MMI July 2000
Vol. 10, No. 7: July 2000
Table of Contents
ODMs Arrive at the Outsourcing Table
Time was when contract manufacturers and original design manufacturers inhabited separate worlds. ODMs were not considered part of the outsourcing equation. One reason stemmed from geography. ODMs for the most part resided in Taiwan. CMs manufactured elsewhere. They also followed different business models. CMs manufactured from customer designs, while ODMs supplied their OEM customers with product designed and manufactured by the ODM. Also, ODMs worked for the computer industry, whereas CMs tended to attract a broader base of customers. Finally, ODMs often sold products under their own brands, which is akin to sacrilege for most CMs.
What’s different today? Several things.
# In recent years, CMs have taken on more and more aspects of product design. It has reached the point where some EMS companies can design a customer’s product in its entirety. In effect, the design capabilities of the EMS world are catching up with those on the ODM side.
# It is becoming increasingly clear that CMs and ODMs may serve the same outsourcing customer. That is a major reason why three top-10 CMs have struck alliances with Taiwanese ODMs. Solectron has an alliance with Acer, a long-standing ODM, while SCI Systems has purchased an interest in Uniwill, a manufacturer of notebook computers.
Then there’s NatSteel Electronics Ltd. (NEL). The CM has used two equity partnerships (Shuttle and Eumiticom) and an alliance with Accton Technology to obtain ODM capabilities. For example, NEL and Accton have jointly bid on projects outsourced by major telecom companies in the U.S. With Shuttle, NEL bid on PC design-and-build projects from a major OEM. Indeed, NatSteel says ODM work will be an important part of its business strategies.
Even the European market is waking up to the potential of outsourcing on an ODM basis. As shown in the next article, Italy’s Finmek Group, which started as a CM, made two acquisitions that allow it to develop and manufacture products to be sold under OEM brands.
# The ODM business has evolved beyond the PCs and notebooks for which it is noted. True, you still can’t expect a single ODM to cover as many OEM markets as top-tier EMS providers do. But ODMs specializing in other markets have emerged, particularly those that serve the networking industry. For example, Accton covers most of the major networking companies in the U.S., E.U. and Japan.
# While the largest providers may in general have the edge when it comes to global locations, many ODMs no longer confine their manufacturing to Taiwan. And some have expanded far beyond their home country. Take Acer. The company has 21 manufacturing and 15 assembly plants worldwide.
Although the two worlds have more in common now than in years past, Taiwanese ODMs are often overlooked or excluded when it comes to discussing the amount of business that is outsourced. MMI is no exception. But one can make a strong case that when an ODM designs and builds a finished product for an OEM, outsourcing is taking place. So MMI thought it high time to survey the ODM market and find out just how much outsourcing is being channeled in that direction. However, the newsletter discovered that obtaining the necessary data would prove difficult at best.
For one thing, Taiwanese manufactures use two terms – OEM and ODM – to describe what they do for OEMs. The distinction, at least for some companies, hinges on where the design occurs. If the OEM basically designs the product and hands it over to a Taiwanese company for refinement and manufacturing, the work is called OEM. The rest of the world might consider this work a form of box build in the EMS sense. If the Taiwanese company handles both design and manufacturing for an OEM customer, the term ODM is used. Taiwanese companies tend to lump OEM and ODM sales together. In addition, they may sell products under their own brand, which further clouds the issue.
Then comes the problem of obtaining a response to MMI’s survey. Despite numerous emails and phone calls to Taiwan, some ODMs on our list did not participate. Still, we have done our best to piece together some data that would provide an indication of outsourcing value outside the traditional EMS market. See the table below. For this analysis, we believe OEM and ODM sales can be combined because both give an indication of total OEM outsourcing.
For the 11 major ODM/OEM players on our list – and it’s by no means complete – we estimate their OEM/ODM sales for 1999 were in the $16- to $17-billion range. Note that some of the sales figures on our list – the numbers reported as total sales – may include revenue from branded products. That’s why we’re hedging. Also note that the total ODM/OEM market in Taiwan for 1999 was undoubtedly more than $17 billion in 1999.
Given the magnitude of that number, one should look at total OEM spend in both the EMS and ODM/OEM markets when estimating how much has been outsourced.
