Manufacturing Market TM

INSIDERinside the contract manufacturing industry Vol. 18, No. 9 September 2008

First-Half Tally for 31 Large Contract Manufacturers

When results of 31 large contract Table 1: First-Half Results by Outsourcing Groups in M US$ manufacturers were rolled up in U.S. Q1-2 Q1-2 Net No. of Q1-2 '08 Q1-2 '07 % % dollars, their first-half 2008 sales grew EMS Group '08 net '07 net mar- cos. sales sales chg. chg. by a collective 21.9% (Table 1). Os- profit profit gin tensibly, that’s a pretty fair showing in A72sia-listed 350,87 245,63 270. 16,06 11,13 -56. 3. spite of an anemic U.S. economy. But E66urope-listed 34,71 31,37 1)0. ()9 (A55 N2-0. this calculation does not necessarily U73S-listed 392,27 285,64 275. 243 226 -710. 0. reflect market reality. Two factors are Combined 20 66,861 54,658 22.3 1,295 1,345 -3.7 1.9 driving a wedge between computed EMS growth and what actually happened in O1DM Group 11513,61 434,19 241. 13,52 14,39 98. 2. the market. The first is Flextronics’ Total/avg. 31 120,472 98,849 21.9 2,819 2,738 3.0 2.3 64.0% first-half growth rate that was Table 2: First-Half Results by Outsourcing Groups in M US$, made possible by its acquisition of Adjusted for Solectron Sales and Net Income in 2007 Solectron. As MMI pointed out last Q1-2 Q1-2 No. of Q1-2 '08 Q1-2 '07 % % month, this rate does not include EMS Group '08 net '07 net cos. sales sales chg. chg. Solectron’s sales for the first half of profit profit 2007 (Aug., p. 4). When an estimate of A72sia-listed 350,87 245,63 270. 16,06 11,13 -6. Solectron’s sales for the period ($5.89 E66urope-listed 34,71 31,37 1)0. ()9 (A55 N billion) is plugged in, calculated U73S-listed 352,27 ~331,53 ~72. 213 ~29 ~-18.6 growth falls to 15.0% (Table 2). Combined 20 66,861 60,544 10.4 1,295 1,372 -5.6 Secondly, a weakening U.S.dollar EMS introduced some inflation in growth O1DM Group 11513,61 434,19 241. 13,52 14,39 9. rates when revenues of Asian and Eu- Total/avg. 31 120,472 104,735 15.0 2,819 2,765 2.0 ropean companies were converted to cannot be said for their combined net When an estimate of Solectron’s first- U.S. dollars. This distortion, which profit. Total net profit, as expressed in half 2007 net income ($27 million) could be up to a few percentage U.S. dollars, rose 3.0% (Table 1). was added in, the net profit increase points, further reduces the overall growth rate. MMI concluded that the Some articles in this issue market growth represented by these 31 companies was below 15% in the first Cover story...... 1 half, but certainly still in double digits. First-half results are rolled up for 31 contract manufacturers. The 31 contract manufacturers in this tally consisted of 20 EMS provid- New Green Niches...... 4 ers and 11 ODMs, accounting for first- Said To Be Shopping Factories...... 4 half sales of $120.5 billion. Elcoteq Acquires TV Operation from ...... 5 Although the 31 contract manufac- Kimball Adds Florida Provider...... 6 turers together achieved double-digit Creation Buys Circuit Service and Its China Unit...... 6 sales growth in the first half, the same First Half

