficiencies and lower operating costs.

GES will also diversify its customer base and product mix. What’s more, Eltech’s operations in Malaysia and the US will complement GES’ facilities in Singapore, with the combined operations achieving greater economies of scale and a higher level of service. (GES also has facilities in India and China.) Finally, Eltech will be able to leverage GES’ ODM capabilities.

Two Eltech shareholders have conditionally agreed to tender a total of 100.1 million shares of Eltech stock, accounting for about 44% of the outstanding shares, to GES. GES will pay $0.32 per Eltech share by issuing new GES shares at an exchange rate of 0.4 GES share for each Eltech share and, if necessary, by adding a cash “top-up.”

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World Markets

Emerging Competitors?

Although the planned acquisitions of Omni and Eltech will thin the ranks of Singapore-based CMs and leave Venture Manufacturing as the only top-25 player there, the robust Asian market will continue to attract competition. And some of it may come from new directions.

One should keep an eye on Taiwan’s Hon Hai Precision Industry Co., a major supplier of PC connectors and cables and PC enclosures. The company is better known by its Foxconn trade name. Foxconn has not limited itself to merely supplying “bare bones” enclosures. For some time, the company has been producing everything from bare-bones chassis, known at Foxconn as level 1, through finished products, which the company designates level 10.

A West Coast contact at Foxconn says more and more of its customers are requiring that the company do box build for them. Foxconn has full box build activities in all three major world markets, and the company performs this service for several companies in the PC industry. For example, the Asian Wall Street Journal reports Compaq is outsourcing PC assembly from a Scotland factory to Foxconn and another Taiwanese company.

Foxconn also has capability for PCB assembly, and the company does most of this work in China. Indeed, late last year Foxconn bought SMT lines from Universal Instruments to support manufacturing for network/router boards. The equipment was earmarked for Foxconn’s Shenzhen, China facility and its greenfield plant in San Jose, CA. What’s more, unofficial reports say Foxconn and Intel are negotiating an agreement that would make Foxconn a motherboard supplier to Intel. Neither Foxconn nor Intel will confirm that talks are taking place.

Foxconn lists sales for 2000 at $2.8 billion.

Acer also bears watching, now that it has carved out a Design, Manufacturing and Services unit within its corporate structure. Before mid July, the Taiwanese company will give its DMS unit a new name, accompanied by a media relations effort. Reuters reports that Acer plans to spin off the DMS unit via IPO next year. Acer’s activities include both contract manufacturing and ODM work.

Flextronics Teams with Japanese Provider

Flextronics has formed an alliance with Kyoden, a Japanese EMS company, which will act as a front end for Flextronics in Japan. Kyoden, a prototype and low-volume manufacturer, will send high-volume programs to Flextronics factories outside Japan.

In Flextronics’ latest mid-quarter conference call, chairman and CEO Michael Marks said Kyoden “is a very good company for us to be working with for a couple of reasons. One is that they look pretty much like our company looks without the high-volume manufacturing.” Kyoden offers design services, plastics, sheet metal, board fabrication and prototype services, as does Flextronics. “The second is they’ve been around forever, and everybody in Japan knows them,” he added.

Marks said Flextronics is optimistic about the alliance as a way to start penetrating the Japanese market.

Downturn Hits Mexico

The EMS industry in Mexico has not escaped the recent downturn, and the hardest hit facilities are in Guadalajara, according to Jesus Amaya, a research analyst with New Venture Research (San Francisco, CA). Amaya has been conducting interviews among CMs and OEMs to determine the impact of the downturn on EMS facilities in different regions of Mexico.

“It turns out that the work slowdown has been profound and pervasive, in some cases up to 80 percent, although no one can quote an exact number,” says Amaya.

In Guadalajara, an EMS center of high-volume production, temporary workers have borne the brunt of the slowdown. “In most all cases, all the temporary workers have been dismissed, but so far very few permanent workers have been fired,” reports Amaya. “There are rumors that some of the sites among first-tier CMs may be merged. Recently, VTech closed a facility in Guadalajara and moved production back to China.”

Rumors aside, it’s a fact that Solectron is closing the Guadalajara plant obtained in the acquisition of NatSteel Electronics Ltd. Some 1800 workers are losing their jobs at the former NEL plant. This closure is part of the restructuring that Solectron announced earlier (Mar., p. 5).

