Vol. 12, No. 10: October 2002
Table of Contents
Flextronics Aims To Change the Rules of the Game
Now perhaps more than ever, EMS providers are fighting desperately over a few percentage points of value add in bids where material costs are largely controlled by the OEM. Flextronics has a better idea. The provider is telling customers that it can reduce the cost of their products by 20% or more if they allow Flextronics to employ all the elements of its vertically integrated solution. That means allowing Flextronics to design the product as well as build it. In return, Flextronics gets to make higher margins.
If successful, this approach would usher in a whole new selling proposition for the EMS industry. Providers would offer cost reduction up front, rather than later on. They would ask to control the product design and thereby optimize it along with the supply chain for lowest cost.
Whether or not others follow Flextronics, the company has made it clear it will no longer play by the rules of who can bid the lowest value add percentage. “We are going out of this business,” said Michael Marks, Flextronics’ chairman and CEO, during its recent Analyst and Investor Day.
For Flextronics, the new strategy has basically two flavors. The company can function as an ODM (original design manufacturer) or CDM (contract design manufacturer). An ODM develops a product first and then sells the design, along with the means to manufacture it, to the OEM. A CDM designs or redesigns a product and then produces it, all based on a customer order. So the approach to the customer is different, but the services required are the same. And in the case of Flextronics, both roles result in higher margins.
In the meeting with analysts and investors, Flextronics showed it can achieve about a 13% operating margin with its first ODM product made public, a low-cost cell phone design. At the same time, the Flextronics product, which is a dual-band GSM phone, is 25% cheaper than the comparable OEM design.
In return for taking the design risk and lowering the product cost through an integrated offering, Flextronics expects to get paid an extra 8% in operating margin. The company believes 8% is in line with the operating margins that ODMs earn. This cell phone design, dubbed PhoneOne, also captures margins from the following Flextronics-supplied items: PCB (0.8%), plastics (0.1%), charger and antenna (0.5%), logistics (0.5%) and assembly (3%). If Flextronics were to build this phone as a traditional contract, it would make just the 3% assembly margin.
Although Flextronics is just beginning to ship its first ODM product, the company already sees the ODM market as a major opportunity. “We think this is very doable that we can have $4 billion of business in this category over the next three or four or five years,” said Marks to the analysts and investors.
Flextronics is also working on an ODM phone with Qualcomm. The two companies are jointly developing a low-end CDMA phone to be offered to Qualcomm’s licensees. For viable ODM projects, Flextronics is looking at high-volume products with relatively low proprietary content. Marks said Flextronics can have an ODM offering for a desktop computer, based on the company’s strength in enclosures and logistics, and has the vertically integrated capabilities for supplying PDAs on an ODM basis. Two other areas he mentioned in connection with the ODM market are printers, where the company is boosting its design capability, and communication products.
This strategy combining initial cost reduction and margin enhancement takes a second form – CDM – when applied to high-end telecom type products. Flextronics showed analysts it can achieve an 11% operating margin on such products instead of the 5% assembly margin that it would normally get. In this case, a major contribution, 4.3%, comes from redesigning the optics and ASICs. The company also picks up margin from the enclosure, backplane and associated hardware (1%); test (0.2%); PCB (0.2%); network services (0.2%); and design services (0.2%). Michael Marks reported that customers would save 20% or 25% on such a product.
The new Flextronics selling strategy represents a major departure for the EMS industry. How competitors respond to it remains to be seen.
IDC Revises Estimates
Market research firm IDC (Framingham, MA) has raised its long-term forecast for the EMS industry to include revenue from Taiwan’s Hon Hai Precision Industry Co., better known by its Foxconn trade name. Foxconn, which put up high growth in the first half of the year, was already ranked as sixth largest provider in the 2001 MMI Top 50.
IDC’s new forecast numbers, which appear in the table below, supersede those published here last month on page 1. Average market estimates based on projections from three market research firms have also been revised (table).
With this new forecast, IDC moves closer to the projections of Electronic Trend Publications and Technology Forecasters, but remains more conservative than the other two firms.
