MMI May 2002

Vol. 12, No. 5: May 2002


Table of Contents

Cover Story

Market Search Spotlights Both High Mix and High Volume

High Mix Gains Sex Appeal

Flextronics Lands Consumer Electronics Deal

Market Data

IDC Lowers ’02 Forecast

iSuppli: A New Source of EMS Data

News

Outsourcing Poll Still Positive

Siemens Outsources To Sanmina-SCI

VOGT To Make German Deal

Venture in Talks with Agilent and Iomega

Solectron Acquires Chinese Repair Firm

Elcoteq Strategizing

Colorado MEDtech Teams with Teledyne

Another alliance

Technology agreements

IMI Joins Sharp Dream Team

New programs

New Players Emerge from Failed Providers

Small CM Thinks Big

People on the move

Q1 2002 Results for 16 Providers


Market Search Spotlights Both High Mix and High Volume

With telecom depressed and the computer industry in the doldrums, EMS providers are seeking business from other EMS markets somewhat overlooked in the past. This search is turning up new business at both ends of the manufacturing spectrum. Some of the largest providers have latched onto consumer electronics business, which favors high volumes and low-cost locations (see second article below). But other providers have found opportunities in the defense, homeland security, industrial and medical markets. Unlike consumer electronics, these segments often generate programs with a high-mix component and a stay-at-home bias.

High Mix Gains Sex Appeal

In years past, high-mix work was often regarded as an ugly stepchild that had to be accepted along with the more desirable, higher volume members of a customer’s product family. But, as the song goes, the times they are a-changing. With the search for business opportunities outside of the computer and communications mainstream, that stepchild has matured. High-mix work is now sexy. Increased spending on US defense and homeland security coupled with greater outsourcing from medical and industrial companies have put a premium on high-mix capabilities.

Indeed, there are high-mix providers that are actually growing. Take the Electronics Manufacturing unit of Varian, Inc. (Palo Alto, CA). For Varian’s fiscal Q2 ended March 29, unit sales were up 7% over the prior quarter and 2% over the year-earlier quarter. An estimated 90% of unit revenue is associated with high mix.

“Our growth is due to a more defined focus in attracting medical customers and industrial controls [customers] – primarily medical,” said Gene Sparks, director of business development for Varian Electronics Manufacturing.

“Over the last 12 months, 80% of our new customers were in the medical electronics business segment,” he reported. Health care equipment customers accounted for 47% of Electronics Manufacturing’s sales in fiscal Q2 versus 24% a year earlier. At the same time, the unit reduced its dependence on telecom.

Wanting high-mix business is one thing. Being able to land high-mix customers is quite another. “Most of them are in regulated businesses as in defense, aerospace and medical. Most of our competitors probably would not qualify as a supplier because they don’t meet the regulations and don’t have the documentation and configuration control,” said David Hockenbrocht, CEO and president of Sparton Corp. (Jackson, MI). Sparton’s business is 100% high mix.

While not a precise term, high mix basically means lots of assembly part numbers in low to medium volumes. For example, the Varian unit averages 50 to 100 final assembly part numbers per customer and ships 1500 to 2000 part numbers in any given month out of an active database of about 5000 to 6000 assemblies.

With so many part numbers, manufacturing and supply chain management are put to the test. “You need quick changeover. You need to be able to manage lots of part numbers and manage many suppliers and low-volume buys,” said Mike Walsh, national sales manager at Reptron Manufacturing Services (RMS of Tampa, FL). He also pointed out, “You have to be able to quote a lot of assemblies at one time” and then “launch them pretty seamlessly from the front end into ERP.” High mix accounts for more than 45% of RMS’s business.

What’s more, high mix and schedule changes often go hand in hand. According to Sparks of Varian, schedule changes create the biggest challenge in high mix: “how quickly can I get material to support a small number of assemblies when I know the change can occur within 60 days.”

High mix can also exert a drag on inventory turns. In a high-mix environment, excess inventory can pile up for a number of reasons. Component reels may not be used up because the volumes are too low. WIP may balloon because of engineering changes, production bottlenecks or incomplete kits. And customers may require finished goods inventory, which can add up over many part numbers.

Open communications – with both customers and suppliers – play a major role in confronting these problems. Reptron Manufacturing Services believes in full disclosure from the start of a program. So, for example, a customer knows up front that its quote is based on achieving a certain number of inventory turns. “If it drops below that, either we pass that risk to the customer or pipeline that material off,” said Walsh.