Some Major ODM/OEM Players in Taiwan
Company Revenue Source 1999 revenue from source* Products included Accton ODM ~$220 mill. networking devices: NICs, switches, hubs Acer Group ODM & OEM $3.9 bill. desktop PCs, notebooks Arima Computer total sales $1.3 bill. notebooks Compal Electronics ODM & OEM $1.5 bill. notebooks, LCD & CRT monitors Delta Electronic Industrial total sales $1.3 bill. networking, power supplies D-Link Corp. ODM & OEM ~$180 mill. hubs, switches, routers, adapter cards First International Computer total sales $2.1 bill. notebooks, desktop PCs, monitors, motherboards, multimedia prod., peripherals GVC Corp. total sales $625 mill. notebooks, modems, networking, wireless Inventec ODM $2.1 bill. notebooks, servers, handheld units, Internet appliances Mitac International ODM $2.6 bill. consolidated thin clients, desktop PCs, workstations, servers, LCD monitors, PCA Quanta Computer ODM $2 bill. notebooks
Reported sales converted at rate of US$1 = NT$30.5
Finmek Branches into OEM & ODM Services
Introduces new organization
Taiwan may be the hotbed of ODM work, but at least one EMS provider in Europe wants a piece of that action too. Through two recent acquisitions, the Finmek Group (Padova, Italy), an up-and-coming European provider, has also positioned itself to develop and manufacture products for sale by OEMs under their labels.
In December of last year, Finmek, under the direction of owner and CEO Carlo Fulchir, acquired the Olivetti PC business in Scarmagno, Italy, from bankruptcy. That 38,000-m2 operation, which produces both PCs and servers, has been renamed ICS S.p.A., which stands for Information and Communication Systems. ICS will continue to produce PCs to be sold under the Olivetti brand name. Two months later, Finmek obtained an impact printer factory from Bull. The 33,000-m2 factory in Caluso, Italy, operates under the name Compuprint. Finmek intends to combine its telecom know-how, which comes from EMS activities with telecom OEMs, with the IT expertise of its Olivetti and Compuprint operations to develop new products primarily for sale by OEMs. Included in these products are web phones, TV set-top boxes and automotive “info-mobility” systems. Finmek expects only marginal sales from these products under Finmek brand names.
By adding these OEM operations, Finmek has boosted its overall purchasing leverage. “This gave me power to reach purchasing volumes that are greater than I can reach by contract manufacturing,” says Andrea Milan, sales and marketing director at Finmek. “I have purchasing power that is double what it was before.”
Nevertheless, when a company starts developing and building products, OEMs may see that as a threat. Finmek has anticipated this concern. “I’m not interested in making any products in competition with my customers,” Milan emphasizes. Finmek only wants to develop products that OEM customers are unable to bring to market themselves.
Finmek’s contract manufacturing side can now utilize capabilities on the OEM side to offer ODM services to EMS customers. The contract manufacturing business can call upon over 200 engineers for delivery of end-to-end services.
Finmek is now organized into three sectors: CM/ODM (Contract Manufacturing and Original Design Manufacturing), OEM and Energy. The company is forming the Energy unit around an electrical equipment plant being acquired from Siemens.
Changes have recently taken place in the CM/ODM sector as well. From Ericsson, Finmek has acquired a 10,500-m2 operation for systems assembly and test in Sulmona, Italy, and a 2000-m2 design and repair activity in Rome. Furthermore, the company has sold Italtest (Volpiano, Italy), a small PCBA operation that was not worth keeping. In addition, Finmek has returned a PCBA operation in Kiel, Germany, to the seller, Hagenuk. Finmek says it took this step due to the risk of a shutdown caused by Hagenuk’s financial problems. Excluding the above OEM operations, the CM sector now has seven locations in Italy. Together, these sites offer integrated services in plastics and sheet metal as well as design, PCBA and system build.
Finmek expects sales for the CM activity will hit $245 million this year, up from $120 million in 1999. The company anticipates that its total revenue will exceed $500 million this year.
Shortages’ Silver Lining
Despite the havoc that component shortages have caused to EMS supply chains, some good may come out of this vexing experience. Because of the shortages, inventory levels in VMI (vendor-managed inventory) programs are down, reports Virtual Integration Associates (VIA), a logistics provider that specializes in electronics. And this ability to manage inventory more closely won’t disappear when the shortages do.