Providers Take 26% Handset Share
According to a new study, 26% of mobile phones worldwide will be produced by EMS providers this year. The new report, Contract Manufacturers’ Path to 40 Percent Cellular Production Share from Strategy Analytics of the UK, projects that the percentage of outsourced handsets will rise steadily to 38% in 2007.
The study finds that EMS provider Flextronics is the world’s third largest handset manufacturer after Nokia and Motorola. Flextronics itself claims to be number two in cell-phone production. But among EMS providers, Flextronics ranks as the largest producer in the handset segment. The report puts Flextronics’ share of the outsourced handset business at 42% in 2002. Strategy Analytics believes that the lion’s share of handset outsourcing occurred in 2001.
Taiwan’s HTC manufactures the most PDAs on contract basis, with an estimated 16% share of the outsourced market in 2002, according to the study. Quanta Computer also of Taiwan (Aug., p. 2) ranks as the largest contract producers of notebooks, with an estimated share of 17%.
“Handset manufacturing is splitting into two camps; those who believe in-house production allows manufacturers to maximize control and minimize risk, such as Nokia and Samsung, and those who believe outsourced production allows manufacturers to exploit economies of scale and output flexibility, such as Sony Ericsson and Alcatel,” stated David Kerr, VP of Strategy Analytics. Nokia is reported as expecting to keep its handset outsourcing at 15% to 20% of production (July, p. 7).
Strategy Analytics notes that overcapacity among EMS providers and ODMs “could fuel the proliferation of a growing mass of third-tier reference design handset vendors.”
The global research and consulting firm handles the following areas: automotive services, broadband, enabling technologies and wireless. For more, go to www.strategyanalytics.com.
Low-Cost Design Centers Arise
While downturn economics have forced a massive loss of EMS capacity and jobs in high-cost regions, these regions have not given up their engineering and development skills. So conventional wisdom says product development activities will stay in these areas. Flextronics, however, is beginning to poke holes in this thinking.
Flextronics is not content to depend on the high-cost regions for all of its development needs. The company has recently made investments on the design side in China, South Africa and India. “We’re going to continue to grow in low-cost regions,” said Ron Snyder, president of Flextronics Design Services, during Flextronics’ recent Analyst and Investor Day.
Countries such as China, South Africa and India offer low-priced engineering talent – an obvious attraction for Flextronics. Of course, outsourcing development, particularly in the software realm, is not new. OEMs have been using India to develop software for years.
Flextronics has signaled that some amount of its software development work will take place in South Africa. The company recently completed the acquisition of a software group there (June, p. 4). This high-end group offers expertise in software development for telecom and networking equipment as well as system applications.
What’s more, Flextronics just revealed it has invested in some design companies in India. The company won’t say anything more so it is unknown what Flextronics’ intentions are for these Indian companies.
Flextronics has also made greenfield investments in low-cost design centers. In China, the provider recently launched a design center in Shenzhen. Flextronics intends to expand its product development service in the Shenzhen area. The company did not find it difficult to hire skilled engineers for the center, which is its third in China. Flextronics also has a design center in Guangzhou, which is associated with the company’s cell phone design center in Singapore, and a small center in Shanghai.
Venture To Buy Iomega Operation
Iomega Corp. (San Diego, CA) has agreed to sell its manufacturing subsidiary in Penang, Malaysia, to Venture (Singapore). MMI reported earlier that the two companies were in talks (May, p. 4).
Venture will acquire a 376,000-ft2 facility producing Iomega storage drives, cartridges, services parts and accessories. Based on asset book value, the purchase price is an estimated $8 million in cash. Upon closing, Iomega will enter into a supply agreement with Venture. Under the agreement, the Malaysian operation will manufacture Iomega Zip drives on an exclusive basis for five years. Also, Venture has nonexclusive rights to produce and supply Zip cartridges and certain other products and services for the same period.
Subject to customary closing conditions, completion of the deal is expected before the end of the year.
The deal will expand the relationship between the two companies as Venture has supplied Iomega with PCB assembly for several years. In the new pact, Venture will provide turnkey system build including e-fulfillment services, NPI, and cartridge manufacturing in addition to current PCBA activities. Venture stated that this relationship may evolve further into joint development activities.
According to Venture, the Penang facility will allow it to better serve its customers already in Penang and attract other customers to the region. Venture will also establish an R&D center in Penang.
