'How flexible can you be?'.

There's timing, and then there's timing. Led by a management group and a healthy investment from KPS Special Situations Fund, a New York investment group, Speedline Technologies bought itself out from Cookson Electronics in 2000 for an estimated $10 million plus other considerations. Fast forward to today: Hoover's estimates Speedline's 2005 revenue at $118 million, and the company acknowledges topline growth of 65% last year. The company is now betting on a new high-end screen-printer platform. President Pierre de Villemejane spoke with CIRCUITS ASSEMBLY'S Mike Buetow in February (see full text at circuitsassembly.com/cms/content/view/1275/154/).

CA: Looking at 2005 in general, what gets you excited?

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PV: It's really the year of lead-free implementation. Some have started, but really I think 2005 is when people will make the jump, and that's obviously going to be a good trend, at least for suppliers. It's a painful trend for the whole industry, because it's going to cost more, and I don't think everyone has a full understanding of the process issues related to lead-free manufacturing and the implications--some do, but there are still quite a few people that are new to that technology.

The other thing that excites me is that most of our customers are focusing more on technology. It's because of some of the new technology trends, versus what we saw in the downturn, [when the situation] was, "Give me a low cost, low price solution to do the job." It's driven by OEMs, not contract manufacturers. Some of the top OEMs in telecom and consumer electronics are really pushing for new technologies and the next step in performance, which is great: it's more exciting to work on that than just reduced cost solutions. It wasn't something we were seeing last year.

CA: Where are the potential pitfalls?

PV: An event that could impact the world economy. The concern is that it's nothing you can control, and if, God forbid, it happens, you'll have to react accordingly. Specific to the industry, it's still early to see whether it will be a growth year. We believe there will be growth for us because of the new products and lead-free. I don't see 25% growth, but I don't see a major downturn.

CA: What indicators or benchmarks can Speedline use to predict its performance?

PV: We use the typical indicators, semiconductors for example, because they have an impact, particularly units, in how we are going to grow. We look at PCBs being manufactured. We look at capex spending. We track key OEMs--that's probably the best way to know what's going to happen. We track global phone manufacturing because that's a big portion of our business ... there are so many parameters. One that took us by surprise in 2001-03 was the used equipment available; that's a dying factor now. We are struggling to find used equipment to refurbish.

CA: Which quarter do you think will be the peak of the lead-free conversion?

PV: We're seeing some cyclicality in our business during the year, which we did not use to see. Now you see a soft Q1, Q2 to Q3 peak, then soft Q4. We saw that very clearly in 2004, and are seeing exactly the same thing in 2005.

CA: Do you think that's because assemblers are trying to buy equipment closer to the time it is actually needed?

PV: Definitely. For me, a trend and something to look at long-term is the speed and how quickly people can react, wherever you are in the supply chain. How flexible can you be? People want to take less and less risk. They try to shrink lead times as much as possible. They want more efficiency, which means less inventory in the pipeline.

CA: Do you have any sense how much companies are trying to retrofit soldering equipment?

PV: Quite a bit. Some models can be upgraded fairly quickly and easily, and some are thinking: "Let's see if that lead-free thing is going to stick or not, and if I can get away with spending a few thousand dollars instead of buying a new machine." We are able to retrofit most of our machines. It's the solder pot and the nozzle that need to be changed, and if you can do that there's great potential for retrofits.

CA: For OEMs that contract heavily, what's your sense of how the equipment buying decision is made?

PV: It's funny, and this may change, but they've left total flexibility to the contract manufacturer, which it absolutely not the case with material. Nokia specs its paste and you cannot deviate from that. Same thing with underfill, components. Most of the time that's specified. But not equipment. The OEMs still have NPI centers to test the equipment. In one instance--a consumer electronics company--we were able to help on the process side, and they spec'd in our machine for all their contract manufacturers. That's a great position to be in, so we're obviously trying to do more of that.

I think OEMs also want to have the opportunity to change from one contract manufacturer to another, so the less tie they have, the more flexible they can be.