When parts are available, buffer inventory for VMI programs typically starts at about two weeks and works its way down to one week as programs mature. “With allocation there isn’t one week of inventory that’s always available,” says Randy Sabourin, VP of sales and marketing at VIA (Mississauga, Ontario, Canada). “So the supplier has to move the product at a higher velocity through his supply chain.” Instead of receiving a supplier’s shipments once a week or once every two weeks, a VMI warehouse may see shipments four or five times a week. “What this does is lower the amount of inventory that is actually in the facility, which is the goal anyway,” he points out.
“I think that when we go back to having these particular commodities not on allocation, we won’t have to put two weeks of inventory in. And we can help lower the cost to the suppliers here, which is a great benefit,” says Sabourin.
Meanwhile, however, component shortages can hit a VMI program just as they can disrupt other parts of the supply chain. Beyond this obvious impact, will shortages affect the progress of VMI programs within the EMS industry?
Solectron offers one point view, and VIA another. During Solectron’s latest conference call to report earnings, the company said it would emphasize improving vendor process capabilities to support VMI before further expanding its VMI program. In addition, Solectron said with the longer lead times now in effect if it tried to add more commodities to the VMI program, it would be unable to perform to VMI requirements until conditions become more stable.
But VIA’s Sabourin argues that in most cases one should not blame component shortages for preventing expansion of VMI programs. “The success of the VMI programs is directly related to the amount of resources that an ECM puts into them. And that’s the issue why most of them aren’t on schedule.”
If progress has been slower than expected, overall demand for VMI remains robust based on VIA’s business in VMI. With six out of the top ten CMs as customers, VIA provides a good barometer. The company also does business with several OEMs as well as a couple of tier-two CMs. VIA expects it will manage about $8 billion worth of material this year, up from about $ 4 billion in 1999. For 2001, the company estimates that the material number will grow to about $20 billion, based on adding more locations. Sabourin says VIA can’t bring new locations on line fast enough to meet CM requirements.
The company operates six sites in North America and one in Brazil. It plans to expand into Europe this year and into Asia early next year.
For more on VMI, see June ’99, p. 6-7 and April ’99 p. 1-2.
Tool Vendors Report Advances
While calls for standardized communications over the Internet grow louder, the EMS industry remains dependent on proprietary tools for transmitting information to the supply chain. And that dependence, if anything, is increasing.
# Take Datasweep (San Jose, CA), which sells Datasweep Advantage software for tracking individual products on the factory floor and monitoring key performance indicators via a web browser. The company reports that Flextronics is now implementing Datasweep Advantage in Latin America, Europe and China. In June 1999, the provider began using the software for a high-end telecom switch line that required PCBA, BTO and CTO in North America. Since then, more and more North American lines have been tied into the Datasweep software.
“Today, Flextronics is our landmark customer in the EMS segment,” says Matt Holleran, Datasweep’s VP of marketing. But according to Holleran, Datasweep has “significant activity in the EMS segment worldwide within the top ten as well as the top twenty.”
He says three trends favor Datasweep: the move from PCBA outsourcing to full box build requiring CTO and BTO, the ability to provide OEMs with web visibility of their outsourced production, and the flexibility of Datasweep versus legacy applications.
For a single plant with five to eight lines – PCBA and/or box build – the cost of Datasweep Advantage including implementation services is in the $300,000 range.
# PolyDyne (Austin, TX) has released QuoteWin 5.0, the latest version of the company’s quote processing tool for CMs. (See also Sept. ’99, p. 5-6.) The new version features automated electronic purchase order capability for new product introduction, enhanced speed, improved reporting, and compatibility with DesignWin, PolyDyne’s quoting solution for OEMs. The electronic PO feature allows immediate follow-up when a contract is awarded, delivered via e-commerce. According to PolyDyne, existing users will notice up to a 50% increase in quote throughput due to speed enhancements in the new version and connectivity with DesignWin, which has also been upgraded.
The 2.0 release of DesignWin provides access to archived pricing history and current market figures allowing probable costs to be tracked during the design process. OEM customers will also have the ability to aggregate demand for enterprise-wide component contracts. Once an RFQ package is ready, an OEM can send it to suppliers and CMs in minutes. The software allows commodity managers to secure long-lead-time items and allocated products for newly introduced designs.
QuoteWin customers include more than half of the top 50 CMs. PolyDyne is also offering Extended Resource Quoting for emerging CMs that are looking for a lower entry point into the QuoteWin system.