The Iomega facility has been underutilized.
Jabil To Add Seagate Repair Site
Jabil Circuit (St. Petersburg, FL) has reached a definitive agreement to acquire Seagate’s repair and warranty facility in Reynosa, Mexico, and become the primary provider of repair and warranty services for Seagate disk drives.
The deal deepens Jabil’s penetration in the data storage market and expands its global reach in the repair services business. Jabil will be acquiring its first repair site in Mexico, a facility of about 300,000 to 350,000 ft2. The company will also lease a nearby facility in McAllen, TX, to provide support and freight consolidation services to the Reynosa site.
Under a multiyear service agreement, Jabil’s repair subsidiary, Jabil Global Services (JGS), will perform repair and warranty work for Seagate’s Personal Storage and Enterprise Storage hard disk drives.
Like Solectron’s acquisition of Magnetic Data Technologies (June, p. 6), this deal expands JGS’s expertise and capability in disk drive repair. The agreement also enables Jabil to start a relationship with Seagate. What’s more, “this relationship will add a low-cost services site and a distribution center to our footprint allowing us to better serve high-growth customers in the Americas,” stated Hartmut Liebel, JGS executive VP.
Seagate’s Reynosa employees and management will be offered jobs with JGS. The number of employees joining Jabil has yet to be determined.
The transaction is expected to close by the end of October. Terms were not disclosed.
Mack Tech. Buys Solectron Plants
As part of an overall restructuring program, Solectron (Milpitas, CA) has sold its facilities in Melbourne, FL, and Juarez, Mexico, to another EMS provider, Mack Technologies (Westford, MA). The deal will expand the capacity and technology offerings of Mack Technologies, an MMI Top 50 provider serving OEMs in the Northeastern US. Financial terms were not disclosed.
In Florida, Mack has acquired a 141,000-ft2 plant with about 200 employees. This purchase also gives Mack 52,000 ft2 and about 300 workers in Juarez, allowing the provider to offer a low-cost manufacturing solution in Mexico. Together, the two plants will double Mack’s SMT capacity from six to 12 lines and will more than double Mack’s facility space.
“Mack Technologies has been active for the last two to three years looking for the right acquisition to bring us more of a geographic footprint, add scaleability and acquire specialized technical capability. And we think we’ve been able to do that with this acquisition,” said Ron Jellison, president of Mack Technologies.
The specialized technical capability being added is on the RF wireless side. Mack will also take its optical assembly capability to a higher level. The provider will gain customers in the business of wireless base stations, fixed wireless phones, GPS asset tracking products, fiberoptic transceivers, optical transmission equipment and military electronics.
By acquiring RF wireless technology, “we’re diversifying ourselves into a broader spectrum within communications,” said Jellison. Mack believes that the area of wireless infrastructure products will provide sustained growth for the industry.
In Mack’s view, the deal will put to rest customer concerns that have hindered the company in the past. “We did not have the perception that we had the ability to grow should our customers’ business significantly increase. We just had one PCA operation in Westford. We did not have the scaleability. And we have been excluded from certain opportunities in terms of being considered because we did not have a low-cost manufacturing solution. Obviously with this acquisition, we have taken care of both those concerns,” said Jellison.
“This is our first step in an overall strategy, and we will continue to look for opportunities to expand regionally and to increase technical capability,” he told MMI.
Solectron said the two operations did not fit into its “strategic and global footprint needs.” The company obtained the two operations with its acquisition of C-MAC Industries. C-MAC in turn had bought these operations, functioning as EMS facilities, from Honeywell in late 2000 (Jan. ’01, p. 7). When C-MAC acquired these facilities, they employed about twice as many people. Motorola was a customer at the time and continues as such, but at a lower volume of business.
Mack Technologies is a wholly owned subsidiary of The Mack Group, a privately held company based in Arlington, VT. Besides operating in the US and Mexico, the provider also has a facility in Larbert, Scotland.
Nortech Strikes Mexican Deal
Publicly held Nortech Systems (Wayzata, MN) has also made an acquisition that will expand its manufacturing into Mexico. The company has acquired Manufacturing Assembly Solutions, an operation with a 15,000-ft2 facility in Monterrey, Mexico.