Citing a Mexican trade association, Reuters reports that electronics exports from Guadalajara’s state of Jalisco decreased by 16.5% in Q1 versus a year earlier.

“In Mexico, it appears that the large CMs have been hit the hardest and will take at least one year to come out of this slowdown according to OEM customers. Midsize and small CMs fortunately have not been hit quite as hard and have not experienced any significant slowdown to date….The midsize and small CMs were not as exposed to the computer and peripherals and communications sectors and are building more complex and low to mid-volume products,” says Amaya.

Companies interviewed say they saw a slight rebound last month. In June, there have been some signs of plant investment and new equipment as well as talk of further investments by OEM customers, he reports. “Overall, executives in Mexico believe that it will take at least one year to come out of this slowdown,” says Amaya.

This month, Jabil Circuit told analysts that its Mexican operations will ramp up “pretty significantly” in fiscal 2002 compared with fiscal 2001.

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Supply Chain

Solectron Deploys Tradec System

Solectron has implemented an Internet-based quoting system supplied by Tradec of San Jose, CA, and already has more than 700 suppliers using the system to receive new business quotes from Solectron. The EMS company has deployed the system in the Americas and is in the process of rolling it out through Europe and Asia. Solectron has applied its own brand name, qPro, to the Tradec system it has implemented.

Using the system, Solectron reports that quoting efficiency improved by over 30%. Many of the manual processes used by Solectron and its suppliers have been eliminated. The quoting software has been integrated into Solectron’s existing systems to provide full visibility of historical quotes, open orders, receipts and contract pricing.

SCI Opts for Chain Measurement Tools

SCI Systems has adopted SeeCommerce’s SeeChain 4.0 applications for supply-chain visibility and performance measurement. For the EMS industry, supply-chain measurement tools represent a new class of supply-chain software to evaluate.

SCI completed an initial implementation of three SeeChain applications – SeeChain Demand, SeeChain Materials and SeeChain Supplier – in less than 90 days. SeeChain Demand allows management to measure the accuracy of sales forecasts compared with actual sales. With SeeChain Materials, a company can measure inventory levels of raw materials and semi-finished goods. SeeChain Supplier aggregates and analyzes supplier performance data from existing systems. SeeCommerce, based in Palo Alto, CA, also offers SeeChain Production, SeeChain Inventory, SeeChain Fulfillment and SeeChain Logistics.

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Celestica To Make Czech and Canadian Acquisitions

To add French OEM’s Czech unit plus Canadian EMS firm

On May 31, Celestica (Toronto, Canada) announced two separate deals. The company has entered into an outsourcing agreement with SAGEM SA, a French technology group in communications, automotive and defense. Celestica has also reached an agreement to acquire a Canadian EMS provider, Primetech Electronics (Kirkland, Quebec).

As part of the SAGEM deal, Celestica intends to acquire SAGEM CR s.r.o., a SAGEM subsidiary that operates in Kladno, Czech Republic. This outsourcing deal makes Celestica SAGEM’s primary EMS provider and includes a three-year supply agreement worth about $500 million in total revenue. Expanding its relationship with SAGEM, Celestica will provide manufacturing, repair and supply-chain services for mobile handsets and other communications products.

About 850 SAGEM employees at the Czech facility are expected to join Celestica. The deal is expected to close by the end of Q2, subject to normal closing conditions. The purchase price was not disclosed.

“In addition to diversifying our revenue base, this acquisition enhances our strategic presence in Central Europe,” states Eugene Polistuk, chairman and CEO of Celestica.

According to Reuters, Celestica will supply 40% of SAGEM’s handsets. One Reuters report says SAGEM sold nearly 12 million mobile phones last year according to Gartner Data-quest, while another Reuters story puts the quantity sold at 13 million. In any event, SAGEM’s handset business has produced first-half losses due to lower demand, and the outsourcing agreement will allow SAGEM to reduce fixed costs during the second half, reports Reuters.

Meanwhile, Celestica has entered into agreement to acquire all of the outstanding shares of Primetech, a Canadian EMS company that is publicly listed on the Toronto Stock Exchange. The total transaction value, including shares, stock options and assumption of debt, is about Cdn$265 million. Primetech has about 15.5 million shares outstanding.