# TRADEC.com (San Jose, CA), a supply-chain hub, has released PurchasingPro 5.0 for the buy side of direct materials procurement over the web. Available by subscription, this latest version gives buyers the ability to aggregate demand across a global organization by allowing them to consolidate multiple bills of material. Other new features include global visibility of past quotations, contract pricing and open orders; capabilities for analyzing supplier performance; new browser technology that links to any database and transmits data in XML format; and a new interface that allows the buyer to get an integrated view of desktop, Internet and back office systems. (See also Sept. ’99, p. 6.)
# webPLAN (Ottawa, Canada) is now selling DemandIT, a web-based solution for collaborative demand management. This tool integrates data from multiple, disparate sources into a single model. Using a browser interface, all parties can participate in developing a demand plan from the model. Each person can see the other’s input, while the software allows multiple what-if scenarios. The company says the tool eliminates “information silos,” in which critical data becomes isolated in a particular department or plant and thus separated from the planning process. A DemandIT feature called Flex technology automatically makes adjustments for forecast error. DemandIT also tests the capability of an operation to meet the plan. The new tool is part of webPLAN CeO, a solution set that combines supply-chain management, product lifecycle management, customer relationship management and strategic and enterprise planning via the Internet.
One of webPLAN’s newest customers is Epson Portland Inc. (Hillsboro, OR), the U.S. manufacturing arm of Japan’s Seiko Epson Corp. and a new player in the EMS business.
# Agile Software (San Jose, CA) and SCI Systems have entered into a multimillion-dollar agreement that will initially provide SCI with more than 2000 subscriptions of Agile Anywhere, a web-based suite of collaborative manufacturing solutions for distribution of product content across the e-supply chain. SCI will implement Agile Anywhere at all 37 SCI facilities worldwide and will use it to connect OEM customers, internal personnel, suppliers and subcontractors. SCI says Agile is one of the cornerstones of SCI’s e-EMS strategy.
But use of Agile Anywhere isn’t confined to the largest providers. Laughlin-Wilt Group (Beaverton, OR) has implemented the Agile software in its Northwest and Orange County facilities.
SYNNEX Joins Exchange
SYNNEX Information Technologies (Fremont, CA), a supply chain integrator with businesses in both EMS and distribution, has joined the electronics industry’s first coalition exchange, eHITEX Inc., as a founding stockholder. This Internet exchange appears to be gaining some momentum as its founding membership has increased from the original 12 companies to 15 (May, p. 1). A top-ten EMS provider (Mar., p. 2 and 5), SYNNEX becomes the third provider in the founding group, which includes SCI and Solectron. Besides these three companies, the other founding stockholders are AMD, Agilent, Canon, Compaq, Gateway, HP, Hitachi, NEC, Quantum, Samsung, Tatung and Western Digital.
Note that the exchange’s official identity, eHITEX , is new as the exchange did not have name when it was announced.
Still in its formative stages, this e-marketplace already has competition from a second coalition exchange backed by IBM and seven other companies (June, p. 7).
IPOs and M&A Go Hand in Hand
If wholesale consolidation of the EMS industry is to occur, don’t expect the top tier to do all the buying. A new source of M&A activity has emerged on the buy side – EMS companies that are about to go public or have just done so. Recently, three companies in this category have announced deals to acquire other CMs. In the first of these deals, SMTC Corp. (Toronto, Canada), which has filed for initial offerings in the U.S. and Canada, intends to acquire another EMS company, Pensar (Appleton, WI), which specializes in engineering services. That deal was reported earlier (June, p. 10). Now two other companies, one newly public and the other in the filing stage, have followed suit.
MSL Gains Northeast Portal
Also expands into China
Manufacturers’ Services Ltd. (Concord, MA), whose shares began trading last month, has acquired Qualitronics Corp., an EMS provider in Lowell, MA. The operation will serve as the cornerstone for MSL’s NPI (new product introduction) Portal in the Northeastern U.S. MSL made the purchase with a combination of stock and cash.
Offering a bridge between design and volume manufacturing, Qualitronics’ 40,000-ft2 facility provides services such as prototyping, DFX engineering and low-volume manufacturing. Along with MSL’s design center in Westford, MA, this operation will support OEMs in the early stages of a product’s lifecycle.
MSL, which had lacked a manufacturing site in the Northeast, earlier told MMI that it would be more likely to start with an NPI operation in the region (Feb., p. 8).
The acquired company will do business as MSL Qualitronics and will retain its 150 employees. Luis Pedroso, founder and CEO of Qualitronics, will serve as the facility’s VP of operations.
