MMI October 1998
Table of contents
- Cover story: Some OEMs still want to wear two hats.
- More Asset Purchases for SCI
- Jabil Posts $1.3B FY
- TMW Makes Two Deals
- Sparton Teams With CAI
- EFTC To Add AlliedSignal Operation
- EAI Acquires Tri-Star Business
- Solectron Firms Up Two Agreements
- Two Expansions for Celestica
Some OEMs Still Want a Piece of the EMS Business
Lexmark, Siemens and VTech making international plays in contract manufacturing
One can make quite a list of OEMs that have entered the EMS business and left it later on. Some fairly recent examples are IBM in Charlotte, NC, Maxtor and Micron Electronics. There comes a time when an OEM must invest in an EMS operation to grow it or keep it expanding. Many have failed this test. But if you think OEMs have disappeared from the contract manufacturing business, better think again. This month, MMI has tabulated ten companies that manufacture both for themselves and outsiders (see table). And they are not alone.
Although outsourcing is now mainstream as an OEM manufacturing strategy, not all OEMs want to be the outsourcer. Some, albeit a minority, want to be on the receiving end along with traditional EMS providers. Given the checkered history of OEMs in contract manufacturing, it would be easy to dismiss this minority group. Easy, that is, until one sees who has joined this group.
New EMS Network
None other than Siemens has this month put a global EMS unit on its official organization chart. Siemens International Manufacturing Services is offering the gamut from pre- to postmanufacturing services through a network of 11 Siemens plants worldwide. Launched last year by the Automotive division of Siemens, the IMS network (not to be confused with IMS, the California-based CM) is based in Regensburg, Germany, and Toulouse, France. In addition to those network sites, Siemens Automotive has contributed plant services in Guadalajara, Mexico; Salto, Brazil; Changchun, China; Ichon, Korea; Foix, France; Vienna, Austria; and Frenstat, The Czech Republic. What’s more, the Siemens Electronics Manufacturing Center in Johnson City, TN, has joined the network as its North American site in the U.S. Plus the Nottingham, UK, plant from Siemens Information and Communication Networks is now a member as well.
But the plant total may not stay at 11. “This is open,” says Jacques Robineau, IMS business development director. “Other Siemens plants may join the network.”
Since Siemens is involved in both components and systems, says Robineau, “PCB assembly is the natural bridge between both sides.” So PCB assembly is a core competency for Siemens, giving it a reason to support the network.
Moreover, Siemens has big plans for IMS sales. For the current fiscal year ending in September 1999, IMS is projecting sales of more than 300 million DM (about $525 million). That alone puts Siemens IMS in the big leagues of contract manufacturing. Robineau estimates that IMS today amounts to between 10% and 15% of Siemens Automotive sales in electronics. The goal for IMS is to become a 1-billion DM subdivision of Siemens in three years and an EMS world leader in five years.
Meanwhile back in the U.S., the Siemens Electronics Manufacturing Center has its own agenda apart from the IMS network. “This is not a major thrust for us in Johnson City,” explains David Jones, marketing and sales manager for Siemens EMC. “If there is a customer that has a product which looks like a better fit off shore, we steer them in that direction.” He adds, “Our primary thrust in Johnson City is to sell our services in North America.”
Lexmark in Expansion Mode
In the past, an inability to expand globally has presented a growth barrier to EMS operations inside OEMs. That is not the case with Lexmark Electronics, the contract manufacturing business unit of printer maker Lexmark International. Lexmark Electronics tells MMI that next year it will have plants operational in two geographies outside the U.S. “We recognize that to be a world-class player, we need to be global — not just Lexmark International, but Lexmark Electronics,” says Jeff Sturges, director of marketing and sales at Lexmark Electronics.
Although Lexmark Electronics made its debut as independent business unit in January, contract manufacturing has taken place within the parent company for a decade (Feb., p. 10). The unit has been growing its business, which would already place it among the MMI Top 50, through existing customers (see table). But Sturges reports, “We have a number of customer prospects that are very close to coming to fruition.”