Each share of Primetech common stock will be exchanged for 0.22 subordinate voting share of Celestica. The exchange ratio will be adjusted such that exchange value of each Primetech share will be no less than Cdn$15 and no more than Cdn$20. This adjustment will be based on a 20-day weighted average price of Celestica shares.

Last year, Primetech was ranked as an MMI Top 50 provider with a total of 235,000 ft2 (Mar., p. 4). Serving OEMs in the computer and telecom industries, the company operates in Kirkland, Quebec, its main site, and in Amherst, Nova Scotia, where the provider acquired a facility in 2000. Two of Primetech’s major customers are Sun and the former Newbridge Networks, now part of Alcatel. Other companies reported as customers include Matrox and Tecknor (Oct. ’00, p. 4).

Indeed, Primetech’s customer mix is attractive to Celestica and provided it with one reason to make this deal. A second reason: Primetech will give Celestica a strong NPI capability. The deal will also add high-complexity manufacturing capability and augment Celestica’s management strength.

For the fiscal year ended Sept. 30, 2000, Primetech earned net income of Cdn$11.8 million on sales of Cdn$205.0 million. EBITDA was Cdn$23.0 million. Board assembly accounted for Cdn$190.6 million, or 93% of sales, while box build represented Cdn$14.4 million, or 7%. Sales in fiscal 2000 grew by 85%.

The transaction, which has been approved by the boards of both companies, is subject to Primetech shareholder and court approvals. Certain Primetech shareholders, including company president and CEO John McAllister, who together own about 62% of Primetech’s stock, have pledged their shares in favor of this deal.

Just before the Primetech and SAGEM deals were announced, Celestica completed a stock sale that will be used for acquisitions and other general purposes. The provider sold 12 million subordinate voting shares at a price of (US)$58.78 per share for net proceeds of about (US)$705 million. The underwriter, Banc of America Securities, has an option to buy up to an additional 1.8 million shares.

Solectron Makes Enclosure and Optical Moves

Solectron (Milpitas, CA) recently announced a pair of deals. First, Solectron has signed a definitive agreement to acquire Singapore Shinei Sangyo Pte Ltd. (Singapore), a privately held supplier of enclosures. Second, Solectron has acquired optical manufacturing capabilities in South Carolina from Cisco Systems.

Through the Shinei deal, Solectron has sent a message that it too has a vertical integration strategy for enclosures. When the deal closes, Solectron will gain capabilities including custom enclosure design and prototyping, tooling and metal fabrication, enclosure assembly and top-level assembly for the server, networking, desktop PC and printer markets. With more than 3000 employees, Shinei manufactures in Shanghai, China; Portland, OR; and Johore, Malaysia. The company also maintains logistics hubs in three US locations and in Cork, Ireland.

The two parties expect to complete the transaction this month. Financial terms were not released.

Upon completion, Shinei, which will be renamed Shinei International, will operate as an independent subsidiary within Solectron’s newly formed Power, Packaging and Cooling unit. Shinei will continue to market its services to other companies separately. Its customers include Apple, Hewlett-Packard and Cisco. Still, the deal will allow Shinei to provide its custom enclosure capabilities to Solectron customers needing total systems solutions.

For those who followed Solectron’s acquisition of NatSteel Electronics Ltd., this deal should not come as a total surprise. Last year, NEL entered into a joint venture with Taiwan’s LiteOn Group, by which NEL would purchase about 25% of LiteOn Enclosure (Nov. ’00, p. 8), a PC enclosure supplier that serves Solectron and other customers. Solectron’s relationship with LiteOn Enclosure, gained through its acquisition of NEL, will also be part of the new Power, Packaging and Cooling unit.

The unit will continue to develop and expand Solectron’s capabilities in enclosure design and manufacturing, backplane assembly, power supply integration, and engineering – all fundamental components of Solectron’s full systems solutions.

“Shinei has established a strong record for delivering high-quality, customer-focused results worldwide, and an ability to drive faster product time-to-market,” states Sean Tzou, VP and GM/managing director, Power, Packaging and Cooling. “Shinei’s capabilities will be an important piece of our end-to-end supply-chain solution.”

Solectron says a review of its customers’ needs showed the time is right to expand its enclosure capabilities.