Meanwhile, MSL has expanded its Asian operations into China with a greenfield facility. Located in Longhua Town within China’s Shenzhen region, the 50,000-ft2 facility offers PCB assembly, box build and fulfillment. Current customers of the new operation include Taiwan-based AOpen, a subsidiary of Acer, and Pro-nets Technology. MSL also has manufacturing operations in Singapore and Malaysia.
The company’s IPO of 11 million shares was priced at $16 a share. MSL common stock now trades on the New York Stock Exchange under the symbol MSV.
Pemstar to Acquire Turtle Mountain
Pemstar (Rochester, MN), a CM that has filed for an IPO (May, p. 11), has signed a definitive agreement to acquire a smaller CM, Turtle Mountain Corp. of Dunseith, ND.
A full-service provider for commercial and military customers, Turtle Mountain generated sales of about $27.1 million in its last completed fiscal year. For the year ended Mar. 31, the CM earned net income of $1.26 million on sales of $28.9 million. Pemstar intends to buy Turtle Mountain for about $18.3 million, subject to adjustment, and assume the company’s debt, which will be deducted from the purchase price. As of April 1, Turtle Mountain had $2.9 million of outstanding debt.
Pemstar believes this acquisition will expand its business opportunities with important common customers because Turtle Mountain serves as a preferred vendor to these customers. The acquisition will also give Pemstar more capacity. Subject to a number of conditions, closing is expected to occur prior to or simultaneously with the public offering.
The company has filed for an IPO of 8.4 million shares of common stock with an anticipated price range of $11 to $13 a share. Some of the proceeds will be used to pay for the acquisition.
ACT To Buy EMS Business From Bull
In yet another case of industry consolidation, ACT Manufacturing (Hudson, MA) has signed an agreement to purchase Bull Electronics Angers (Angers, France), an EMS unit of the French company Bull. ACT will pay about $56.6 million for BEA, which operates a 230,000-ft2 facility and employs about 750 people. It was reported here last month (p. 11) that the two companies were in talks.
Revenues of ACT and BEA would have totaled about $917.4 million for 1999. Subtracting ACT’s actual sales of $696.3 million for the year, one finds that BEA’s 1999 sales were $221.1 million.
ACT says this deal gives it greater scale in Europe and expands its customer base and capacity.
The acquisition is subject to customary closing conditions and is expected to be completed in Q3. Prior to closing, BEA will spin out its printed circuit fabrication business to a separate subsidiary of Bull.
This news should not come as a shock. As far back as 1998, Bull had been looking for a partner to take some ownership in Bull Electronics.
Left out of this deal is Bull Electronics’ U.S. operation in Lowell, MA. But the EMS facility in Lowell is also for sale. “We’re still looking for a partner just like France was,” says Tony DeVito, GM of the Lowell operation.
Meanwhile, ACT has obtained a new $250-million senior secured credit facility, which includes term loans that will be used in part to finance the BEA acquisition.
Plexus To Add Scotland’s Keltek
Plexus (Neenah, WI) is making a consolidation move of its own. The provider has signed a definitive agreement to acquire Keltek (Holdings) Ltd., a privately held CM based in Kelso, Scotland. This deal will give Plexus a presence in Western Europe.
Keltek operates 37,000 ft2 of factory and office space in Kelso and a 40,000-ft2 facility in Maldon, England. In addition, a new 57,000-ft2 facility is due to open in Kelso at the end of the summer. Keltek’s annual run rate is between $55 million and $60 million. Plexus intends to bring new and existing programs to these operations.
The purchase price, to be paid in cash and notes, totals about $29.6 million. The cash portion will be financed through Plexus’ recently expanded $100-million line of credit. Subject to customary closing conditions, the deal is expected to go through in Plexus’ fiscal Q4.
This is the sixth acquisition announced by Plexus over the last 15 months.
Sanmina Makes Supply-Chain Move
Completes Hadco merger
Extending its reach down the supply chain, Sanmina (San Jose, CA) has paid cash for the purchase of InterWorks (Orange County, CA), a supplier of DSP modules and memory products.
Though not a typical EMS industry transaction, this deal does resemble Solectron’s acquisition of SMART Modular Technologies last year.
Sanmina says the acquisition advances its end-to-end solutions strategy for the communications market. Among Interworks’ customers in that market are Alcatel, Cisco, Ericsson, Lucent, Motorola and Nortel.