Despite the shift of EMS programs and capacity to Asia especially among top-five providers, four EMS companies have recently acquired a manufacturing presence in Mexico (see also July, p. 4). These US-based companies are betting that their customers will still want to use Mexico as a low-cost solution.
“We’ve been exploring low-cost manufacturing alternatives for several years, to augment our domestic capabilities,” stated Mike Degen president and CEO of Nortech. “To be a world-class manufacturer, Nortech needs to embrace these options or risk jeopardizing our customer relationships.”
The company expects that the new facility will contribute to both revenue and earnings in 2003 and beyond. No reductions in domestic employment are anticipated as a result of this acquisition.
Nortech’s Monterrey facility will complement its alliance with a Chinese manufacturer. The provider also operates in five Minnesota locations and at one location in Wisconsin.
The company recently raised its guidance the September quarter.
Beyonics To Acquire Plastics Supplier
Also entering Thailand
Beyonics Technology (Singapore), an MMI Top 50 provider, has signed a letter of intent to acquire Pacific Plastics Pte Ltd, which operates three plastics subsidiaries in China. The purchase price is S$15 million, consisting of S$7.5 million in cash and the balance in newly issued stock.
If completed, the deal will expand Beyonics’ manufacturing capacity in China and enhance its position in value-added plastic products and assembly.
In China, Pacific Plastics owns three subsidiaries: Pacific Plastics (Suzhou) Co., Ltd; Pacific Tooling (Suzhou) Co., Ltd; and Pacific Plastics (Nanjing) Co.
Beyonics is also planning to extend its manufacturing reach to Thailand, where it recently set up a wholly owned subsidiary. The company expects its new plant in Thailand to start operations in the January 2003 quarter. Activities of the new plant mainly involve the manufacture of electronic components and base plates for hard disk drives.
Beyonics is aiming for a sales target of S$1 billion by 2005 through acquisitions and capacity expansion. For fiscal 2002 ended July 31, the provider reported sales of S$615.2 million, of which S$471.4 million, or 77%, came from its Contract Manufacturing Division (see also table on p. 7). This division includes EMS and a plastic injection molding business. Beyonics also operates Precision Engineering and Distribution divisions.
Solectron, Lucent To Unwind Deal
Solectron and Lucent have agreed to unwind the outsourcing and asset purchase transaction involving optical work at Lucent’s site in North Andover, MA. Last month, Solectron said it was negotiating with Lucent to change or rescind the deal, which was completed May 31 (April, p. 5-6; June, p. 6-7). The provider explained that the talks resulted from marketplace changes and decreased demand.
This is yet another deal impacted by weak demand from the communications sector (Aug., p. 2).
Selected as primary EMS provider for Lucent’s advanced optical systems produced in North Andover, Solectron paid a little less than $100 million for certain equipment and inventory at the North Andover facility. Under an agreement in principle, Lucent will repurchase the equipment and unused inventory that Solectron bought. The companies expect to complete a definitive agreement to unwind the deal in the November quarter.
Solectron will continue to produce a portion of Lucent’s optical networking products through March. The parties are planning the details of an operational transition, including timing and work-force requirements. Solectron expects to vacate space leased in the North Andover facility at the end of the transition.
The two companies entered into a three-year supply agreement initially estimated to be worth $2 billion in revenue to Solectron. The agreement generated revenue of about $50 million in its first quarter ended in August.
Solectron said its other business with Lucent, which is not part of these talks, represents about 2% of Solectron’s revenue.
Medical Provider Exploring Options
Publicly held Colorado MEDtech (Boulder, CO), a supplier of products and outsourcing services to the medical market, has hired an investment banking firm to help the company explore its options. They include the sale of all or a part of the company, the shutdown of certain operations, mergers, and divestitures.
Colorado MEDtech’s services include device and disposables development, software, medical device connectivity, manufacturing, system components for medical imaging, and ultrasound accessories.
For the company’s fiscal year ended June 2002, sales totaled $70.7 million, compared with $77.2 million in the prior year. Outsourcing services accounted for 39% of 2002 revenue, with the balance coming from medical products. Colorado MEDtech posted a fiscal 2002 net loss of $2.4 million before settlement expenses. Customers include Abbott Laboratories, Baxter, Boston Scientific, DuPont, Eli Lilly, GE Medical Systems, Johnson & Johnson, Medtronic and Siemens.
