Hard lessons learned: a March earthquake. September floods. Social unrest. Throughout 2011, upheaval was in the air.
In what will remain a year for the books, an earthquake and subsequent tsunami hit northeastern Japan, wiping out scores of manufacturing plants and other business, and leaving painful images of the dead. But in what turned out to be Japan's finest hour, the nation recovered quickly, with most multinational business back to normal within two quarters. Thailand wasn't so fortunate. Plants there took such a drubbing that it could be a year before they are usable again. Worse, the repeat disasters had decision-makers rethinking their supply-chain plans.
Had it not been for the weather, the story of the year would have been Elcoteq. Once a top 5 EMS company, the onetime main supplier to Nokia found the competition from Foxconn too much to overcome. It saw sales and profits spiral down over a five-year span, then finally declared bankruptcy last fall, shuttering or selling all but four of its 13 manufacturing sites.
Watching, and perhaps learning from, Elcoteq's mistakes, No. 2 Flextronics bailed from the price-sensitive PC assembly space in 2011. Having just formally entered the PC production business in 2008, Flextronics quickly grew that segment to $4 billion in annual revenue, only to see margin erosion threaten to wipe out the company's profits. Competing in a commodity space works only for the largest player, it seems.
Speaking of the largest player, Foxconn (who else?) in 2011 continued its long reign at the top of the pile. It seems hard to imagine, but 10 years ago, Foxconn trailed Flextronics, Solectron, Sanmina-SCI and Celestica in annual revenues. Still, cracks in its formidable armor began to show. Dinged by government-mandated wage hikes, Foxconn has moved much of its reportedly 800,000-man workforce inland, leaving its Shenzhen campus to Apple (more on that in a moment). Worldwide social pressures shone an uncomfortable spotlight on Foxconn, where a blitzkrieg of worker suicides, plant explosions, inflammatory statements (and, perhaps, just a little bit of Apple fatigue) put the firm squarely in the crosshairs of the mainstream media, not to mention several workers' rights NGOs. In response, Foxconn intimated plans to automate a number of its operations with robots.
Upheaval. An army of robots would have made no difference in Thailand, which was turned upside down when fall floods like none seen in the country in 50 years soaked the nation for the better part of two months. No EMS company was decimated more than Fabrinet, No. 19 on the 2010 list and headed for an even higher ranking. High waters breached two of its facilities, rendering one permanently closed and taking the other offline for months. Others that felt the impact in Thailand included No. 6 Cal-Comp, No. 7 Benchmark, No. 42 Hana Microelectronics and No. 47 SVI Public Co.
No. 14 Beyonics also was hit hard by the Thailand floods. Having seen sales fall about 15% over the past two years, and in the midst of five straight unprofitable quarters, the Singapore-based firm in October announced plans to go private. (The company should know something about going private; its founders came from Flextronics, which did the same thing in 1987 before relisting in 1991.)
In the aftermath of Japan and Thailand, certain OEMs and EMS companies are rethinking their supply chains. No. 3 Jabil already has made clear it wants to navigate away from the all-in-one industrial parks--where suppliers sit almost on top of each other--so characteristic of the Pacific Rim. Moreover, as companies become more aware of time-to-market and the amounts of capital tied up in product in transit from distant lands, a trend is emerging toward positioning production closer to the point of end-use, a phenomenon known in the US as "reshoring." Social pressures, accented by the long and loud protests over alleged worker exploitation that have landed Foxconn (and its leading customer, Apple) on the front page of The Wall Street Journal for all the wrong reasons, are also leading assemblers to contemplate not just higher but politically safer ground.
As usual, major mergers and acquisitions changed the face of the Top 50 list. No. 21 OnCore Manufacturing, a major defense and aerospace supplier, acquired Victron in what was essentially a merger of financial equals. No. 31 Ducommun made the biggest splash in its 157-year history, acquiring LaBarge in June to form a defense electronics powerhouse. No. 16 AsteelFlash bought Catalyst EMS. (Just after the year ended, No. 8 Plexus announced a deal to acquire Kontron Design Manufacturing Services in Penang.)