Both RMS and Varian make sure their component suppliers understand what is expected of them in a high-mix environment.

One provider has shown that inventory turns can be improved greatly even with high-mix production. Electronic Product Integration (Southfield, MI), a provider with over 150 active assemblies, has raised its overall turns from four to over ten. EPI has the equivalent of less than one shift of WIP in its facility. “I think in a higher mix environment, these are standard setting in our segment in the industry,” said John Sammut, president and CEO of EPI.

EPI uses a three-zone finished goods leveling system along with a two-bin kanban system for raw materials. In addition, EPI has reduced its setup times from one to two hours to an average of less than 15 minutes.

Despite the difficulties of high mix, there are rewards. For one thing, margins can be higher. According to Varian’s Sparks, products with a lot of change and a lot of engineering involvement command higher margins and operating profits.

In addition, Sparton finds that high-mix OEMs are much more loyal as customers. “They stay year after year,” remarked Sparton CEO Hockenbrocht.

Furthermore, high-mix providers in one geographic market such as the US are less likely to lose business to low-cost regions elsewhere. High mix can be viewed as a “keep-at-home strategy,” noted Walsh of RMS. High-mix customers typically look for flexibility from their providers, and RMS has seen cases where customers stayed at home because of that flexibility.

As for the high-mix business that Sparton focuses on, “for the most part it’s going to stay in North America,” said Hockenbrocht. Out of Sparton’s total of about 73 customers, he can recall only company that shifted production to a low-cost region. “I can also name three that are coming back because of a horrible experience – distance, culture, language and time zone,” Hockenbrocht added.

High mix may be more attractive these days, but providers beware. If high-mix business isn’t priced correctly and then managed properly with the right business processes and IT, it can turn into a money loser.

Flextronics Lands Consumer Electronics Deal

Will manufacture variety of Casio products

Flextronics (Singapore) and Casio Computer, a Japanese consumer electronics company, have entered into a contract manufacturing agreement estimated to exceed $1.5 billion over three years. Under this agreement, Flextronics will manufacture a variety of Casio’s electronic products.

The deal also includes the purchase of various assets. Flextronics will purchase Casio’s manufacturing operations in Aichi, Japan, excluding land and building. The provider will also buy a Casio production facility in Shah Alam, Malaysia, and will acquire certain equipment from Casio’s factory in Kluang, Johor, Malaysia.

The Aichi operations produce cell phones, digital cameras and LCD TVs. In Malaysia, the Shah Alam facility manufactures products such as calculators, watches and digital dictionaries. It also operates LCD cell and module process lines. The other Malaysian plant produces LCD TVs, musical keyboards, label printers and calculators.

Flextronics joins top-five providers Celestica, Sanmina-SCI and Solectron that have already acquired facilities in Japan. The facility in Aichi will serve as a Flextronics site for repair, logistics and distribution services. Still, Flextronics currently has no plans to transfer Casio business from the Aichi facility. The site will also offer NPI services to Japanese customers.

“We look forward to working with Casio and enabling them to take advantage of our robust supply chain while leveraging our high-volume consumer products manufacturing capabilities from our Southern China Industrial Park,” stated Michael Marks, Flextronics’ chairman and CEO.

The deal will also allow Flextronics to gain access to Casio’s design and production engineering capabilities. Both companies will collaborate on new product development and design activities.

Expected to close on July 31, the acquisition will bring Flextronics’ manufacturing space in Asia to over 11 million ft2 with a work force of 26,000 people.

Meanwhile, Flextronics will also be using its industrial park in Doumen, China, to manufacture Microsoft’s Xbox game console. The two companies plan to open an Xbox manufacturing facility in Doumen later this year. Flextronics’ console manufacturing operation in Hungary will be relocated to Doumen. Microsoft cited cost savings mainly from reduced overhead costs in Doumen and the park’s proximity to where many of the Xbox components are manufactured.

Microsoft said it will add another Xbox facility in Asia in the future.

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Market Data


IDC Lowers ’02 Forecast

IDC (Austin, TX) has reduced its 2002 forecast for the EMS industry by 10% to $92 billion, according to IDC’s most recent quarterly report on contract manufacturing. This figure represents a mere 2% growth rate for the industry in 2002, compared with IDC’s estimate of $90.5 billion for 2001. The forecast reduction has resulted from lower than anticipated demand.