In the second deal, Solectron acquired Cisco’s capabilities for manufacturing DWDM (dense wave division multiplexing) optical modules in West Columbia, SC. As a result, Solectron takes over manufacturing, test and certain NPI responsibility for Cisco’s core DWDM multiplex, demultiplex and add/drop optical modules for the next two years. The provider will perform optical assembly and test, which includes splicing and fiber handling; supply-base management; and in-warranty repair services.

Solectron expects to move the operation to the company’s East Coast optical center of competence in Charlotte, NC.

Apart from this deal, Solectron has offered jobs to key people familiar with Cisco’s optical product line and experienced in optical work.

The acquisition enhances Solectron’s existing infrastructure and capabilities for the optical networking market. In 1997, the company gained optical expertise through its acquisition of Ericsson’s site in Norrkoping, Sweden. Since then, Solectron has expanded its optical capabilities to sites in Milpitas, CA; Hillsboro, OR; Charlotte, NC; and Austin, TX; through OEM divestitures and greenfield operations. The company also expects to further expand its optical assembly capabilities into low-cost regions in the near future.

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Comtel To Buy EMS Assets from NMT

A wholly-owned subsidiary of privately held Comtel Holdings (Tustin, CA), which has EMS operations in Southern California, has reached an agreement to buy selected assets and the business of IPAC Manufacturing and IPAC Precision Machining, two subsidiaries owned by National Manufacturing Technologies (Carlsbad, CA). These assets being purchased from NMT make up substantially all of its EMS business and include a sheet metal operation. With this deal, Comtel will add facilities in Carlsbad and Vista, CA, and Tijuana, Mexico, totaling 118,000 ft2.

With existing facilities in Orange County and the Los Angeles/Ventura County area, Comtel will gain a presence in San Diego and Mexico.

“The acquisition of the IPAC subsidiaries completes two strategic goals that Comtel established twenty-five months ago when we launched our ‘enclosed-electronics’ regional roll-up plan in Southern California,” states Lyle Jensen, Comtel’s CEO. “First, Comtel has now established a regional leadership footprint with combined manufacturing facilities totaling 243,000 ft2 from Santa Barbara to San Diego.” These facilities are intended primarily to meet customer needs for proximity, he notes.

“Secondly, the IPAC capabilities complete our vertically-integrated EMS model by providing sophisticated sheet metal fabrication and machining in our Vista facility, card-level and cable/harness assembly in Mexico, and box build and final systems integration in our Carlsbad facility,” continues Jensen. “Combined with the nine SMT lines in our Tustin and Camarillo locations, we will be running at an annualized revenue run rate of $100 million, which was a critical-mass milestone.

“We are enjoying a strong regional demand for our EMS services, which are focused primarily in the medical, industrial, and RF/microwave end-markets.”

In 1999, Comtel Holdings acquired both Comtel Electronics in Tustin, CA, and Corlund Electronics, which was later moved from Newbury Park, CA, to a new 60,000-ft2 facility in Camarillo, CA. Comtel also acquired selected EMS assets and a depot repair center from InCirt Technologies last year.

Comtel is majority owned by investment funds managed by MapleWood Partners, a private equity firm.

National Manufacturing Technologies, an OTCBB-traded company, says defaults by two of its largest customers have caused severe financial pressures on NMT. The company’s lender said that it would proceed to immediately exercise all of its available remedies in light of defaults by the company if the transaction did not take place in a timely fashion.

Proceeds from the sale, to be paid in notes, will be used to repay NMT’s secured debt and other obligations to the extent available. The company’s commercial stamping operation in Oceanside, CA, its remaining business, is not part of this transaction, but NMT plans to sell its assets as well.

Comtel made this purchase through a wholly-owned subsidiary, Alton Diversified Technologies.

VisionTek on the Prowl

VisionTek (Gurnee, IL), a provider of technology, design and manufacturing services (TDMS), wants to expand that business by acquiring an EMS company with annual sales between $75 and $150 million. Another option is to add one or more design firms.

As a longtime supplier of memory modules to OEMs, VisionTek may not be well known in the EMS world. But the company has been manufacturing other products for OEMs since 1995. Last year, privately-held VisionTek recorded sales of $250 million. Of that total, 80% came from TDMS consisting of OEM memory modules and traditional EMS work. But memory modules only accounted for an estimated 10% to 15% of TDMS revenue, compared with 85% to 90% from EMS.