Table 3: Six-Month 2008 GAAP Results for Seven side, not a surprising Table 4: Rough Estimate of Six- Large EMS Providers, US Traded (M$ or %) result. Month Growth Adjusting for Company Q1-2 Q1-2 Solectron Sales in 2007 Q1-2 '08 Q1-2 '07 Yr.-yr. Of the $66.9 billion (in order of '08 net '07 net Company Yr.-yr. sales sales chg. in EMS group sales for Q1-2 '08 Q1-2 '07 6-mo. sales) inc. inc. (in order of chg. the first half, Hon Hai sales sales F6lextronics 186,125. 90,833. 654. 367. 227. 6-mo. sales) Precision Industry and 6,146.9 5,936.8 3.5 14.4 20.1 Flextronics + Flextronics represented 1*6,125.6 ~615,720 ~2. S7anmina-SCI 33,720. 35,461. 7). (9.1 (53.7) Solectron 63%. When they are 3,712.0 3,779.3 -1.8 69.6 (53.5) Jabil 6,146.9 5,936.8 3.5 excluded, composite B7enchmark 18,366. 14,508. -19. 455. 50. S7anmina-SCI 33,720. 35,461. 7. growth for the other 18 Plexus 907.4 739.8 22.7 39.5 25.7 Celestica 3,712.0 3,779.3 -1.8 providers drops to 5.4%. N3am Tai 2493. 3789. -224. 420. 47. B7enchmark 18,366. 14,508. -9. Tables 3 and 4 re- T6otal/avg. 322,272. 285,649. 225. 2937. 263. Plexus 907.4 739.8 22.7 prise first-half results N3am Tai 2493. 3789. -24. slipped to 2.0% (Table 2). Even this published last month for the U.S.-trad- T6otal/avg. 352,272. ~331,53 ~2. number probably includes some U.S.- ed EMS providers, with Table 4 add- * Estimate combines Flextronics' sales for the dollar induced inflation. The EMS ing in an estimate of Solectron’s quarters ended March 31 and June 29, 2007 group saw its total net profit nominal- first-half revenue for 2007. Tables 5 with Solectron's sales for the quarters ended ly decline by 3.7% from the year-ear- through 8 on pages 2 and 3 present March 2 and June 1, 2007. lier period (Table 1) or by 18.6% with first-half results for the large EMS U.S. Federal Reserve. Due to the de- the Solectron adjustment (Table 2). In providers listed in Asia and Europe. clining value of the U.S. dollar, growth contrast, the ODMs produced an over- Results are tabulated in both the com- rates went up by varying amounts all profit increase of 9.4%. Overall net panies’ reporting currencies and U.S. when reporting currencies were con- margin for the 31 companies in the dollars. Results in non-U.S. currencies verted to U.S. dollars. To the extent first half stood at 2.3%. Net margin were converted to U.S. dollars by us- that companies’ manufacturing con- for the ODM group was 90 basis ing six-month averages for 2008 and tracts were based on U.S. dollars, this points higher than that of the EMS 2007 based on monthly data from the is not a distortion. Companies that Table 5: First-Half Results for Seven Asia-Based Table 7: First-Half Results for Six European EMS Providers in M US$ EMS Providers in M US$ Q1-2 '08 Q1-2 '07 Yr.- Q1-2 '08 Q1-2 '07 Q1-2 '08 Q1-2 '07 Yr.- Q1-2 '08 Q1-2 '07 Company Company sales sales yr. % net profit net profit sales sales yr. % net profit net profit H1on Hai 286,18 261,53 241. 970 94 E7lcoteq 24,77 28,55 8). ()39 (90 Cal-Comp 1,578 1,236 27.7 39 40 PartnerTech 213 197 8.4 (1) 5 V8enture 11,37 17,29 68. 889 K3itron 231 106 311. 16 USI 1,127 891 26.4 29 27 Neways 199 184 8.0 3 10 S0MT 261 189 6). (43 S6canfil 186 174 152. 18 Wong's Intl. 203 211 -3.7 3 3 NOTE 146 129 13.4 3 6 J6urong 119 287 -7727. 1 T6otal/avg. 34,71 31,37 1)0. ()9 (55 T2otal/avg. 350,87 245,63 270. 16,06 1,13 Currencies converted to US$ using 6-month averages based on Currencies converted to US$ using 6-month averages based on monthly 2008 and 2007 data from the US Federal Reserve. monthly 2008 and 2007 data from the US Federal Reserve.

Table 6: Q2 2008 and Six-Month Results for Seven Asia-Based EMS Providers Yr.- Q2 '08 Q2 '07 Yr.- Home Cur- Q2 '08 Q2 '07 Q1-2 '08 Q1-2 '07 Yr.-yr. Q1-2 '08 Q1-2 '07 Company yr. net net yr. base rency sales sales sales sales chg. net profit net profit chg. profit profit chg. Hnon Hai T$aiwa M**3NT 8711,03 7011,25 184. 218,00 341,26 -10. Cal-Comp Thailand M Baht 26,466 19,815 33.6 622 618 49,879 41,042 21.5 1,239 1,328 -6.7 Veenture S$ingapor K6S 9372,50 12,004,65 -53. 625,63 748,66 15,911,64 11,973,55 -93. 1421,96 1349,37 -18. USI Taiwan M NT$ 16,694 14,735 13.3 288 394 34,900 29,439 18.5 895 905 -1.2 SgMT H$ong Kon K5HK 8367,04 8116,84 6). (04,799 135,41 12,634,32 16,533,37 6). (626,613 289,64 -189. Wong's Intl. Hong Kong K HK$ 1,584,063 1,648,864 -3.9 25,722 24,851 3.5 Jeurong S$ingapor K9S 1825,51 1995,96 -35. 4,110 133,895 2471,50 4514,28 -834. 93,85 206,67 -63. * Not available for comparison.