New programs…StorageTek (Louisville, CO) has decided to outsource manufacturing for the StorageNet 6000 series of storage domain managers to Celestica (Toronto, Canada). The OEM will transfer production to Celestica. Also, StorageTek has contracted with Wipro Technologies, the technology services division of India’s Wipro Ltd., to continue development activities for the product line. These development and manufacturing activities currently take place in Minneapolis, MN, and Toulouse, France. StorageTek intends to sell its manufacturing and development facilities in Minneapolis….Hughes Network Systems has chosen Solectron to support the manufacture of digital satellite recorders for satellite TV. These recorders are set-top boxes that combine a digital satellite receiver and a video recorder. Solectron will also provide PCB assembly, system assembly and test services for Kyocera’s next generation of CDMA mobile phones. These handsets will be produced in Latin and South America. In another new program, Solectron will furnish NPI, PCBA and product assembly for a telemetry data modem from PerComm. PerComm is a supplier of personal wireless products to pager service carriers. Solectron has also won new business from Silicon Graphics, which has engaged Solectron to provide NPI and PCB services for a new graphic server. Finally, Sun has chosen Solectron to perform incremental manufacturing, integration, test and repair services for Sun activities in network storage and high-end servers. This work is still subject to the signing of a definitive agreement….NMS Communications (Framingham, MA) has selected Plexus (Neenah, WI) as its supply chain and manufacturing partner for PCB assemblies and subassemblies sold to communications equipment suppliers, carriers and network operators. NMS will immediately begin transitioning its product supply, circuit pack manufacturing, and customer order fulfillment to Plexus….Cal-Comp Electronics (Bangkok, Thailand), another MMI Top 50 provider, has landed three contracts totaling $25 million to build mobile phones in South Korea, according to Reuters. Cal-Comp units in South Korea will manufacture CDMA phones for the Hisense Group and China’s TCL Mobile Communication and TDMA and FWT phones under the Motorola name for Brightstar….Under a memorandum of understanding, Inami & Co., Ltd. of Japan, an ophthalmic product company, will outsource certain activities to CEI Contract Manufacturing Limited (Singapore). CEI will provide redesign of componentry integral to Inami’s products as well as materials management and manufacturing for items such as PCB assemblies, power supplies, transformers and optical illuminators….Metretek Contract Manufacturing, or MCM (Melbourne, FL), has received an order from Kasten Chase Applied Research for turnkey communications assemblies. Kasten Chase markets data security products to mitigate risk when sharing and storing sensitive information. In addition, MCM will act as a primary subcontractor to DataSec (Nashua, NH), a US government supplier of secure communications products. Under a multiyear contract, MCM will supply products including networking assemblies. MCM is a subsidiary of Metretek, Inc., which in turn is owned by Metretek Technologies, a NASDAQ-listed company. The parent company is a provider of energy measurement products, services and data management systems to industrial and commercial users and utilities….Photronic Devices (West Bridgewater, MA), an optical networking supplier, has selected Chase EMS Group (West Bridgewater, MA) as a partner for the manufacture of optical gain amplifier controllers….Superior Manufacturing Services, or SMS (Beaver, WV), will build robotic assemblies for World Wide Video (Culpeper, VA). SMS serves as lead manufacturer of the customer’s security and surveillance systems. World Wide Video has secured production financing for up to $3 million from SMS.