“I think we can grow our TDMS business very rapidly, and we will do that organically as well as via acquisition of both pure EMS companies and design firms,” says Mark Polinsky, VisionTek’s CEO. “We will be a player in this industry.”

For VisionTek, three factors enter into an acquisition. The most important is that the target company’s business be in one of the following three sectors: industrial, medical or telecom. Second, the target must offer skills or talent that VisionTek wants. The third criterion is location. Polinsky lists Asia, Europe, the US East Coast and the West Coast as places that VisionTek considers strategic. Even if a candidate does not satisfy the skills and location criteria, VisionTek would still consider the company as long as it is doing business in the right sector. In addition, VisionTek would look at acquiring a PCB fabricator to support NPI activity as well as an enclosure company.

Manufacturing takes place in a Gurnee, IL facility with 75,000 ft2 and eight, soon to be nine, high-volume SMT lines. The company runs Fuji CP6 chipshooters and has the capacity to generate $600 million in revenue with its current equipment. OEM customers include Compaq, Gateway, IBM, Micron Electronics, Motorola and Williams (WMS Industries/Midway Games). Recent examples of EMS work include PCBA for a set-top box and manufacture of a police radio.

VisionTek has defined its EMS niche as programs ranging from $1 million to $99 million a year. The company says it can offer customers in this range the same quality, support and service that they would expect from a tier-one provider.

Overall, VisionTek has adopted a two-pronged strategy, with TDMS on one side of the fork. The other side consists of branded products such as PC graphics cards and memory, compact flash and IEEE 1394 technology. Although branded products do not normally go hand in hand with an EMS strategy, VisionTek can make a case for both. “A lot of the OEMs we’ve talked to really like the fact that we have a brand business because inventory has been a problem for the last 12 months or so, with many companies taking write-offs. We have other outlets to get rid of some of that excess inventory,” says Polinsky.

After envisioning a TDMS strategy about two years ago, VisionTek firmed up a plan for the strategy some 12 months ago. That meant bringing in a management team to carry out the plan. On the executive level, the company hired six people, and chief among them was a new president, Andrew Zahn, who runs the business day to day. He also provides VisionTek with much needed expertise in M&A. The company’s new VP of operations, Michael Blatz, comes from Dell, where he served as director of worldwide procurement and director of server and storage manufacturing operations. The new VP of quality, Otis Hayes, most recently held the job of corporate director of quality for CTS Corp.

Within the design element of the strategy, VisionTek is already making moves. The company has taken a stake in a Dallas-based design firm with eight engineers and a focus on telecom. VisionTek has first right of refusal on any of the firm’s designs that turn into production. What’s more, VisionTek is looking at two other engineering firms.

VisionTek was founded in 1988 by Polinsky and three friends. All but one of the founders are still with the company.

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New programs…LTX (Westwood, MA), a supplier of IC test equipment, has selected Jabil Circuit (St. Petersburg, FL) to build LTX’s Fusion test systems. Over the next 12 months, LTX plans to transfer all of its assembly, final integration and test operations to Jabil, which supplies PCB assemblies to LTX….Manufacturers’ Services Ltd. (Concord, MA) has landed a contract from Catena Networks (Redwood Shores, CA) to provide EMS for Catena’s line of broadband access products….RLX Technologies (The Woodlands, TX) has chosen PEMSTAR (Rochester, MN) to provide manufacturing and fulfillment services for RLX’s new servers….Nam Tai Electronics (Hong Kong) has added Ericsson as a new customer, for whom Nam Tai will manufacture a digital camera accessory product for GSM and GPRS mobile phones.

Expanding design services…To further expand Jabil Technology Services, Jabil has established new design centers in Bergamo, Italy; Penang, Malaysia; and Raleigh, NC….The former ASIC International, an IC design services house recently acquired by Flextronics (Singapore), will move into a 30,000-ft2 building in Oak Ridge, TN, to prepare for staff expansion. ASIC International has been renamed Flextronics Semicon-ductor….To meet a growing need for design services, Sparton Corp. (Jackson, MI) has reorganized its design activities and formed a Corporate EMS Engineering group. The new organization centralizes design staff management, but maintains a presence in all six Sparton locations….XeTel (Austin, TX) has added a team of designers to increase its range of services to include PCB layout and design, DFM and custom enclosure design.