For now at least, Lexmark Electronics is focusing on the computer peripherals market. “We believe if we concentrate in one area, we get that momentum, and it gives us additional customer references. That’s more productive for us than trying to take a shotgun approach and chase every lead that comes up,” says Sturges. “But we would expect to broaden our customer portfolio in the future.”
OEM Competition From Asia
Another OEM looking for a greater international presence in EMS is the VTech Group of Companies, based in Hong Kong. VTech’s Contract Manufacturing Division is expanding its sales presence in the U.S. with the opening of an East Coast office to handle both sales and program management. The new office is located in Cambridge, MA. “We needed to have an East Coast presence. The customers and prospective customers we were talking to said, ‘We would highly recommend that VTech have a presence on the East Coast,'” says VTech’s Rolf Seichter.
VTech recently hired high-tech veteran Seichter, who is based in the new office, to head up contract manu-facturing sales east of the Mississippi River. For some time, VTech has maintained a sales operation on the West Coast through VTech (OEM) in Campbell, CA.
New England is already providing VTech with new business. The Contract Manufacturing Division recently won a program for a new datacom product from a New England company.
As an Asia-based CM, VTech may not have the name recognition of a NatSteel or a Venture, but VTech is a familiar brand in the cordless phone business. In fact, VTech says it holds a 50% market share of the 900-Mhz cordless phone market in the U.S. Other VTech businesses include electronic learning products. The Hong Kong-listed VTech Group recorded an after-tax profit of $69.1 million on sales of $841.7 million in fiscal 1998.
The VTech division has built high-speed modems for Compaq, medical diagnostic equipment for Japan Radio Corporation’s Aloka subsidiary, sound effects equipment for Harman Ltd., and laser scanner board assemblies for Fujitsu, to name some examples. VTech wants to capitalize on its RF expertise in seeking new programs.
But VTech is not the only OEM based in Asia looking for a piece of the EMS market. Bonso Electronics of Hong Kong, a manufacturer of electronic scales and other products, aims to pursue opportunities in con-tract manufacturing while ramping its own production. The company manu-factures all of its products in China.
OEMs Buying Into EMS
The traditional way for an OEM to enter the EMS business is to offer some portion of its capacity to outside customers. But another strategy has emerged in the last two years or so. At least four OEMs — Aim Global Technologies (formerly Aim Safety Co.), Dauphin Technology, Photomatrix and TELS Corp. — have either acquired or merged with a contract manufacturer. In each case, the OEM gained manufacturing capacity for its own product line while diversifying into a growing market.
Take Aim Global Technologies of Delta, B.C., Canada. It entered the EMS market through its 1997 acquisition of CompAS Electronics, which had two facilities in Ontario, Canada, and one in Ogdensburg, NY (April ’97, p. 7). At that time, Aim needed high-volume manufacturing for its gas detector business, and buying Comp-AS offered a solution.
Now Aim is taking a further step into the EMS business. The company intends to purchase Pachena Industries, a Canadian CM, for $8 million Cdn in cash and an earn-out of up to $2 million Cdn in cash. Pachena will become a division of Aimtronics Corp., an Aim subsidiary that engages in EMS. Aim says this deal positions Aimtronics as Canada’s “third largest non-commodity EMS company.”
Pachena brought in sales of $14 million Cdn for fiscal 1998 ended in May and is projected to achieve sales of $19 million Cdn and EBITDA of about $3.4 million Cdn for fiscal 1999. The Canadian CM operates facilities in Vancouver and in the Toronto area with a total of 45,000 ft2 and 130 employees.
Aim says an important aspect of this acquisition is that it gives the company a presence in the greater Toronto area.
Not All Negative
Contrary to some popular beliefs, not all OEM forays into contract manufacturing end up with the OEM withdrawing or selling out. There are cases where the contract manufacturing side of a company’s business has grown to the point where EMS dwarfs the OEM side. At the Varian Tempe Electronics Center and Winland Electronics, EMS now contributes 80% and 90% respectively of total sales.
As long as some OEMs hold onto manufacturing as a core competency, there will likely be a group of them selling manufacturing services. But the days of selling excess capacity may be numbered. OEM customers seeking long-term partnerships want to see resources committed to them. In the EMS business, those OEM providers that commit to such things as geographic expansion are sending a positive message.