Furthermore, IDC expects a 5% sequential decline in Q1 2002 to $19.5 billion. EMS revenue is then projected to increase sequentially in the subsequent quarters of 2002 and reach $27.3 billion in Q4 (table). IDC says the growth that it is forecasting for the year will be driven by both a limited increase in secular outsourcing as well as a limited recovery in end market demand. The firm expects continued weakness from telecom and networking sectors, while the consumer, storage and server segments will show the strongest performance.

IDC’s 2001 revenue estimate of $90.5 billion represents an 8% decline from the previous year’s figure. In the first half of 2001, EMS revenue grew 18% over the year-earlier period, according to IDC, while second half revenue decreased by 27%.

For more information, go to www.idc.com.

iSuppli: A New Source of EMS Data

iSuppli (El Segundo, CA), which provides supply chain, professional and market intelligence services, is now offering its own analysis of the EMS market. The company’s new report, “EMS Industry Adjusts to New Realities,” contains among other things a forecast of EMS industry revenues through 2006.

Like IDC, iSuppli predicts that the EMS industry will barely grow this year. The firm expects that industry sales will increase just 1.7% to $96.1 billion in 2002. Last year, revenues totaled $94.6 billion, down by over 5% from $100 billion in 2000, according to iSuppli.

For 2003, iSuppli expects industry sales to resume healthy growth with an increase of 21.2% to $116.5 billion. Revenue will then rise to $140 billion in 2004 and $162 billion in 2005. From 2002 to 2006, the firm is forecasting a compound annual growth rate of 18.3%, and industry sales will reach $188 billion by 2006. Adding in the effect of 2001, the CAGR drops to 14.6% from 2001 to 2006.

Revenues in the Asia-Pacific region will more than double from 2002 to 2006, and the region’s market share will increase by 5 percentage points over that period, predicts iSuppli. The firm projects that the Americas will remain the largest EMS market, but its global share will shrink from 49.2% in 2001 to 40.5% in 2006. As a region, Europe, the Middle East and Africa will see their percentage of global sales dwindle slightly.

For more, go to www.isuppli.com.

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News


Outsourcing Poll Still Positive

A new survey found that 87% of OEM participants plan to increase their outsourcing in the coming year. The Bear Stearns Fifth Annual Electronics Manufacturing Outsourcing Survey polled 101 companies, representing 73% of the total available market estimated at $560 billion.

This result is in line with last year’s poll, in which 85% of respondents were planning to increase their use of a contract manufacturer over the next year (May ’01, p. 4).

In the new poll, the strongest outsourcing responses came from semiconductor equipment manufacturers at 100%, followed by consumer product companies and automotive-related companies at 93%, and telecom manufacturers at 91%.

OEMs cited 51% as their long-term outsourcing goal when results were weighted based on cost of goods. Last year, the reported goal was nearly the same at 49%. According to Bear Stearns (New York, NY), this 51% goal amounts to $286 billion of revenue as fully outsourced, compared with a current outsourcing total of $111 billion, split between EMS providers at $91 billion and ODMs at $20 billion. Provided that the EMS/ODM ratio remains the same, the EMS industry could grow from $91 billion to $234 billion, Bear Stearns concluded. This 157% growth scenario assumes no growth in end markets.

Bear Stearns believes the combination of a richer mix from front-end and back-end outsourcing, more profitably structured deals with fewer plants acquired, and more sales from core EMS outsourcing will help the EMS sector return to peak earnings. “Combined with our recent boom/bust cycle primary research work on declining tech hardware inventory and investment in capacity, the survey results increase our conviction on earnings growth recovery for the industry,” stated Thomas Hopkins, Bear Stearns managing director and EMS analyst.

Siemens Outsources To Sanmina-SCI

Sanmina-SCI (San Jose, CA) has entered into a memorandum of understanding to acquire some operations of Siemens Information and Communication Networks Group. The provider intends to take over IC Networks’ final system assembly and test operations in Lake Mary, FL, as well as two other manufacturing operations in Europe.

The Lake Mary facility provides full-system assembly and test and module assembly for wireline communications switching products. This location will serve as a Center of Excellence for Siemens IC Networks.

The transaction is expected to close in Sanmina-SCI’s fiscal Q4, subject to completion of definitive agreements, regulatory approvals, and consultation with workers councils for the European operations. Financial terms of the transaction and multiyear supply agreement were not disclosed.

Siemens is an existing customer of Sanmina-SCI.