InterWorks is projected to achieve about $50 million in sales this year. It will operate as a business unit of Sanmina’s EMS Technology Division, which offers design services and engineered solutions. The InterWorks facility in Orange County will serve as the design and NPI center for modular solutions, while volume production will be transferred to Sanmina’s global assembly facilities.
In addition, Sanmina has completed its merger with Hadco, a major PCB fabricator (April, p. 6).
Jabil Takes Repair Business to Europe
Jabil Circuit (St. Petersburg, FL) will acquire Telenor Technology Services, a European repair and logistics operation, from Norway’s Telenor, a provider of telecom, data and media communication services.
Subject to regulatory approval, this acquisition will allow Jabil Global Services to offer repair and warranty services from Dublin, Ireland. Global Services operations had been confined to the U.S. Key customers of the Telenor unit include Cisco, Marconi, Lucent and Compaq.
Last month, Jabil’s president, Tim Main, told MMI that global expansion is the next step for the Services business (June, p. 4). The company says the new European service is in high demand from its global customers.
Celestica Takes Over NEC Facility in Brazil
Celestica (Toronto, Canada) has acquired the 130,000-ft2 manufacturing facility of NEC’s Brazilian subsidiary, NEC do Brasil, Ltda. Included in this deal is a five-year supply agreement worth $1.2 billion.
Located in Guarulhos, Brazil, the operation will continue to manufacture NEC communications network equipment for the Brazilian market. Some 680 people work there.
The acquisition will expand Celestica’s presence in Brazil. Last year, the company opened a 40,000-ft2 facility in Hortolandia.
For NEC, this is its second divestiture of a plant in the Americas. Earlier this year, the company announced it was selling a plant in Hillsboro, OR, to NatSteel Electronics (Feb., p. 11). An NEC spokesperson in Japan says NEC is studying other possibilities of the same kind as these two cases, but cannot comment further at this time. At present, NEC has 58 manufacturing affiliates outside Japan.
The Brazilian subsidiary will now focus on development, marketing and distribution.
NatSteel Partners with Kodak
NatSteel Electronics Ltd. (Singapore) and another company, Hi-P Singapore Pte Ltd., are taking over Kodak’s camera parts manufacturing operations in Shanghai, China. NEL and Hi-P, a plastics supplier, are paying a total of $6 million for the board assembly and plastic molding operations supplying Kodak’s camera production factory there.
NEL and Hi-P are each assuming a Kodak plant. Of about 1000 employees involved in the transfer, about 650 are joining NEL. The plants will feed parts to Kodak, which will continue to manage camera assembly and testing.
The deal also includes a three-year contract calling for NEL to supply Kodak with circuit boards on a global basis.
NEL expects its Shanghai operation to contribute initially 1% to 2% of its revenue base.
Flextronics Targets Norway
In a move to enter the Norwegian market, San Jose-based Flextronics International is taking over a manufacturing and engineering center in Asker, Norway, from Nera, a maker of microwave radio and satellite communications equipment. The transfer takes effect July 1, and Flextronics is offering jobs to the factory’s 125 employees.
But that is not all Flextronics is doing in Norway. The company is also setting up an industrialization and engineering center near Oslo and a Product Introduction Center in Billingstad.
Solectron To Obtain ECAD from Nortel
Adds more Nortel facilities
Solectron (Milpitas, CA) has reached a definitive agreement to acquire from Nortel certain ECAD (electronic computer-aided design) capabilities in Santa Clara and Simi Valley, CA; Ottawa and Toronto, Canada; and Raleigh, NC. The transaction is due to be completed by the end of this month.
As a result, Solectron will expand its relationship with Nortel. Under this agreement, Solectron will provide Nortel with a range of design services under its four-year supply agreement. Solectron will offer jobs to about 40 engineering employees and acquire certain layout and design assets. The provider says the acquisition will strengthen its design capabilities for high-end communications and networking products.
In addition, Solectron completed the purchase of three Nortel operations in Europe, as part of a larger agreement (April, p. 1). The company acquired facilities in Pont de Buis and Douarnenez, France, from a Nortel joint venture. Pont de Buis offers PCBA, while Douarnenez will be dedicated to assembly and molding services. Solectron gained about 200,000 ft2 of capacity in France along with about 750 employees.