More Asset Purchases for SCI
Plus a look at its annual report
SCI Systems (Huntsville, AL) has announced one OEM asset purchase and closed another.
Based on a newly signed letter of intent, SCI will purchase certain manufacturing assets of Intergraph, also headquartered in Huntsville, and will assume all production of Intergraph Computer Systems products.
Separately, SCI has completed a deal, announced last year, to acquire an Ericsson Telecom plant in Leganes, Spain, and supply Ericsson from that location (July ’97, p. 3). SCI has offered jobs to affected Ericsson workers.
Due to close within six to eight weeks, the Intergraph deal is expected to bring SCI “in excess of several hundred million dollars per year” in sales, according to a joint statement. Using $519 million for Intergraph’s cost of systems revenues over the last 12 months, Bear, Stearns & Co. (New York, NY) estimates this divestiture could generate $300 to $400 million in revenue for SCI.
Plans are that SCI will lease Intergraph’s manufacturing facilities for six to 12 months before moving those operations to SCI facilities. The EMS company will offer jobs to about 300 Intergraph employees at their current salaries and tenure levels.
Also, some manufacturing previously outsourced by Intergraph will be moved from other EMS providers to SCI.
Searching the Annual Report
Look in the back of SCI’s 1998 annual report, and you’ll find that foreign sales increased faster than domestic sales did in the fiscal year ended June 30. Foreign sales climbed by 49% over fiscal 1997 to $2.11 billion, while domestic sales edged up 8% to $4.70 billion. SCI states that substantial sales growth from its Mexican operations, combined with improving European markets, accounted for the higher growth in foreign sales.
Still, SCI points out that because of strategic global relationships, geographic data do not represent the effect that each region has on its operating results. In addition, foreign units do certain work for domestic units, and intergeographic transfers amounted to about $400 million in 1998.
SCI’s annual report also reveals that the company intends to maintain the mix between subassemblies and finished products at about 50/50 based on dollar value. As a percentage of total sales, finished product assembly declined from about 58% in fiscal 1997 to about 50% in fiscal 1998.
Despite lower average selling prices, stuffed distribution channels, and the Asian financial crisis, SCI managed to grow fiscal 1998 revenues by 18% to $6.81 billion. Net income rose 29% to $145.1 million, while diluted EPS came in at $2.13, up 26% from the prior year. Return on average equity measured 22%, beating the company’s target of 20%+.
Although SCI is not a brand name in the computer business, SCI has become a major manufacturer of computers. The company delivered about three million finished computers during fiscal 1998.
Another area generating high volumes of finished products for SCI is consumer electronics. SCI is shipping direct broadcast satellite receivers at a rate of over two million a year for a customer in the satellite TV business. Providing a likely clue as to the identity of that customer, SCI recently announced shipment of 2.5 million receivers to EchoStar Communications. According to SCI, continued expansion of its box-build operations suggests that growth of its consumer product business will be skewed toward production and distribution of finished products.
In the telecom segment, SCI reports that it has been selected as a strategic manufacturing partner for a major telecom company headquartered in North America. Note that the number of large telecom companies based in North America is limited, with Lucent Technologies and Nortel topping the list.
To meet sales growth targets while average selling prices decline, SCI needs to make large additions to its unit capacity. In fiscal 1998, the EMS company added 78 automated assembly lines — the largest number in its history — of which 65 were of the SMT variety. The total number of SMT lines went up by 36% to 246. What’s more, facility space increased by 29% to 5.0 million ft2.
Net assets in property, plant and equipment rose 45% to $436.1 million. Yet SCI’s continued focus on asset management provided for this asset growth without increased working capital and with somewhat reduced indebtedness.
In fiscal 1998, SCI’s ten largest customers accounted for more than 75% of revenues. Hewlett-Packard was by far the largest, representing 40% of SCI’s sales.
Supporting HP has required SCI to set up new facilities. For instance, last year HP tapped SCI to build desktop PCs for HP in Europe. That contract eventually could be worth more than $1.0 billion a year. As a result, SCI has started operations in Leek, The Netherlands, and plans to construct a permanent facility in Heerenveen, another Dutch location, during fiscal and calendar 1999. What’s more, SCI will dedicate a new facility in Huntsville, AL, due to start operations in Q4, to one of HP’s computer product families. Earlier this year, SCI said it had under construction three plants dedicated to HP.