In October of last year, Siemens said half of the 20 production facilities of its IC Networks Group would be closed, sold or have their production transferred to other Siemens operations, reported the Associated Press. At that time, Siemens announced it would cut an additional 5000 jobs from IC Networks.

VOGT To Make German Deal

VOGT electronic (Erlau, Germany), an EMS provider that also manufactures passive components and PCBs, will acquire DeTeWe Produktionsgesellschaft mbH, which serves as the manufacturing subsidiary of DeTeWe, a telecom company based in Berlin, Germany. The acquisition will become effective as of June 1.

From this deal, VOGT will gain sales of 40 million euros in the current fiscal year and sales of 80 million euros in each of the two following fiscal years. Further details were not released.

VOGT expects to profit from an upswing in the German electronics industry in the next fiscal year.

At present, VOGT employs some 5200 people at 14 manufacturing locations in Europe, North America and Asia (see also April, p. 7-8).

Started in January 2001, DeTeWe Produktionsgesellschaft was set up from the manufacturing operations of DeTeWe, a group of nine subsidiaries covering product areas such as ISDN-DECT phones, ISDN/DSL equipment, ITK platforms and voice over IP.

Venture in Talks with Agilent and Iomega

Singapore-based Venture Manufacturing is holding separate discussions with Agilent Technologies and Iomega concerning the acquisition of manufacturing assets.

Agilent and Venture are discussing the sale of Agilent’s PCB assembly operation located at Agilent’s Liberty Lake facility outside of Spokane, WA. Under a proposed transition plan, the PCBA operation would remain in its current location for a period before being moved to another location in Spokane. If the deal goes through, this Spokane location will become another NPI center for Venture in the US. Definitive agreements have not been reached, and the parties are under no obligation to carry out the transaction.

Meanwhile, Venture is in preliminary talks with Iomega, a data storage customer, about the possibility of Venture acquiring Iomega’s Penang, Malaysia facility. However, Venture said nothing concrete has been signed and neither party is obligated to proceed with any transaction.

Citing an analyst, Reuters reported that Venture does PCB assembly for Iomega Jazz, Zip 100 and Zip 250 drives in Johor, Malaysia.

Solectron Acquires Chinese Repair Firm

Solectron (Milpitas, CA) has expanded its after-sales service operations in China by acquiring NC&C, a Chinese component repair company. With this deal, Solectron has added repair service locations in Beijing, Shanghai and Hong Kong. The provider’s Global Services business unit already has a repair operation colocated with Solectron’s manufacturing site in Suzhou.

Through this acquisition, Solectron will initially provide component repair services in China for computing, peripherals and point of sales equipment, including servers, desktop PCs, notebooks and workstations. In the next few months, Solectron will expand these services to other markets such as cell phones, telecom infrastructure and LCDs. Over time, the company plans to add other services including logistics and call centers to provide end-to-end solutions in concert with manufacturing operations in Suzhou, Shanghai and Shenzhen as well as strategic partners.

Privately owned NC&C was started in 1996 in Beijing. Customers include BlueExpress, IBM, HP, Compaq and Apple. Financial terms were not disclosed.

According to Solectron, its after-sales offering in China makes it the only EMS company in China to offer a complete one-stop solution there. Solectron now has 10 sites in China and a distribution partnership with ECS, a major distributor in China.

What’s more, Solectron has a 252,000-ft2 building for manufacturing and warehousing under construction in Suzhou.

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Elcoteq Strategizing

Elcoteq Network (Espoo, Finland), a top-10 provider, is sharpening its strategy in the wireless sector. When finished, this revamped strategy will tell Elcoteq where to focus its efforts in building an end-to-end offering from product design through after-market services.

For some providers, wireless is a niche. But for Elcoteq, wireless is an extensive space accounting for about 85% of sales. “Wireless is very broad. Within this wireless area, we want to define those segments where we want to put all our efforts,” said Ilkka Pouttu, who serves as president of Elcoteq’s North American unit, Elcoteq Inc. (Dallas, TX).

Once those segments are defined, he noted, Elcoteq will want to fill any gaps in services or geographic coverage. To meet this potential need, the provider has three options: put in a greenfield capability, partner with someone or make an acquisition.

The company expects to have more on its wireless strategy when it announces Q2 results in August.

Meanwhile, Elcoteq is positioning itself to make deals, should the need arise. According to a recent statement, “Elcoteq’s principal shareholders have announced their support for Elcoteq as the company takes an active and significant role in future consolidation measures in the industry.”