2 Manufacturing Market Insider, September 2008 Table 8: Q2 2008 and Six-Month Results for Six European EMS Providers Q2 '08 Q2 '07 Cur- Q2 '08 Q2 '07 Yr.-yr. Q1-2 '08 Q1-2 '07 Yr.-yr. Q1-2 '08 Q1-2 '07 Ceompany Home bas net net rency sales sales chg. sales sales chg. net profit net profit profit profit Eglcoteq LRuxembour M8EU 9304. 9668. -)6. ()13.7 (620.6 18,813. 16,920. -)5. ()25.3 (67.5 PartnerTech Sweden M SEK 694.7 683.1 1.7 3.7 16.0 1,306.7 1,365.3 -4.3 (6.1) 34.3 Kyitron NKorwa M3NO 6513. 5110. 220. 471. 149. 12,108. 9396. 171. 555. 34. Neways Netherlands M EUR 130.0 138.6 -6.2 1.9 7.8 Sdcanfil FRinlan M7EU 598. 538. -20. 62. 37. 1108. 1211. -82. 93. 6. NOTE Sweden M SEK 469.2 470.2 -0.2 8.2 22.4 896.5 895.2 0.1 15.7 38.4

Table 9: Consolidated First-Half Results for Ten Large Taiwan-Based ODMs in Millions of NT$ (or %) Q1-2 '08 Q1-2 '08 Q1-2 '07 Q1-2 '07 Q1-2 '08 Q1-2 '08 Q1-2 '07 Q1-2 '07 Q1-2 Q1-2 Q1-2 '08 Q1-2 '07 Yr.-yr. Company gross gross gross gross oper. oper. oper. oper. '08 net '07 net sales sales chg. profit marg. profit marg. profit marg. profit marg. profit profit Q0uanta 4917,37 3916,34 321. 232,00 58. 167,63 52. 94,82 29. 87,49 28. 96,03 7,64 Asustek 345,700 370,003 -6.6 38,872 11.2 33,326 9.0 11,518 3.3 14,490 3.9 12,874 13,577 C3ompal 2826,76 2227,27 -40. 185,40 68. 165,06 64. 86,17 37. 93,83 44. 62,42 5,85 178,894 109,882 62.8 11,010 6.2 7,346 6.7 3,627 2.0 2,934 2.7 3,107 2,451 I3nventec 1249,63 1415,59 249. 65,70 42. 63,12 52. 19,30 03. 13,52 14. 14,96 2,52 Innolux 86,097 68,542 25.6 10,596 12.3 7,734 11.3 7,035 8.2 5,358 7.8 6,770 4,500 M8iTAC 332,50 483,20 -624. 45,71 194. 68,39 164. 748 28. 24,34 54. 13,20 2,41 Inventec 39,057 39,613 -1.4 4,442 11.4 4,336 10.9 1,473 3.8 1,946 4.9 1,420 1,581 Appliances Compal Com- 127,629 256,49 -633. 19,74 91. 25,79 180. 317 29. 10,57 65. 720 2,14 munications Ability 15,378 16,984 -9.5 1,365 8.9 2,093 12.3 663 4.3 1,333 7.8 700 1,055 Enterprise T9otal/avg. 18,509,02 11,333,93 173. 1716,85 73. 1702,85 78. 404,77 37. 479,84 36. 414,20 43,74 Net profit represents consolidated net income attributable to the parent company. were paid in U.S. dollars actually gave bal analysis, company results must be over year in NT dollars, net profit rose up some revenue growth in the first expressed in the same currency. by just 1.1%. Table 10, which lists half when payments were converted to First-half results native currencies. But in general, U.S.- for 10 large ODMs Table 10: First-Half Results for 11 ODMs in M US$ Q1-2 '08 Q1-2 '07 Yr.- Q1-2 '08 Q1-2 '07 dollar conversion did inflate growth based in Taiwan Company rates where contracts were not trans- appear in Table 9. sales sales yr. % net profit net profit Q3uanta 193,47 96,57 420. 229 23 acted in U.S. dollars. Growth inflation Although their Asustek 11,160 11,204 -0.4 416 411 most likely was greatest with European first-half sales in- C0ompal 72,32 64,88 67. 270 17 providers. But in order to do this glo- creased 13.1% year Wistron 5,775 3,327 73.6 100 74 Chart 1: First-Half Growth Rates for Hon Hai's Consolidated Sales T8PV* 48,89 30,79 279. 986 80 Inventec 4,830 3,500 38.0 63 76 I9nnolux 26,77 29,07 393. 261 13 70 MiTAC 1,049 1,308 -19.8 39 73 60 Inventec 10,261 11,20 56. 484 Appliances 50 Grow th in NT$ Compal Com- 569 802 -29.1 23 65 40 munications Grow th in US$ Ability 4496 551 -33. 223 30 Enterprise 20 T1otal/avg. 513,61 434,19 241. 13,52 1,39 Currency converted to US$ using 6-month averages based on 10 monthly 2008 and 2007 data from the US Federal Reserve. 0 *Hong Kong-listed company reports results in US$. 6 mos. 2005 6 mos. 2006 6 mos. 2007 6 mos. 2008 Manufacturing Market Insider, September 2008 3 Table 11: Components of Hon Hai's billion, up 14.0% year over year. Ex- bulbs per month. Consolidated Sales pressed in U.S. dollars, consolidated LED lighting, which involves solid- Q1-2 '08 Q1-2 '07 Yr.