Among other facility projects listed in the 1998 annual report is a new complex in Hortolandia, Brazil, where SCI will consolidate Brazilian operations. Remodeling of the buildings that SCI bought for this larger site was scheduled to be finished last month.
Although SCI executives state that long-term trends favor the company, SCI recently warned that its revenue estimates for the September quarter “may be below analysts’ expectations by a single-digit percentage.” Timing of various customer shipment releases was cited as the primary factor involved in the shortfall. Still, the company estimates that EPS for the quarter will “approximate” Wall Street’s expectations.
Jabil Posts $1.3B FY
Lands Nortel Networks program
For the fiscal year ended Aug. 31, Jabil Circuit (St. Petersburg, FL) reported revenues of $1.28 billion, up 31% over the prior year. The company took a one-time charge of $24.4 million related to its Hewlett-Packard acquisition. Excluding the charge, pro forma net income for fiscal 1998 was $69.8 million, or $1.81 per share. Actual net income came to $54.7 million, $1.42 per share. Pro forma and actual EPS increased 32% and 4% respectively.
Bear, Stearns & Co. (New York, NY) reports that customers representing more than 10% of fiscal 1998 sales include Cisco Systems (21%), 3Com (18%) and HP (11%).
Sales for Jabil’s Q4 increased 4% over a year earlier to $317.6 million. Pro forma net income, which excludes the one-time charge, was $13.4 million for Q4, while including the charge resulted in a net loss of $1.8 million. These figures can be compared with net income of $18.0 million in Q4 fiscal 1997.
Meanwhile, Jabil has announced a new manufacturing relationship with Nortel Networks, formerly known as Bay Networks. Jabil plans to put production for Nortel Networks in multiple plants, with modest production in Q1 fiscal 1999 followed by increasingly significant levels in Q2 through Q4. The company anticipates Nortel Networks may become a 10% customer by the end of fiscal 1999.
What’s more, Jabil expects revenue and operating profit to rebound more sharply than previously anticipated, reflecting higher production levels across all business sectors. The company points to a “brisk pickup of business in the fall.”
For fiscal 1999, Bear, Stearns predicts that Jabil will break the $2-billion barrier, with help from the HP LaserJet PCBA acquisition estimated to contribute $500 to $550 million in sales.
TMW Makes Two Deals
Emerges as another financial player in the EMS industry
TMW Enterprises (Troy, MI), a private equity investment fund, has surfaced as another financial player looking to add EMS companies to its portfolio (July ’98, p. 1). The company recently acquired Cirmount Circuits, Inc. (CCI), an EMS provider in Farmington Hills, MI, as well as the assembly assets of TK Electronics, an automotive supplier owned by Takata of Japan.
These two deals are related: assembly operations at TK have been merged into CCI. CCI now manages both operations, which are less than a mile apart. Plans are to combine operations into a new 20,000-ft2 facility in Q1 1999.
TMW’s main principal, Thomas Wheeler, is also the largest shareholder in SMTEK International, a public CM formerly known as DDL Electronics. Through this ownership, TMW intends to use SMTEK as a platform for acquiring a network of small regional players. “We’re trying to build from the platform company in some cases directly with acquisitions where we can add value to companies through our network of contacts to enable them to increase revenue and earnings more quickly. And in other cases, acquisitions can be made through share transactions by SMTEK,” explains John Sammut, VP of business development at TMW. He serves as TMW’s primary contact for pursuing additional investments in EMS.
“These acquisitions required quick and simple cash transactions so we chose to pursue them directly,” says Sammut. “The acquired properties were also located near TMW’s main office, which enables us to get actively involved in managing the operations to increase the revenue and earnings.” He adds, “We’re also entering discussions with SMTEK that could lead to a merger of these operations into SMTEK International, which would be accretive to SMTEK’s earnings per share.”
“This is a great opportunity for us to increase our core business and expand our production capabilities with the acquired automated assembly equipment,” states Jim Camp, who will remain as president of CCI. From the TK deal, CCI has gained three high-speed SMT lines and a high-flexibility SMT line plus other equipment including over ten environmental chambers.