Falling off the list was EPIQ, which sold a total of five plants in Bulgaria, Czech Republic and Mexico to No. 25 Integrated Microelectronics Inc. Also departing was Surface Mount Technology Holdings (No. 45 in 2010), the Hong Kong-based EMS firm that endured a painful reorganization in 2011. Revenue plunged 38% year-over-year to about $177.6 million. Suffering a similar fate is former Top 50 mainstay Simclar, which has seen sales fall from a high of $400 million in 2006.
Joining the list were several large flex circuit companies whose EMS revenues were previously not properly accounted for. Most flex PCB fabricators also perform assembly, and it is difficult to get an accurate reading of the value of the bare board from the finished assembly. However, based on data from IPC and others, bare flex circuits comprise roughly 40% of the shipment value. Based on such estimates, No. 12 Nippon Mektron (which has at least IT plants that perform SMT assembly) and No. 28 MFLEX are now represented in the Top 50.
Whither Kaifa? Not making the list: Sichuan Changhong Electric, a huge Chinese entity (35,000 employees) that makes TVs, white goods and other components. While it builds product for several brand name Japanese OEMs, it was impossible to determine just what its EMS/ODM sales were in 2011. Same goes for Aeroflex. We also left off ODMs such as Qisda, Corn-pal, Wistron, BenQ, and others that are essentially OEMs.
Should Shenzhen Kaifa Technology be included in EMS rankings? It's not an easy question to answer. On revenue alone, perhaps: Kaifa, as the company is known, had sales of over $4 billion last year. Using that gross number would place it squarely between Sanmina-SCI and Cal-Comp in the Top 10.
But there's more to it than that. Kaifa generates an extraordinary amount of its revenue from making and selling hard disk drives to Seagate. In fact, under most classifications, Kaifa would rank as an ODM, and not just of printed circuit board assemblies.
Then there's the confusion of what, exactly, "Kaifa" is. The company, which is supposedly traded under the ticker symbol 00021 on the Shenzhen Exchange, has no current listing. However, it is also apparently a subsidiary of China Electronics Corp.
CEC is giant. The conglomerate says its annual revenues topped S8 billion back in 2006, and it employs more than 70,000 workers across some 61 subsidiaries, including 13 listed holding companies. Among them are cellphone and datacom OEM Panda Electronics, computer and TV manufacturer Greatwall Technology, and yes, Kaifa.
It also is state-owned, and operates directly under the administration of China's central government. Forget, for the moment, how strange it is for what is essentially a government entity to be publicly traded. Consider instead whether a government business can be considered a contract manufacturer, especially in China, where the Communist Party still holds sway over most economic policy and can pick the winners and losers at the drop of a hat. Want to get a government contract? Use a government provider. It becomes hard to distinguish between what is competitive bidding and what is political.
Then there's the matter of CEC's financials. They are dense, to be sure. It's hard to tell what revenue comes from external customers and what is just "padding" from its own pyramid. Among those that can be discerned, Greatwall alone made up $1.6 billion in revenue in 2010. Read the fine print and you'll see the company has several "deals" in place to buy components and services from other CEC subsidiaries.
So should Kaifa be listed on the Circuits Assembly Top 50? Because it is next to impossible to know what its true revenue from EMS-related activities is, we say no, while respecting the decision of others to disagree.
EMS is a lopsided business. The Circuits Assembly Top 50 make up about 87% of the total revenues of the entire electronics outsourcing industry, although that figure admittedly includes a fair percentage of revenue that would properly be classified as ODM work. The industry as a whole reached about $205 billion in sales last year, according to IHS iSuppli. (The research firm predicts industry revenue to be flat in 2012.)
The US continues to dominate the Top 10 list, with five of the top eight entries, although we are seeing some minor shifts take place (TABLE 3). Regionally, the Top 50 remain intact, led by Southeast Asia (16 entries), North America (15) and Europe (12). Japan gained two entries, a reflection of heretofore unacknowledged EMS work. Notable for its lack of entries is Russia, which almost certainly has domestic firms that would qualify, and whose electronics assembly industry was forecast to reach $ 14 billion in 2010 (55% of which was industrial or military). While changes in the rankings have been most common in the middle to lower half of the list, a few firms are threatening to shake up the top. Given their organic growth and acquisition strategy, respectively, Zollner and AsteelFlash look like good bets to break into the Top 10, should any of the current leaders falter.