Pouttu said this means “our principal shareholders are willing to participate in that by directing their own ownership [shares].”

What’s more, Elcoteq’s board has been authorized to issue shares, and the company is free of interest-bearing net debt.

Elcoteq reported Q1 sales of 402.3 million euros, down 14% from 469.9 million euros in the year-earlier quarter. Sales declined 24% from the previous quarter. The company posted a pretax loss of 8.1 million euros versus a loss of 0.7 million euros a year earlier.

Sales of Elcoteq’s Terminal Products business in mobile phones fell by 25% from the same period a year ago to 285.6 million euros. With mobile phone deliveries forecasted at slightly over 400 million units in 2002, Terminal Products’ sales this year are not expected to exceed the 2001 level.

Colorado MEDtech Teams with Teledyne

Colorado MEDtech (Boulder, CO), a provider of medical technology outsourcing services, has entered into a manufacturing alliance with Teledyne’s Advanced Manufacturing Technologies unit in Lewisburg, TN. The Teledyne unit will provide high-volume manufacturing services to Colorado MEDtech, which will continue to focus on core operations that include medical device design and development services and preproduction and low-volume medical manufacturing.

“This alliance gives Colorado MEDtech access to clients in a segment of the medical outsourcing market in which we have not historically competed. We believe that this access will serve to grow both of our businesses,” stated Stephen Onody, CEO and chairman of Colorado MEDtech.

Meanwhile, Colorado MEDtech has received a one-year extension to manufacture a computer-aided detection system for CADx Medical Systems. The system is designed to assist radiologists in the detection of breast cancer.

Another alliance…Boundless Manufacturing Services (Hauppauge, NY) has formed an alliance with The Electronics Consulting Group (ECG) to develop business with OEMs in the aerospace and defense industries. Long Island-based ECG specializes in the development of products, systems and processes for the space, defense and medical markets.

Technology agreements…Flextronics (Singapore) is transferring its direct fiber coupling and solder attachment processes to Newport (Irvine, CA), which can then develop a standardized platform for automating key fiberoptics packaging processes. In addition to an initial fee and royalties, Flextronics will get preferential pricing for equipment developed. Newport will become the exclusive provider of fiberoptic alignment and attachment systems for Flextronics Photonics….Elcoteq and Aspocomp Group Oyj, a PCB fabricator, have formed a joint venture to develop and commercialize Integrated Module Board technology, by which active components are integrated inside a PCB structure. The new technology is expected to be in prototype production within a year….Photon Dynamics (Aliso Viejo, CA), a supplier of yield management solutions, has announced a technology collaboration with EMS provider SMTEK International (Moorpark, CA).

IMI Joins Sharp Dream Team

Integrated Microelectronics, Inc. (IMI), a Philippine EMS provider, has announced a new partnership between its design subsidiary, Eazix, and Sharp Electronics (Singapore) Pte.

Eazix has joined the Dream Team, a Sharp initiative comprised of 15 business partners that provide development and contract manufacturing services in six continents. Through these partnerships, the Dream Team aims to offer cost-effective and high-end technology solutions for consumer electronics such as PDAs, LCD-related products and smart cards.

As a member of the Dream Team, Eazix will provide services such as system application development, component-level design by using Sharp devices such as LCDs and flash memories, premanufacturing and value engineering. The partnership also draws on the strengths of IMI, one of the largest contract manufacturers in the Philippines and a member of the Ayala Group of Companies.

“Being a member of Sharp’s Dream Team will further enhance the value proposition of the IMI Group as a product realization company for its strategic customers. This milestone is a recognition of the creativity of the Filipino,” stated Arthur Tan, president and COO of IMI.

IMI currently serves leading Japanese multinational corporations in the hard disk drive and optical disk drive industries. It has also worked with global companies in the telecom, industrial, automotive and other segments.