Also, CCI has hired ten key employees, mainly engineers and technicians, from TK. With them, CCI’s staff totals 45.
As a turnkey provider of high-complexity, low-to-medium volume assembly, CCI has sales running at an annual rate of $8 to $9 million. The company has enjoyed a compound annual growth rate of 30% for the past five years and is projected to double in size over the next two years. CCI is reported to have maintained a history of profitability. The company entered the EMS business in 1985. Industries served by CCI are industrial controls, biomedical, tier-two automotive, telecom and instrumentation.
While CCI will get some low-to-medium volume automotive work as a result of the TK Electronics acquisition, the high volumes have gone to a joint venture that TK’s parent Takata formed with Philips VDO.
Created in 1995, TMW is pursuing three separate platform strategies. Besides focusing on the EMS industry, the private equity fund also has subsidiaries in metal forming and plastics injection molding. The fund was set up from the proceeds of the sale of Electro-Wire Products, a $500-million+ company formerly owned by Thomas Wheeler. TMW is seeking follow-on investments within the low-to-medium volume, high-complexity segment of the EMS industry. Targeted are electronics hotbeds throughout the U.S. including North Carolina’s Research Triangle Park, Texas, Oregon, Kansas, Arizona, Massachusetts and Georgia.
Sparton Teams With CAI
Sparton Corp. (Jackson, MI), a public EMS company with a history in the automotive and defense industries, has formed an alliance with Contract Assembly, Inc. (Lawrence, MA), a private contract manufacturer.
This alliance serves as yet another example of an EMS provider establishing a local presence to support customers in a particular area during new product development. CAI will meet the front-end needs of New England customers, and when volumes get high enough, programs will be shifted to Sparton plants. “The bigger volumes will go to bigger plants — in this case, Florida or Jackson, Michigan — and the smaller volumes will stay with CAI,” confirms Dave Hockenbrocht, president of Sparton.
Through the CAI alliance, Sparton end ups with a New England presence that it had lacked. The company used the same strategy to gain a European presence when it allied with Simclar International (Dunfermline, Scotland) earlier this year.
So Sparton has departed from many EMS providers that have taken the acquisition route to expand geographically. Hockenbrocht does not believe “you have to own it to control it.” Although Sparton does not own stock in an affiliate such as CAI, he declares, “we can still treat it as another Sparton facility and can get done what needs to be done.”
Cost also enters into the alliance strategy. “I believe we can put together several affiliates without having to charge around and pay premium prices,” says Hockenbrocht. He thinks some of the prices paid for EMS acquisitions are “patently ridiculous.”
Moreover, Sparton may have been unable to acquire either Simclar or CAI even if it had wanted to. “Both owners did not feel the need to sell, but wanted to be part of something larger,” Hockenbrocht points out.
CAI, a 15-year-old company, is owned by Harold Kelley, its CEO. The company employs 110 people in a 35,000-ft2 facility and serves about 75 customers. Hockenbrocht says CAI “has a full range of ECM capabilities except for engineering, which we’re going to provide.”
Sparton is seeking two to three more affiliates where it doesn’t have market coverage. “We’re looking for affiliates in the Research Triangle area, the Virginia-Maryland area, and the Dallas, Texas, area,” notes Hockenbrocht.
In other news, Sparton has selected seven distributors as strategic supplier partners. They are Avnet, Bell Industries, Marshall/Sterling, Jaco Electronics, Pioneer Standard, Sager Electronics and VEBA AG Group. Included in the VEBA Group are EBV, Insight and Wyle.
EFTC To Add Allied-Signal Operation
Faces class action lawsuit
Hires executive from AVEX
EFTC Corp. (Denver, CO) has signed an agreement to acquire AlliedSignal’s card assembly operation in Lawrence, KS. The operation falls within the Business & General Aviation Enterprise of AlliedSignal Electronic & Avionics Systems. This is the third card assembly operation that AlliedSignal has sold to EFTC. The deal is expected to close this year.
After a three-stage transition is completed, the operation is expected to generate $20 million in annualized revenue. Completion is anticipated by the end of Q2 1999.