-yr. sales for the period amounted to state devices, is a technology that is Sales sales sales chg. $26.18 billion, representing an in- perhaps closer to home for EMS pro- Component (M US$) (M US$) (%) crease of 21.6% from a year earlier. viders. Celestica, for example, has an Hon Hai non- 109,865 165,45 28. First-half growth rates for Hon Hai LED lighting customer, for whom consolidated have now declined three years in a row Celestica provides highly automated Inter- 41,790 43,59 4. (Chart 1, p. 3). manufacturing (July, p. 2). What’s national Holdings Hon Hai’s non-consolidated sales more, Hon Hai Precision Industry, O6ther units 17,52 19,49 1. for the first half grew by 20.6% in the world’s largest EMS provider, has Hon Hai 286,181 261,53 21. NT$ or 28.6% in US$, which were set its sights on LED lighting. Last consolidated above the corresponding increases in year, Hon Hai group subsidiaries and ODM results in U.S. dollars, includes consolidated sales. Performance of affiliates bought a 46.6% stake in an an eleventh ODM, TPV Technology, Foxconn International Holdings, LED manufacturer, Advanced Opto- which reports results in U.S. dollars. Hon Hai’s handset subsidiary, and oth- electronic Technology. Less than er Hon Hai units exerted a drag on three months later, CENS.com, a Tai- Law of large numbers may be consolidated sales growth. In U.S-dol- wan news source, reported that Hon catching up with Hon Hai lar terms, FIH’s six-month sales in- Hai had entered into an agreement to For the first half, Hon Hai, the creased by 4.3% year over year, while establish an LED manufacturing plant world’s largest EMS provider, report- other units eked out growth of 1.9% at Wuhan in China’s Hubei province. ed consolidated sales of NT$811.03 (Table 11). Not just for the big players Green Business that Flextronics expects outsourced Green business is not the exclusive production volumes to come its way. domain of the largest EMS providers. New Green Niches Flextronics is not alone in its pur- In the case of Finland’s Incap, energy suit of solar module outsourcing. efficiency is one of the company’s As the world looks for alternative Celestica is ramping business in solar three business units in a new structure sources of energy and ways to con- panels out of its facility in Spain and that went into effect this month. For serve it, green business opportunities has slated additional facilities to have customers in this unit, Incap is manu- are opening up for the EMS industry. solar module capability (July, p. 2). facturing devices and parts for genera- July’s cover story took the first stab at With these two major players engaged tors and electric motors, energy identifying these opportunities. Here’s in solar panel activity, others in the meters, power supply units, electrical an update with some new information. EMS industry have to be at least think- cabinets, and UPS inverters. The com- While the outsourcing of solar pan- ing about it. Take Sanmina-SCI. The pany believes that the energy efficien- els is in its infancy, some EMS provid- company would not comment about cy unit will produce significant growth ers want to be ready for this trend solar modules because of proprietary and profitability potential for Incap. before it’s out of diapers. For the July concerns. article, Flextronics’ president of its On the conservation side of green News industrial segment, E.C. Sykes, told business, energy-efficient lighting has MMI that photovoltaic module assem- emerged as another niche that appeals Dell Said To Be bly fit well within the company’s gen- to a growing number of EMS provid- eral manufacturing capabilities. Now ers. The latest company to enter the Shopping Factories Flextronics appears to be readying it- lighting arena is Jurong Technolo- According to a widely circulated self for production in the solar panel gies, which has formed a joint venture but unconfirmed report by The Wall arena, if a newspaper account proves with a European partner to design, de- Street Journal, Dell is looking for buy- true. This month, a local newspaper in velop and manufacture compact fluo- ers to take over Dell factories in what California, the Morgan Hill Times, rescent light bulbs for the European potentially could be one of the largest reported that Flextronics has leased and American markets. Jurong plans to 2 chunks of outsourcing ever seen by the 155,520 ft in Morgan Hill to produce invest up to $50 million over the next 2 contract manufacturing business. If “solar panel parts.” (Morgan Hill is 12 months in its new 500,000-ft facili- Dell does sell plants to contract manu- near San Jose.) Dedicating a facility of ty in Nusajaya, Johor, Malaysia, tar- facturers, the move would certainly this size for solar panel work shows geted to produce up to 50 million light