New programs…EMC and ADC have selected Flextronics as a strategic partner. Both were relatively small customers of Flextronics. Also, the provider recently added Jedai Broadband Networks and Rhapsody Networks as new customers. For Jedai (Red Bank, NJ), Flextronics is manufacturing a gigabit Ethernet access switch router with integrated telephony. And Flextronics has landed new business on the infrastructure side from Nokia, an existing customer (Mar., p. 7). Finally, Flextronics Regional Services, a unit of Flextronics, has received a contract for the manufacture of 10-gigabit Ethernet transceivers developed by Optillion. Production will take place at the Regional Services site in Vasteras, Sweden….Not previously reported here, Solectron won what it described as “another big deal” from Cisco Systems as a takeaway from competitors. This news came out of Solectron’s latest conference call on earnings. There is speculation that Flextronics is among these unnamed competitors. Flextronics disclosed in February that it had lost most of the volume at Cisco for a variety of reasons. Another program win that Solectron mentioned on that call came from AirPrime for handheld wireless devices. Finally, Solectron will design and manufacture control circuitry for variable-frequency AC generators from Cheng Power Systems (Mountain View, CA)….MSL (Concord, MA) is providing PCB design for a new storage controller product from NetCell (San Jose, CA)….VOGT electronic is building satellite receivers in Witten, Germany, for Galaxis Technology (Lübeck, Germany). In addition, Galaxis expected to start shipping digital cable decoders in April from the Witten plant. Earlier this year, VOGT received an order worth 43 million euros from Galaxis….Natus Medical (San Carlos, CA) has contracted with PEMSTAR (Rochester, MN) to complete the development of a product for the neo-natal market. That product is expected to be introduced in the later part of 2003. Natus recently completed an agreement with PEMSTAR to acquire certain intellectual property and product rights to serve as a basis for developing neo-natal products.

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New Players Emerge from Failed Providers

TeligentEMS and TotalEMS make their debut

Even in today’s environment, one company’s misfortune can be another’s opportunity. Two of the EMS industry’s newest players – TeligentEMS and TotalEMS – owe their existences to the failure of predecessor companies.

Take TeligentEMS, a new EMS company operating out of a 45,000-ft2 facility in Havana, FL. TeligentEMS recently purchased substantially all of the assets of the MercuryEMS operation in Havana, FL, from the Bank of America (April, p. 6). This asset-only purchase resulted from the break-up of MercuryEMS, which had operations in six US states (March, p. 6).

With 150 employees, TeligentEMS services OEMs in the industrial, instrumentation and telecom sectors. “We provide highly specialized assembly and test capabilities in radio frequency and fiberoptic communications,” said Chris Eldred, president of TeligentEMS. For example, the operation has assembled and tested over 100,000 lasers in the wavelength range of 1310 to 1550 nm.

TeligentEMS offers both rapid NPI and high-mix, medium-volume production. Capabilities extend to complete box build and shipment to the point of use.

The company expects monthly run rates to climb to $24 million on annual basis late in Q3. TeligentEMS anticipates that the trend will continue through 2003 with projected run rates above $36 million.

“Our growth for the year 2002 is coming from existing customers. We are seeing modest increases in demand from most market sectors,” said Eldred.

Founded in 1978, the Florida operation previously did business as NRT Contract Manufacturing before it was acquired by a MercuryEMS company, Midwestern Electronics, in December 1998. Chris Eldred, who had served as president of NRT, was retained as president to run the Florida unit under MercuryEMS.

TeligentEMS is held by a group independent investors.

A second new player, TotalEMS, came from the failure of Controls/inc., an EMS company in Logansport, IN. Again, new owners acquired assets of the old company from its bank.

Newly formed TotalEMS has taken possession of the 72,000-ft2 facility in Logansport formerly operated by Controls/inc. The new company employs about 200 people and maintains eight SMT lines. TotalEMS also has a shelter operation in Reynosa, Mexico. Annual revenue is in the neighborhood of $40 million to $50 million.

The company’s main markets are industrial, commercial, instrumentation, medical and specialty transportation. Industrial is the provider’s largest market. “And that is our focus, our mission,” said Russ Steiner, manager of marketing and new business development at TotalEMS.

The new provider is looking for projects between $1 million and $50 million. TotalEMS sees an opportunity in projects that are too big for small providers and too small for the large players.

“We retained all of the customer base we desired to and have several new accounts this spring,” Steiner noted. “We have a lot of NPI going on right now. There will be several new launches this summer.” With just a dozen customers, TotalEMS looks for strategic partnerships as opposed to bidding on every order.

“We’re going to be a consolidator in the industry,” said Steiner. “We’re going to be looking to grow through acquisitions,” he added.

A group of private investors including the major shareholders of VisionTek (Gurnee, IL) acquired the assets of Controls/inc.

The downfall of Controls/inc. resulted from the poor business conditions of last year and the loss of about one quarter of the company’s revenue in about six weeks. That loss was associated with a single customer.