The operation will be relocated from Lawrence to nearby Ottawa, KS, where EFTC is buying a 41,000-ft2 facility from AlliedSignal. EFTC will offer jobs to the operation’s employees, numbering about 130.
Meanwhile, a class action lawsuit has been filed in U.S. federal court against EFTC and certain officers and directors on behalf of those who bought EFTC stock between June 2 and Aug. 20. The complaint alleges that prior to a second offering the defendants concealed information about the company’s prospects. Several law firms are involved.
“This suit has absolutely no merit, and we’ll defend it aggressively,” responds Jack Calderon, EFTC’s CEO, president and chairman.
In other news, EFTC has hired Chuck Tillett as president of its manufacturing business. The company considers this a coup as Tillett is a well-known and seasoned EMS executive, having most recently been VP of worldwide operations for AVEX Electronics.
EAI Acquires Tri-Star Business
Last month’s MMI News reported that EA Industries (West Long Branch, NJ) had opened its third Tanon EXPRESS center, located in Methuen, MA. It turns out that this EXPRESS center resulted from EAI’s acquisition of Tri-Star Technologies’ contract assembly business. EAI bought the inventory associated with Tri-Star’s assembly business, and along with that came employees, equipment and customers, “basically for the price of the inventory,” reports Frank Brandenberg, EAI’s president and CEO.
It was Brandenberg who disapproved of EAI’s original offer to buy all of Tri-Star, which included a raw board fab operation (June ’97, p. 6). That offer was made months before he arrived at EAI. “For all the prices negotiated, it would not have been a good deal for EA stockholders,” he explains. And the company wanted to commit capital to its Tanon EXPRESS business.
However, when EAI looked at Tri-Star again about a year later, Tri-Star had brought in a new manager and showed EAI more promise. “Tri-Star came to us and asked if we would want to buy a piece,” says Brandenberg. “It’s a good deal for Tri-Star. They get some cash infusion. It’s a good deal for us. We get to expand our Tanon EXPRESS.”
Apparently that cash infusion was not enough. As this goes to print, Tri-Star has closed down its remaining fab business.
Solectron Firms Up Two Agreements
EMS provider Solectron (Milpitas, CA) and wholesale distributor Ingram Micro (Santa Ana, CA) have agreed to the terms of their previously announced alliance to provide build-to-order and configure-to-order services globally (June, p. 8 and August, p. 1). The two plan to begin shipments to customers in early 1999. Originally, the plan was to start shipping before the end of this year.
In addition, Solectron has finalized its manufacturing partnership with Mitsubishi Electric Corp., the parent company of Mitsubishi Consumer Electronics America (MCEA). Under this agreement, which was reported earlier, Solectron takes over MCEA’s cell phone manufacturing operations in Braselton, GA, and will provide MCEA’s cell phone division with manufacturing services for five years (Aug., p. 3). G. Robert Hawkins, who joined Solectron when it acquired NCR manufacturing assets in Duluth, GA, will run both operations as Solectron’s VP and GM in Georgia.
Design deal done…Smartflex Systems (Tustin, CA), an EMS provider specializing in flex circuits, has purchased Logical Services (Santa Clara, CA), a privately held design firm, for cash. Logical is listed with annual sales of $3 million. Many of its product designs have been done for the medical and RF telecom markets. Also, Smartflex will manage manufacturing of certain disk drive sliders within IBM facilities in Guadalajara, Mexico.
More new programs…Flextronics International (San Jose, CA) has landed a contract from Philips to produce an assembly in a CD-rewritable product. This program is expected to generate about $200 million in revenue for Flextronics over the next 12 months. Flextronics has been producing a portion of a PCBA for a previous CD-rewritable product from Philips…MMI has learned that Hewlett-Packard has expanded outsourcing of inkjet printer work to Solectron in Guadalajara, Mexico. This move, says HP, is part of its Consumer Products Group strategy to supply regions from within regions. Also, Solectron will manufacture the M40 router for Juniper Networks (Mountain View, CA), according to Bloomberg News….Under a letter of intent, SCI Systems will build prototypes of Imagek’s Electronic Film System, which permits digital photographs to be taken with an existing 35-mm camera. A manufacturing agreement will be negotiated. Imagek is a subsidiary of Irvine Sensors (Costa Mesa, CA)….I-PAC Manufacturing (Carlsbad, CA), a subsidiary of Photomatrix, has won a contract worth more than $1 million to manufacture irrigation control assemblies for Altec Irrigation (San Diego, CA).