More action in China…Reuters is reporting that Thailand’s Cal-Comp Electronics is putting up a $10-million facility in Suzhou. The plant will primarily manufacture telecom products….Nam Tai Electronics (Hong Kong) has taken possession of its new factory premises with about 138,000 ft2 of production space. The new factory project will bring Nam Tai’s capacity in China to some 626,000 ft2. Nam Tai estimates it will make a capital investment of $20 million in the project over the next six months, with new production lines expected to be operational in March 2003. The five-story project includes two floors of class 1000 clean room facilities, intended for the manufacture of RF and LCD modules. Producing RF modules for mobile phones is a new business for Nam Tai, which is setting up new production lines for this business temporarily in its existing factory. In addition, Nam Tai’s software development subsidiary, Shenzhen Namtek Co., Ltd., has expanded into Shanghai with a new office. Namtek is based in Shenzhen….Surface Mount Technology (Holdings) Limited, or SMTL (Hong Kong), has set up a wholly owned subsidiary, Superior Electronics Company, in Dongguan, Guangdong Province. The new subsidiary will supplement the capacities of SMTL’s existing Dongguan plant and provide EMS particularly for markets in southern China….Tyco Electronics (Harrisburg, PA), which is touted as the world’s largest manufacturer of passive components, will begin making components at Flextronics’ industrial park in Doumen, China. Tyco will lease space from Flextronics and will manufacture a variety of components including connectors, cables and battery packs.
Aimtronics In Receivership
In Canada, an interim receiver will sell the assets of EMS provider Aimtronics (Kanata, Ontario, Canada), the operating subsidiary of AimGlobal Technologies (Kanata, Canada), to satisfy creditors. Valtec Capital Corp., AimGlobal’s senior secured lender, filed a motion to appoint the interim receiver, Richter & Partners Inc. (Toronto, Canada). AimGlobal’s board did not oppose the Valtec motion.
Aimtronics operates in four locations: Kanata and Brockville, Canada; Ogdensburg, NY; and Dongguan, China. AimGlobal and Aimtronics websites list manufacturing space at more than 175,000 ft2 and more than 200,000 ft2 respectively, with 40,000 ft2 in China.
Recently, Valtec informed AimGlobal that it would not provide any more capital to AimGlobal in its present state. In May, Valtec took the senior lender position by acquiring bank debt owed by AimGlobal. In that position, Valtec had advanced funds to the company for working capital and had purchased C$2.1 million in convertible debentures.
Before the court action, AimGlobal had tried to restructure its obligations. Creditors representing over C$11 million in claims against AimGlobal had agreed to compromise their claims. But several of the larger creditors did not join in the agreement. And last month, Giga-Tron Associates, a creditor that did not participate in the compromise, filed a motion in Canada to put Aimtronics into bankruptcy. Giga-Tron also petitioned to appoint an interim receiver. Valtec followed with its own motion to bring in an interim receiver.
In light of Giga-Tron’s motions and AimGlobal’s inability to operate without Valtec’s financial support, AimGlobal’s board of directors concluded that it would not contest Valtec’s motion. The board has resigned because the interim receiver will be in control of AimGlobal’s operating business.
Valtec intends to provide the interim receiver with sufficient funds to allow AimGlobal to continue as a going concern until the sale of assets has been completed. In addition, Valtec has offered to purchase the assets of Aimtronics for an amount equivalent to the company’s total indebtedness to Valtec. Valtec has agreed to let Richter show its offer to perspective buyers. Depending on the level of interest, Richter will likely require bidders to submit offers on Oct. 28.
Most of AimGlobal’s difficulties in its fiscal 2002 ended March 31 resulted from the default of a major customer, Cell-Loc, and the general slowdown in the EMS industry.
The challenges continued in the June quarter, when AimGlobal posted a net loss of C$4.4 million on sales of C$13.7 million. The company restated its results for the year-earlier quarter, which ended up with the same net loss of C$4.4 million on sales of C$31.6 million. AimGlobal sold off assets of its operation in Delta, British Columbia, during the June quarter.