Small CM Thinks Big

Conventional wisdom says small providers can’t play in the global manufacturing game. But don’t tell that to Integrex. The Bothell, WA-based provider has launched its Global Initiative to offer manufacturing and distribution options overseas.

Integrex intends to partner with EMS providers in global markets, and its initial emphasis will be on Europe. “We’re looking for a global manufacturing partner initially for Europe,” said Ted Volberding, Integrex’s chief technology officer and a founder. He added that the partner being looked at for Europe also has some Asian factories. Integrex expects to name its first partner before the end of Q2.

Integrex’s customer base consists of both emerging technology companies in networking and telecom infrastructure as well as established high-mix medical and industrial accounts. Because of their volumes, many of these OEMs have not previously had access to the potential benefits of overseas manufacturing, reports Integrex.

“By extending our flexibility and responsiveness globally, Integrex is offering low-volume OEMs strategic business options formerly only available to high-volume producers. This type of innovative service offering is particularly valuable to many Northwest industries because of the types of products they produce,” stated John Carleton, who recently succeeded Volberding as CEO of Integrex.

A full-service provider, Integrex has the ability to assemble and test highly complex PCBs. With about 90 to 100 employees, Integrex reports its sales are up over last year and on plan for Q1. The company was founded in 1999.

Integrex is not the first provider to come up with this strategy for gaining global reach. Xetel (Austin, TX) announced a global alliance of six providers last year (Nov. ’01, p. 8). And earlier this year, Sweden’s NOTE AB and Sanmina-SCI signed an agreement that allows for production transfers between the two providers.

People on the move…Flextronics has named Michael McNamara as COO…Craig London has joined Solectron as president of its Technology Solutions unit to replace Ajay Shah, who was elected to Solectron’s board. London, who most recently served as managing director of technology products for Safeguard Scientifics, is also an executive VP of Solectron. Within Technology Solutions, Iain MacKenzie has been promoted to president of SMART Modular Technologies, and Paul Mercadante has moved up to president of Force Computers….Reptron Electronics (Tampa, FL) has made Bonnie Fena president of its Reptron Manufacturing Services (RMS) division. She had served as president of the RMS operation in Hibbing, MN. In addition, three executives of the Hibbing facility will assume corporate-level VP positions at RMS. They are Charlie Crep, VP of Hibbing operations; Jake Dungan, VP of finance and administration at Hibbing; and Steve Johnson, VP of facility engineering and technical services. Also, Mike Walsh has been appointed national sales manager for RMS….SMTEK International (Moorpark, CA) has promoted Edward Smith to president and CEO. He joined the company as VP of business development in January after leaving Avnet. Smith replaces Gregory Horton who resigned to pursue other interests….Saturn Electronics & Engineering (Auburn Hills, MI) has hired Peter Scheffler as COO. He came from Sanmina-SCI, where he spent over eight years as a senior VP with the former SCI….Ionics EMS (Makati City, Philippines), an MMI Top 50 provider, has appointed Jan Doude Doets as president and COO. He is a veteran of Philips Electronics….Michael Degen will serve as the interim president and CEO of Nortech Systems (Wayzata, MN) following the unexpected death of Quent Finkelson. Degan, a Nortech director, is a senior manager with SSI Worldwide, a consulting company….Creation Technologies (Vancouver, BC, Canada) has appointed Arthur Tymos as COO. Tymos, who has been a director on Creation’s board, most recently served as VP and CIO for TELUS Corp. He will play a key role in the company’s efforts to expand into the Northeastern and Central US. “To meet our aggressive growth targets, we’ll be investing significantly in the US market – combining a targeted sales effort with a plan for strategic acquisitions,” stated Geoff Reed, Creation’s president….Gary Lehren has been promoted to president of Ayrshire Electronics (Fayetteville, AR), formerly Baldwin Contract Electronics. Ayrshire’s owner, Milo Bryant, has stepped down as president, but will continue as chairman….Greg Wilemon has joined XeTel (Austin, TX) as VP and CFO. He comes from Tufco Technologies….LaBarge (St. Louis, MO) has named Vernon Anderson VP of operations for its contract manufacturing business to succeed Harvey Baker, who has taken the new position of VP of enterprise systems.

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Copyright 2002 JBT Communications. Unauthorized distribution is prohibited.

MMI April 2002

MMI June 2002

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