4 Manufacturing Market Insider, September 2008 News affirm Dell’s pledge to have more and business and its PBS (Philips Business its supply base. deeper relationships with EMS compa- Services) business in the Americas Philips’ FTV business already nies and ODMs under a new supply under a long-term agreement. In addi- makes extensive use of outsourcing. It chain strategy (April, p. 1). The strate- tion, Elcoteq has a long-term contract is well known that TPV and Jabil Cir- gy is part of a plan to generate $3 bil- from Japan’s Funai Electric to supply cuit assemble LCD TVs for Philips lion in annualized savings for Dell EMS to Funai’s FTV business in (Dec. 2007, p. 3). Earlier this year in over three years. North America. Under a brand licens- January, two published reports citing Dell has offered to sell its factories ing agreement implemented in August, the Chinese-language Commercial around the world to contract manufac- Funai is taking over sourcing, distribu- Times named Qisda (formerly part of tures, The Journal reported, citing tion, marketing and sales of Philips’ BenQ), Funai and China’s TCL as people familiar with the situation. An consumer TV business in the U.S. and new contract suppliers of LCD TVs unnamed source privy to Dell’s plan Canada. for Philips. told the Journal that he believes Dell Elcoteq will pay about $32 million will divest most, if not all, of its plants in cash for this acquisition, which in- More LCD TV outsourcing within the next 18 months. cludes certain fixed assets and invento- predicted Wistron is evaluating the possibili- ries of the Philips operation in Juarez. A number of Japanese and South ty of acquiring Dell’s plants, Taiwan Philips’ personnel in Juarez will go to Korean LCD TV OEMs are consider- news source CENS.com reported, cit- work for Elcoteq. The Juarez plant ing raising the level of their outsourc- ing Wistron’s chairman, Simon Lin. employs about 740 people. Elcoteq ing, market research firm iSuppli 2 As of Feb. 1, 2008, Dell occupied will lease 20,000 m of required manu- reported recently. Except for Philips, 2 3.6 million ft of manufacturing and facturing space. the other top-five LCD-TV OEMs – distribution in the U.S. and Brazil, 1.0 The provider expects that the deal Samsung, Sony, Sharp and LG – all 2 million ft of such space in Europe, will bring revenue in the range of $200 rely primarily on in-house production. 2 and 1.25 million ft in Asia. Earlier million this year, including LCD pan- But iSuppli believes that these Asian this year, the company announced it els, and $250 million in the following OEMs are looking to gain financial will close its desktop manufacturing years, excluding LCD panels. Elcoteq and operational leverage from EMS facility in Austin, TX. Besides Texas, anticipates that the deal will have a providers and ODMs. The major Dell operates plants in Florida, North positive impact on the company’s LCD-TV OEMs told iSuppli that the Carolina and Tennessee as well as home communications profitability in use of contract manufacturing could Brazil, Ireland, Poland, China, Malay- 2008. help them to improve risk mitigation sia and India. “This acquisition significantly ac- and asset flexibility during a time of As the EMS world knows, plants in celerates the development of our home economic uncertainty. high-cost areas are generally unattrac- communications business and service In keeping with this view, iSuppli tive to EMS companies. But there is offering. This deal marks our entrance predicts that contract manufacturing one exception: when the capacity into complete final assembly of FTVs, will account for 41.1% of LCD TV needs of a large contract cannot be met a strategic product segment for us revenue in 2012, up from 28.2% in without acquiring high-cost facilities. where we so far have provided printed 2007. This year, the outsourced share If a provider did entertain taking over circuit assemblies and various subas- is projected to reach 35.2%. high-cost plants from Dell, it is likely semblies to our customers,” stated Citing news in the Nikkei business that the provider would want Dell to Vesa Keränen, president of Elcoteq daily, Reuters reported last month that foot the bill for any subsequent clo- Home Communications. Sony and Toshiba plan to “sharply sures of acquired facilities. The transaction gives Elcoteq capa- increase” the percentage of their LCD bilities to offer final assembly services TVs made by Taiwanese contract man- Elcoteq Acquires TV for FTVs as well as related engineer- ufacturers. According to informa- ing and new product introduction, sup- tion published by Nikkei and reported Operation from Philips ply chain management and sourcing by Reuters, Sony’s outsourcing of Elcoteq (Luxembourg) has pur- services. LCD TV production will grow from chased Philips’ flat panel TV (FTV) Philips said the transfer of its TV 500,000 units in fiscal 2007 to over 3 assembly operations in Juarez, Mexi- assembly facility in Juarez marks an- million in the current fiscal year. The co. As part of the deal, Elcoteq will other step taken by Philips to improve Japanese paper also said Toshiba has provide Philips with manufacturing the financial performance of its TV farmed out some LCD TV manufactur- services for its Latin American FTV business through the optimization of ing to , which is