Two Expansions for Celestica
Gateway strategy detailed
Celestica (Toronto, Canada) is expanding two international sites, while setting up Customer Gateway Centers to act as local points of entry to the company’s global facilities.
Last month, Celestica announced a $38-million expansion of its Dublin, Ireland, facility and the creation of 500 jobs there. Purchased in February from Madge Networks, the Dublin facility currently employs 260. The Industrial Development Agency of Ireland is supporting Celestica’s development in Ireland. MMI has also learned that the EMS company is adding a 214,000-ft2 facility to its Monterrey, Mexico, operation. Celestica expects the new facility will be operational in February 1999. Both the new Monterrey facility and the existing one, which was acquired from Lucent Technologies, sit in the same industrial park.
Like some other EMS providers, Celestica has adopted a strategy of putting front-end services in locations where customers are clustered. These locations can then act as portals for directing customers to Celestica’s full capabilities including volume manufacturing at other facilities. Current sites identified as Customer Gateway Centers include Santa Clara, CA (June, p. 7); Raleigh, NC (Sept., p. 7); Fort Collins, CO; Toronto, Canada; and Kidsgrove, UK. Future centers are planned for Texas, New England, the Far East and Europe.
Other expansions…Solectron has completed a 230,000-ft2 expansion to its Austin, TX, campus, which now totals 680,000 ft2….After adding 90,000 ft2 in Hungary, Flextronics will start construction on another 100,000 ft2 there. The company has also purchased land in Brazil for building an industrial park, its fourth in emerging markets, and will add a new facility to its campus in Doumen, China. The latter will provide more capacity for PCBA and plastic molding….EI Microcircuits, a CM in Mankato, MN, recently expanded its ISO 9001-certified facility from 17,000 ft2 to 32,000 ft2. This addition is intended to support growth in the medical device and industrial process control markets as well as box-build activity. The company has grown to nine SMT lines, four of which combine chip shooting and precision placement….Sonic Manufacturing Technologies, a privately held CM, has signed a lease on a new 28,500-ft2 facility that will support up to five SMT lines and over 100 employees in Fremont, CA. The new building will be ready for occupancy in December and will replace Sonic’s existing 12,000-ft2 plant in Fremont. Founded in December 1996, Sonic currently operates with 60 employees and two SMT lines. The CM is supporting $7 million in customer orders and positions itself as servicing customers from product design through volume production.
Canadian CM folds…Nikom Electronics, a Canadian CM that recently filed for bankruptcy, is out of business. The entire contents of the company’s 70,000-ft2 facility in Aurora, near Toronto, Canada, are being auctioned off this month. Danbury Sales (North York, Ont., Canada), is handling the auction, which includes 11 Panasonic placement machines of various models.
Name changes…As mentioned earlier, DDL Electronics (Thousand Oaks, CA) has changed its name to SMTEK International effective Oct. 9. Its shares will trade under the ticker symbol SMK on the New York and Pacific exchanges starting Oct. 12. The company adopted the name if its operating subsidiary, SMTEK, Inc. …KYREL Oy, an EMS provider based in Kyroskoski, Finland, has taken a new name, KYREL EMS Oyj, effective Sept. 18. The company will also use the name KYREL EMS Corp. internationally. Its French subsidiary is now called KYREL EMS France S.A. instead of KYTRONIC S.A.
Update on SigmaTron’s recovery…SigmaTron International (Elk Grove Village, IL) says it has made substantial progress in recovering from flood damage in Del Rio, TX, and Acuna, Mexico (Sept., p. 9). The company expects that by the end of this month substantially all damaged production equipment will be repaired or replaced and that all raw material issues will be resolved. The Acuna operation is now running at 90% of preflood levels. Although losses are expected to exceed $8 million, management believes the losses will be substantially covered by insurance.