TABLE 1. Currency Conversions
= 0.762613 euros
= 0.63738 British pound
= 6.56100 Chinese RMB
= 7.75637 Hong Kong dollars
= 222.241 Hungarian forint
= 82.4575 Japanese yen
= 3.01050 Malaysian ringgits
= 5.59383 Norwegian kroners
= 1.25386 Singaporean dollars
= 6.79566 Swedish kronors
= 29.51 Taiwanese dollars
= 30.557 Thai baht
TABLE 2. The Circuits Assembly Top 50 EMS Companies, 2011 RANK COMPANY NATIONALITY 2011 URL REVENUES (USSM) 1 Foxconn Taiwan $93,100 foxconn.com Electronics (1), (2) 2 Flextronics (1), US S$27,450 flextronics.com (3) 3 Jabil Circuit (1) US $16,760 jabil.com 4 Celestica (1) Canada $7,210 celestica.com 5 Sanmina-SCI (1), US $6,040 sanmina-sci.com (4) 6 Cal-Comp Thailand $4.469 calcomp.co.th Electronics/Kinpo Electronics (1), (5) 7 Benchmark US $2,300 bench.com Electronics (1) 8 Plexus (1) US $2.195 plexus.com 9 SIIX (1) Japan $2,035 siix.co.jp 10 Universal Taiwan $1,953 usi.com.tw Scientific Industrial Co. (USI) (1) 11 Venture Corp. (1), Singapore $1,940 venture.com.sg (5) 12 Nippon Mektron Japan $1,390 mektron.co.jp (1) 13 Zollner Germany $1,255 zollner.de Elektronik (E) 14 Beyonics Singapore $929.1 beyonics.com Technology (1), (5) 15 UMC Electronics Japan $840 (E) umcxo.jp 16 AsteelFlash Group France $780 asteelflash.com 17 Global Brands Taiwan $690.8 gbm.com.tw Manufacture (1) 18 Fabrinet (1) US $668.1 fabrinet.com 19 Kimball US $653.9 kimball.com Electronics Group (1) 20 Sumitronics Japan $650 (E) stimitronics.co.jp 21 On Core US $640 (E) oncorems.com Manufacturing 22 Nam Tai China $602.3 namtai.com Electronics (1) 23 Elcoteq (1), (6) Luxembourg $600 (E) elcoteq.com 24 Creation Canada $547 creationtech.com Technologies 25 Integrated Philippines $501.5 imiphil.com Microelectronics Inc. (IMI) (1), (7) 26 3CEMS Group (FIC China $500 3cems.com Group) 27 Enics Switzerland $499.4 enics.com 28 MFLEX US $497.8 mflex.com 29 Eolane France $476 eolane.com 30 Di-Nikko Japan $466.6 dne.co.jp Engineering (1) 31 Ducommun LaBarge US $452.3 labarge.com (1) (E) 32 Videoton Holding Hungary $450 videoton.hu (1) 33 VTech Hong Kong $419.6 vtechems.com Communications (1) 34 Wong's Hong Kong $380 wongswec.com Electronics/WKK Technology (1) 35 Neways Electronics the $372.2 neways.nl (1) Netherlands 36 Topscom Precision Hong Kong $350 (E) topscom.com.cn Industry 37 VS. Industry (1) Malaysia $353.2 vs-i.com 38 Alco Electronics Hong Kong $342.5 alco.com.hk (1), (5) 39 Selcom Italy $316.4 selcomgroup.com (E) 40 PartnerTech (1) Sweden $328.5 partnertech.se 41 Computime Ltd. Hong Kong $321.1 computime.com (1), (5) 42 Hana Thailand $320.1 hanagrovip.com Microelectronics (1) 43 CTS Electronics US $308.7 ctscorp.com Manufacturing Solutions (1) 44 Kitron (1) Norway $296.1 kitron.com 45 Key Tronic EMS US $283.7 keytronic.com 46 SRI Radio Systems Germany $283 sri.de 47 SVI Public Co. Thailand $278.3 svi.co.th 48 Scanfil (1) Finland $276.3 scanfil.fi 49 MC Assembly US $258 (E) mcati.com 50 Fittec Hong Kong $233.9 fittec.com.hk International (1) RANK COMPANY NOTES 1 Foxconn NGO hackiash Electronics (1), takes shine (2) off iPad maker 2 Flextronics (1), Exits ODM PC (3) biz, reducing consumer exposure 3 Jabil Circuit (1) Biting off more of Apple 4 Celestica (1) Quietly demonstrating technical and financial excellence 5 Sanmina-SCI (1), Two straight (4) growth years 6 Cal-Comp