At Monkstown, Northern Ireland, Solectron acquired a portion of Nortel’s prototyping and production for PCBA. After a temporary stay in the Nortel site, the acquired work will go to a 50,000-ft2 facility that Solectron purchased outside of Belfast. Expected to be operational in September, the new site will serve as an NPI center for Nortel and its optical networking products. About 200 employees will transfer to Solectron.
More deals done…Solectron has also completed the acquisition of IBM’s manufacturing operations in Hortolandia, Brazil (June, p. 10). …Flextronics’ Multek subsidiary has acquired CUMEX S.A. de C.V., described as Mexico’s largest PCB manufacturer.LaBarge (St. Louis, MO), a publicly held provider, has sold its 90% interest in LaBarge Clayco Wireless, a joint venture.
Marconi Outsources to APSCO
Marconi Communications Power business will outsource all PCB assembly from its Lorain, OH, location to APSCO International, a privately held CM in Perry, OH. This is the largest plant outsourcing agreement in APSCO’s history.
Over the next year, some 500 different PCB assemblies used in Marconi’s telecom power equipment will be moved to APSCO. The CM plans to add more than 100 employees and expand its Perry facility by 40,000 ft2. APSCO also intends to make capital equipment investments including the purchase of certain Marconi assets, primarily PCB production and testing equipment.
Marconi is a long-time customer of APSCO’s and will soon rank among the CM’s top three accounts.
More new programs…JIT Holdings Ltd. (Singapore) recently started production of Motorola GSM cell phones in JIT’s new 40,000-ft2 facility in Budapest, Hungary. Motorola is now JIT’s largest customer, and JIT does not expect any fallout from Motorola’s new pact with Flextronics. …Celestica will provide contract optical subassembly services to JDS Uniphase for its optical amplifiers. The company is undertaking a capacity expansion program, which includes the use of outsourcing.Newly public Network Engines (Canton, MA), a developer of Internet servers, is using SCI Systems (Huntsville, AL) as sole source of EMS.Telemetrix Technologies has selected Plexus to serve as the engineering and manufacturing services provider for the new Telemetrix T3000 Data Collection Telemetry, designed for supplying telemetry services over PCS wireless systems. …McDonald Technologies International (Farmers Branch, TX) is producing NetXpress information appliances for Netier Technologies (Carrollton, TX). The company contracted with MTI to increase production capacity.
New facilities… In Reynosa, Mexico, Lexmark Electronics (Lexington, KY) has opened a new facility, which was announced earlier (Jan., p. 12). …Kimball Electronics Group (Jasper, IN) has broken ground on a 40,000-ft2 microelectronics facility in Valencia, CA. Replacing an existing facility in Burbank, the new facility will also have PCBA capability and will serve as an NPI center.
Some EMS company news…EFTC has hired James Bass as its new president and CEO. He comes from Sony, where he was senior VP in charge of businesses with revenues over $1.0 billion. Jack Calderon, EFTC’s current chairman and CEO, will continue as chairman focusing on strategic initiatives. Chuck Tillett, EFTC’s president and COO, is leaving the company to pursue other interests. These changes follow a recapitalization whereby BLUM Capital Partners and Thayer Equity Investors IV initially invested $54 million in EFTC (April, p. 8). The two firms intend to undertake a tender offer for up to 5.625,000 shares of EFTC common stock. This maximum number was originally higher. In the second stage of the recapitalization, the two firms this month invested an additional $14 million in exchange for senior subordinated exchangeable notes. Also, EFTC plans to relocate its headquarters from Denver, CO, to Phoenix, AZ.MSL and Lockheed Martin have agreed to settle a lawsuit filed by Lockheed in connection with the proposed acquisition of Lockheed Martin Commercial Electronics by MSL. That deal fell through, and the Lockheed operation was later purchased by Benchmark Electronics. Under the settlement, MSL paid Lockheed $1 million in cash and issued to Lockheed two promissory notes with a total face value of $4 million. Donaldson, Lufkin & Jenrette Securities has also agreed to provide Lockheed with discounted services. DLJ entities served as MSL’s financial backer. …Servatron, a new CM formed by four former Itron employees, will operate from a leased portion of Itron’s Spokane, WA, facility. The new company has acquired a substantial portion of Itron’s manufacturing and depot repair assets in Spokane and has hired most of the associated employees. Itron decided to outsource a significant portion of its low-volume production, and Itron will be Servatron’s primary customer initially. Itron serves utilities with data solutions.
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