Manufacturing Market Insider, September 2008 5 News expected to produce about 20% of tions and workforce to the KEG-Tam- America. Toshiba’s LCD TVs in fiscal 2008. pa facility located less than one mile Circuit Service is described as a It is rumored (underline rumored) away from the existing Genesis facili- Top-100 contract manufacturer. The that Hon Hai Precision Industry ty. Consolidation of the two facilities company’s “similar service, technical (Tucheng City, Taiwan), the world’s is scheduled to be completed in about capabilities, profit momentum and largest EMS provider, is the beneficia- six months. growth opportunities will only serve to ry of Sony’s increase in LCD TV out- “This opportunity to combine these enhance and reinforce our existing op- sourcing, according to Nikkei. While manufacturing resources will better erations and customer offerings,” said this rumor cannot be substantiated, support the growing demand for spe- Arthur Tymos, president and CEO of Hon Hai recently bought 120 pieces of cialty medical, high-end industrial and Creation Technologies. equipment from Sony Manufacturing public safety products,” stated Don CSI’s Wheeling operation, now Systems at a cost of NT$557.1 million Charron, president of Kimball Elec- called Creation Technologies – Chica- 2 ($17.3 million), according to several tronics. go, employs 255 people in a 53,000-ft published reports. Hon Hai reported to The acquisition also enhances Kim- facility and has about 20 customers. the Taiwan Stock Exchange that Fa- ball’s service offering through the ad- The operation has served customers in nuc, a robotics company, was the trad- dition of certain after-market the Central and Eastern U.S. since ing counterpart for this transaction. refurbishing, repair and reverse logis- 1972. Employees in the Wheeling fa- Hence, the conclusion can be drawn tics capabilities. Within Genesis’ oper- cility will continue to report to James that this purchase involved robotics ations is a warranty and repair depot. Herring, CSI’s president and CEO. He equipment. Although the products to A top-20 EMS provider in 2007, will also play a key role in ensuring a be manufactured with this equipment KEG specializes in durable electronics smooth transition for both the Chicago were not disclosed, it can still be noted for the automotive, medical, industrial, and China facilities over the coming that TV assembly is well-suited to ro- and public safety markets. months. botics. The purchase price was not dis- The China facility, now called Cre- In another example of this out- closed. ation Technologies – Changzhou, is sourcing trend, news sources reported located in Jiangsu province. “This in January that Sharp was planning a Creation Buys opens up a new growth market oppor- major order for LCD TVs to be made tunity in Asia for Creation,” said Ty- by Taiwan’s contract manufacturing Circuit Service mos. “In addition, Changzhou will industry. and Its China Unit provide services to our North Ameri- can customers who have products Creation Technologies (Burnaby, Kimball Adds whose Right-Shore manufacturing BC, Canada), a Top-50 EMS provider, needs fit an Asian model.” Charles Ma Florida Provider has acquired Circuit Service, Inc. will continue as the operation’s GM, (CSI) of Wheeling, IL, and its subsid- Kimball Electronics Group (Jas- overseeing 56 people who work in the iary, Changzhou CSI, Ltd. of Chang- 2 per, IN), a subsidiary of publicly held 36,000-ft facility. It has ten custom- zhou, China. Financial terms were not Kimball International, has acquired ers. released. Genesis Electronics Manufacturing, The Chicago and Changzhou opera- The acquisition extends Creation’s a privately owned EMS company lo- tions become Creation’s tenth and footprint in the Central U.S. region cated in Tampa, FL. The acquisition eleventh facilities, or business units. and gives the Canadian company its supports Kimball’s growth and diver- With the addition of these two units, first manufacturing facility in Asia. sification strategy, bringing new cus- Creation is projecting 2008 sales of Creation said its new Asian business tomers in key target markets. $385 million. Its combined workforce unit expands the company’s Right- Offering manufacturing and repair now stands at about 2,200 people. services, Genesis recorded sales of Shore manufacturing solutions, which provide customers with local, regional about $16 million last year. The com- Joint Venture in India pany’s website lists the number of its and global solutions. employees as 100. This deal marks Creation’s sixth Jurong Technologies (Singapore), Under the terms of the deal, Kim- acquisition in the past five years. Cre- a top-20 EMS provider in 2007, and ball Electronics Group (KEG) ac- ation said the acquisition further solid- SemIndia (Bangalore, India) have quired the assets and certain liabilities ifies the company’s position among agreed to form a joint venture to pro- of Genesis and will move its opera- the top 15 EMS providers in North vide ODM, electronics assembly, test-