Elbowing into Electronics/Kinpo N. America Electronics (1), (5) 7 Benchmark Thailand Electronics (1) floods proved finest hour 8 Plexus (1) Coke eases networking volatility 9 SIIX (1) Partnering in US; expanding in Indonesia 10 Universal Now owned by Scientific ASE Industrial Co. (USI) (1) 11 Venture Corp. (1), Took a 9% (5) sales rutin 2QU 12 Nippon Mektron 11 flex (1) circuit plants worldwide 13 Zollner Expanding in Elektronik style in US 14 Beyonics Being taken Technology (1), private (5) 15 UMC Electronics Will be Japan's third billion dollar EMS 16 AsteelFlash Group Acquisitions, not market, will drive 2012 growth 17 Global Brands Also a top 10 Manufacture (1) bare board fabricator 18 Fabrinet (1) Bangkok flooding washed out profit streak 19 Kimball Feeling pinch Electronics Group from medical, (1) industrial drops 20 Sumitronics Sumitomo subsidiary 21 On Core Victron deal Manufacturing doubled its size 22 Nam Tai Gov't delaying Electronics (1) China expansion 23 Elcoteq (1), (6) Total collapse 24 Creation Has never Technologies closed a facility 25 Integrated Acquisitions Microelectronics boosting Inc. (IMI) (1), growth (7) 26 3CEMS Group (FIC Lite-On's Group) biggest supplier 27 Enics Expanding in Suzhou 28 MFLEX Apple in their eye 29 Eolane Picked up Elcoteq Tallin 30 Di-Nikko Expanding in Engineering (1) Japan 31 Ducommun LaBarge Estimates $80M (1) from LaBarge in Q2 32 Videoton Holding Pride of (1) Eastern Europe is big in automotive 33 VTech EMS division Communications supplanting (1) phone biz 34 Wong's Solid year in Electronics/WKK China Technology (1) 35 Neways Electronics Upgrading SMT (1) lines and test capabilities 36 Topscom Precision Networking Industry EMS; hard to pin down numbers 37 VS. Industry (1) Under the radar, but customers everywhere 38 Alco Electronics Heavily vested (1), (5) in Blu-ray 39 Selcom Will Italy's dive bring it down too? 40 PartnerTech (1) Q4 rescued year 41 Computime Ltd. White goods (1), (5) maker 42 Hana EMS now60% of Microelectronics sales; also IC (1) assembly/test 43 CTS Electronics Fires in Manufacturing Scotland, Solutions (1) floods in Thailand 44 Kitron (1) Slow Q3 couldn't derail Kitron 45 Key Tronic EMS 31 straight quarters of profitability 46 SRI Radio Systems Former Siemens unit spun off in 1997 47 SVI Public Co. Floods marred rebound 48 Scanfil (1) Went public Jan. 1,2012 49 MC Assembly Forecast 20-25% growth in 2012 50 Fittec Loss of International (1) Toshiba biz brutal Notes:. E = Estimate. (1.) Publicly held. (2.) Includes ODM work; excludes $1.3 billion m PWB sales (3.) Includes ODM work; excludes S2 billion in PWB/component sales (4.) Excludes S400M in PWB sales (5.) Based on four quarters ended Sept. 31. (6.) H1 S487.2M, rest estimated (7.) Excludes S74M from PSI Technologies TABLE 3.Top 50 Entries by Nation US 13 Hong Kong 6 Japan 5 Thailand 3 Taiwan 3 Canada 2 China 2 Singapore 2 France 2 Germany 2 Finland 1 Hungary 1 Italy 1 Luxembourg 1 Malaysia 1 Netherlands 1 Norway 1 Philippines 1 Sweden 1 Switzerland 1
MIKE BUETOW is editor in chief of CIRCUITS ASSEMBLY.
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|Title Annotation:||EMS TOP 50|
|Publication:||Printed Circuit Design & Fab|
|Article Type:||Company overview|
|Date:||Apr 1, 2012|
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