New facilities…Manufacturers’ Services Ltd. has opened a 55,000-ft2 NPI facility in Lowell, MA. The new facility is starting out with 135 employees, who moved there from the former location of Lowell-based Qualitronics, which MSL acquired last year (July, ’00, p. 5). Working closely with MSL’s design center in Westford, MA, the Lowell facility specializes in low to medium production and final integration and testing of products….Publicly held Nortech Systems (Wayzata, MN) has opened a 7,500-ft2 service and repair center in Baxter, MN. The EMS provider recently landed a four-year service contract with a major medical OEM….Electronics Manufacturing Group (Calgary, Alberta, Canada) has launched a new Engineering Center of Excellence in Markham, Ontario. At about 20,000 ft2, the new center is offering engineering services, NPI, prototyping, low volumes, and quick turnaround. The center is across the street from EMG’s volume facility in Markham. In addition, EMG is moving its rapid prototyping operation in Calgary into the company’s volume facility there. The operation had been in an old building whose lease had expired.

New consulting firm…Callidus Partners (Burlington, MA) is now offering consulting services to OEMs who have outsourced or are considering it. Backed by high-level experience in operations, these services include supply-chain management, program management, IT, outsourcing strategy and acquisition integration. In addition, the firm can play an interim management role to add management bandwidth. Offering a perspective of both sides of the outsourcing process, Callidus consultants have worked for or with OEMs such as Cisco, Dell, Ericsson, HP and IBM as well as CMs including MSL and Solectron. Go to www.calliduspartners.com.

Restructuring update…Restructuring at two of the EMS industry’s vertically integrated providers has meant closing PCB fabrication plants. Flextronics is closing its PCB operation in Austin, TX, while Viasystems Group (St. Louis, MO) intends to shutter its PCB plants in Richmond, VA, and San German, Puerto Rico….Solectron is closing its facility in Wangaretta, Australia….Jabil Circuit will turn its Billerica, MA plant into a New Customer Development site to serve the needs of small, fast-growing companies with emerging technologies. As a result, certain higher volume production at the site will shift to other Jabil facilities.

Lucent update?…The Wall Street Journal is now reporting that Flextronics and Lucent did not come to terms regarding the sale of Lucent’s plants in Oklahoma City, OK, and Columbus, OH (May, p. 7).

People on the move…Benchmark Electronics (Angleton, TX) has promoted cofounder and CEO Donald Nigbor to chairman of the board. John Custer, who had served as chairman, will continue to serve as a board member. Nigbor will hand over his duties as president to Cary Fu, a cofounder and longtime CFO. Fu will also assume the title of COO and will be responsible for day-to-day operations. In addition, Gayla Delly, treasurer and VP of finance, will take over the CFO position while continuing in her current duties….Flextronics has named Tom Wright as president of worldwide logistics. He formerly held the job of senior VP, WW Operations for buy.com, an Internet reseller, where he oversaw supply chain strategy, fulfillment and sourcing. Before that, Wright spent ten years at Ingram Micro. He will be tasked with integrating recent acquisitions that include IEC Logistics and Lightning Logistics….Dana Waterman has joined MSL as president of the Americas operations. With over 20 years of experience, Waterman most recently served as VP and GM for Invensys, where he headed worldwide operations of the Thermal Systems Business. Also, MSL has hired Jeffrey Sturges as director of global accounts. Sturges comes from Lexmark Electronics, where he had been director of sales and business development….Dewayne Rideout has joined SCI Systems (Huntsville, AL) as its new senior VP of human resources. His resume including serving as the HR leader for Lucent’s microelectronics business and Gateway….Lou Gaviglia has stepped down as president and CEO of Century Electronics Manufacturing (Marlborough, MA) and left the company, which filed for bankruptcy protection under Chapter 11 earlier this year. Walt Conroy, a board member who has become president and COO, is now running the company….At Neways Electronics International (Eindhoven, Netherlands), B. Doorenbos has been confirmed as chairman of the board. In March, he was announced as the new CEO replacing J.H.J. Mengelers, who left the company. Neways, which was ranked in the MMI Top 50, operates a group of EMS companies.

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Copyright 2001 JBT Communications

MMI May 2001

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