6 Manufacturing Market Insider, September 2008 ing, marking and packaging services in tronics became a preferred manufac- tomation systems for Kirby Lester India for a range of networking prod- turing partner for SemIndia under a (Lake Forest, IL), a provider of auto- ucts. The joint venture agreement 2006 agreement by which Flextronics mated tablet machines. Production will states that services will include box was to invest an unspecified sum. take place in Plexus’ Buffalo Grove, build for SemIndia’s products such as IL, facility….Key Tronic (Spokane set top boxes, WiMax consumer Medical venture Valley, WA) expects to begin work in premise equipment and ADSL mo- In addition, Jurong has entered into December on a new manufacturing dems for broadband and consumer a joint venture agreement with Spirit program for Kaz (Southborough, markets in India. Solutions (Dayton, OH) to design, MA), a healthcare and home comfort Jurong will own about 60% of this develop and manufacture a breast can- device company. Over the long term, venture called JSEMTECH Hold- cer screening system. The system uses Key Tronic expects to add several oth- ings, and SemIndia will hold the re- infrared thermal imaging cameras for er Kaz product programs. All told, the maining stake of about 40%. The the detection of breast cancer. One Kaz programs, when in full produc- venture will start with capital of Jurong subsidiary will manufacture the tion, are anticipated to contribute over S$21.0 million ($14.8 million) includ- system, and another will market it. The $25 million to Key Tronic’s annual ing 10 SMT lines. Six of them will be system will undergo clinical trials in revenue. Key Tronic intends to carry supplied by Jurong, and four will be Singapore. out manufacturing in its primary plant contributed by SemIndia, who will buy This agreement is in line with Ju- in Juarez, Mexico. them from Jurong and pay with rong’s strategy to focus on higher val- SemIndia stock. ue-added products and penetrate into Jabil Base To Stay The agreement describes SemIndia the healthcare sector. as an ODM that engineers, designs and Meanwhile, Jurong has established in St. Petersburg distributes communication and con- a new business unit, Microfab Hold- Will expand manufacturing sumer electronic products. That’s one ing, to provide mechanical contract there also of SemIndia’s activities. The company manufacturing services for the semi- Rewarded with state and local gov- was originally started for the purpose conductor, industrial control and bio- ernment incentives, Jabil Circuit has of manufacturing semiconductor chips technology industries. Expected to decided to keep its headquarters in St. in India. contribute up to 15% to 20% of Ju- Petersburg, FL, and to significantly While SemIndia’s proposed wafer rong’s 2008 revenue, the new unit will expand its local manufacturing and fab project has yet to be realized, the bring together assets from subsidiaries employment in future years. company is building a semiconductor in China and Malaysia. “In light of the substantial support ATMP (assembly, test, mark and from the State of Florida, Pinellas pack) facility in Hyderabad, India. EE Alliances…EMS provider Brecon- County and the City of St. Petersburg, Times reported that the proposed joint Ridge and AFORE Solutions, both of we intend to proceed with a plan to venture will manufacture in this facility. which are headquartered in Ottawa, build a new manufacturing plant and Jurong believes that the venture Canada, have formed a partnership to consolidate corporate functions in a will enable it to gain immediate access offer complete design and manufactur- single location,” stated Timothy Main, to the Indian market and establish a ing solutions. By establishing this rela- Jabil’s president and CEO. strong presence there. The company tionship with AFORE, BreconRidge According to two Florida newspa- also sees the venture as further ex- can expand the scope of its product pers, Jabil will spend $54 million to panding its ODM product range and lifecycle services to include embedded build a complex on the city’s Gandy customer base. software and systems development. Boulevard. The St. Petersburg Times According to the agreement, the …Hunter Technology (Santa Clara, reported that the company will con- venture will combine Jurong’s CA), an EMS company with board struct a new headquarters plus manu- strengths in EMS with SemIndia’s fabrication capabilities, and PCB fab- facturing, research and development ODM capabilities. ricator Hallmark Circuits (Poway, facilities. Jabil plans to break ground EE Times reported that the venture CA) have launched a joint market later this year. aims to produce cell-phone modules, campaign. The incentive package from the which reduce design time. Jurong state, county and city totals $26.6 mil- brings technology