Other financial news… This month, Moody’s Investors Service lowered its credit ratings on Sanmina-SCI’s convertible subordinated debt and cut two other ratings. Moody’s said the ratings outlook is negative for Sanmina-SCI. The ratings downgrade was based on erosion in Sanmina-SCI’s performance, its high debt to cash flow ratio, and the protracted downturn in customer end markets, particularly telecom. The downgrade of the rating on long-term senior unsecured debt caused Sanmina-SCI to obtain a waiver for its receivables purchase agreement, which has been amended to avoid termination. The company’s other bank credit facilities were unaffected….Solectron posted a 3% sequential sales increase in its August quarter, but took pretax charges including $2.7 billion to revalue goodwill and intangibles and $97 million for excess and obsolete inventory. The provider said the inventory charge was unusual….NASDAQ has notified IEC Electronics (Newark, NY) that it does not comply with NASDAQ rules regarding minimum net tangible assets, minimum stockholders’ equity and dues payment. As a result, IEC’s common stock is subject to delisting from the NASDAQ SmallCap Market. IEC has requested an appeal, and its stock will continue to be listed until a final determination has been made….Elcoteq (Espoo, Finland) expects that its sales and operating profit for the September quarter will beat earlier guidance. The company now projects sales of more than 450 million euros, compared with Q2 sales of 425 million euros….For the quarter ended July 31, SigmaTron International (Elk Grove Village, IL), a NASDAQ-listed provider, reported sales of $19.2 million, up 12% from the year-earlier period. The company made a net profit of $616, 201 in the July quarter, its fourth profitable quarter in a row….For the fiscal year ended June 30, SMTEK International (Moorpark, CA) recorded sales of $74.2 million versus $91.1 million for the prior fiscal year. The company showed a net loss of $6.0 million in fiscal 2002, compared with net income of $1.8 million for the previous year.
Bear Stearns (New York, NY) has counted 21 million ft2 and 96,728 employees cut since December 2000 from the eight EMS companies it tracks. The space and employee reductions represent 27% and 26% respectively of pro forma totals at December 2000. The securities firm also found that the eight providers closed 108 plants, of which 60 were pure EMS facilities, 39 were either PCB fab or enclosure operations, and the remaining nine were in pre- or post-manufacturing services. Over 90% of plant closures have taken place in the US and Western Europe, according to Bear Stearns.
For example, Solectron has taken out about 35,000 people, about 5.5 million ft2 and about 600 SMT lines since it started to restructure. The company expects that it will need to eliminate about 5000 to 6000 additional jobs and about 3 million ft2 over the next several quarters in its fiscal year.
One of the latest plants to fall silent is the Sanmina-SCI facility in Motala, Sweden. All the plant equipment is being auctioned including 18 Panasonic chip shooters. Originally acquired from Nokia, the plant manufactured set-top boxes.
Some company news…Benchmark Electronics (Angleton, TX) has received the “Supplier of the Year” award from Sun Microsystems. Covering Sun’s fiscal year, this highest honor goes to a single supplier. Benchmark won for its work in the contract manufacture of Sun’s entry-level server products….CEI Contract Manufacturing (Singapore) has earned QS9000 certification, which puts the provider in a position to take on automotive business….Sparton (Jackson, MI) has received certification for European Standard EN 46001 and ISO 13485, which are applicable to medical products….Nextek (Madison, AL) has installed an x-ray fluorescence system for analysis of surface finishes and a scanning acoustical microscope (SAM) for internal imaging of structures and boundaries that may not be visible via x-ray. Nextek offers EMS and analytical services.
People on the move…Koichi Nishimura, Solectron’s chairman, president and CEO, will retire from his CEO duties at age 65. Nishimura recently turned 64. A successor has not been identified, and Nishimura will continue as CEO until the transition to a new CEO is completed. He will retain his role of chairman. Solectron has also appointed Wesley Chen as VP and managing director of Solectron China Electronic Manufacturing and Test Solutions Group. In this new role, Chen will oversee Solectron’s manufacturing sites in Suzhou and Shanghai, China. He replaces Kent Chen, who retired….Steven Schlepp, who was president of Flextronics’ Multek unit, has left the company. Benjamin Robinson, COO of Multek, is running operations of the PCB unit. Also gone from Flextronics is Ross Menard, who had managed operations of Flextronics’ enclosures business. Flextronics said it no longer needed his position because the company had integrated that business into its operations….Elcoteq has named Harri Ollila as president, Elcoteq Europe as of January 1, 2003. He will be responsible for sales, production and financial performance of the provider’s Terminal Products and Communications Network Equipment business areas in Europe. Ollila will join Elcoteq from ABB Oy’s Automation Division, where he serves as global key account manager and head of a business unit….Mack Technologies has hired Fran Burke as VP of business development. He held the same position at the now defunct ACT Manufacturing….Nextek has appointed Charles Perry as VP and COO and Mark Edwards as VP of sales. Most recently, Perry served as a senior manager with Deloitte Consulting, while Edwards worked as business development manager for EMS provider XeTel.