for such modules. Some new business...Plexus lion, not counting $11 million in road Jurong is not the first EMS provid- (Neenah, WI) has landed the primary improvements previously committed er to be involved with SemIndia. - contract to manufacture pharmacy au- to. Under performance-based incen- Manufacturing Market Insider, September 2008 7 News tives, Jabil expects to add 850 employ- new facility will allow Plexus to better er that operates exclusively in China, ees to meet the growing needs of its serve global customers with regional has set up a new manufacturing base in defense and aerospace business. The decision centers in the greater Shang- Southern China under the name TDG company currently employs 1,880 peo- hai area. Plexus will also gain greater Technology Shenzhen Co. Ltd. The ple in St. Petersburg. access to the pool of technical talent in new Shenzhen facility started produc- In February, Jabil began a process the Hangzhou area. Production is ex- tion this month. TDG Technology was to determine whether to consolidate pected to begin late in Q1 of fiscal founded two or three years ago (de- operations in Florida, consider alterna- 2009….ESCATEC (Penang, Malay- pending on the source) as an EMS tive locations or remain in its current sia) recently launched its third plant in platform of its parent company, pub- 2 location (July, p. 7). According to Malaysia with 1,500 m of manufactur- licly held TDG Holding. The Chinese 2 Jabil, several states, including Califor- ing space and 2,500 m of storage and provider also has an operation in the nia and Michigan, prepared incentive office space. Located in Bayan Lepas, Eastern China province of Zhejiang. bids to attract the company’s head- the new facility now employs 120 peo- quarters and manufacturing operations. ple, and ESCATEC expects the num- Jabil made public its decision a day ber of workers to reach 200 by year Editor and Publisher: John Tuck after the company announced a layoff end. Included in the facility’s office Circulation Director: Ann Connors of 120 employees in St. Petersburg, space is a new design center. The pro- Board of Advisors: Michael according to local media. vider gained two SMT lines with the Thompson, CEO, I. Technical Servic- es; Andy Leung, CEO, VTech Com- new facility and, due to strong busi- munications Ltd. More new facilities…Foxconn ness growth, just purchased three lines Manufacturing Market Insider is a Technology Group is the lead tenant for ESCATEC’s main electronics as- monthly newsletter published by JBT at the Centre at Cypress Creek, the sembly facility in Penang….The Mo- Communications, 43 Summit Ridge, former corporate headquarters for rey Corporation, a provider of Burlington, VT 05401-3911. Phone Compaq Computer in northwest hardened electronics, broke ground (802) 651-9334. Fax (802) 651-9336. Houston, TX. The campus develop- this month on a major expansion of © Copyright 2008 by JBT Communi- 2 ment consists of more than 630,000 ft manufacturing capacity at its Wood- cations™. ISSN 1072-8651 2 of office space. “Foxconn wanted to ridge, IL, headquarters. To 52,000 ft The information and analysis pre- capitalize on working with HP and of existing manufacturing space, Mo- sented here are based on sources be- 2 lieved to be reliable, but content other clients as it looks to grow its rey will add 45,000 ft of manufactur- 2 accuracy is not guaranteed. The pub- business,” said Brad Marnitz, principal ing, 29,000 ft of warehousing, and an lisher shall not be held liable for any of NAI Houston, who represented additional support area. The expansion business decisions influenced by this Foxconn….Plexus plans to open its project also includes additional manu- publication. second plant in China (its third in facturing automation that, once fully E-mail: [email protected] Asia) and has agreed to lease about deployed, will give Morey a 280% Web site: www.mfgmkt.com 2 106,000 ft in a technology park locat- increase in production capacity. ed in Hangzhou. The company said the …TDG Technology, an EMS provid-

Subscription Form I want 12 monthly issues of MMI at the annual rate of Send the print edition. Or send the electronic edition (pdf). US$485. For subscriptions outside North America, add $50 for the print edition or $25 for the electronic edition. Payment is enclosed to JBT Communications. Sign me up for two years. I'll receive 24 issues for US$875, Please bill me. Charge my credit card (see below). which is $95 off the annual rate. Outside North America, add Mail or fax to: JBT Communications, 43 Summit Ridge, $100 for the print edition or $50 for the electronic edition. Burlington, VT 05401-3911. Fax (802) 651-9336.

Name______Title______

Company ______Phone______

Street Address______Fax______

City/State/ZIP______Email______

____MasterCard____Visa____Amex no.______Expires______