Vol. 26, No. 1 January 2016

Emerging Trends of Low Industry Growth, Value-Add Microelectronics, Consolidation, Near-Shoring, and Manufacturing Innovation for 2016

By all accounts and indicators, are engaging in more outsourcing to manage the terms and conditions of 2015 was a year of very low or every year. the traditional engagement for the no growth in the EMS industry— A successful business will naturally standard reasons. Increasingly, mid- certainly for the top-tier attract competitors, and because the tier suppliers such as Benchmark, suppliers. Mid-tier companies barriers to entry for EMS are low, Firstronics, Morey, Venture, have fared better, with many outsourcing is being driven by the Kimball, IMI, TT Electronics, firms taking advantage of needs of high-velocity OEM Creation Technologies, and a few acquisition opportunities and companies that seek the lowest cost European suppliers have achieved expanding services to other and try to capture all the available more leverage in the relationship and geographic regions for profit (e.g., Apple vs. ), become more evenly balanced. For the assemblies that customers require leaving the EMS supplier struggling. last two decades, EMS subcontracting (a summary of 2015 M/A activity It is difficult to understand why EMS has been under the control of the will be provided in the February companies put up with this OEM, but with the development of issue of MMI). The EMS imbalance, which forces them to seek advanced and high-skill services industry is undergoing significant profit in supply chain management, (discussed below), the playing field is consolidation, although this is not parts arbitrage, or services such as becoming more level for EMS. deterring new entrants from design, logistics, or repair. entering the market. The The question of who controls the Low Industry Growth financial and structural relationship (the OEM or the Table 1 (on page 2) illustrates how advantages of outsourcing have subcontractor) is changing depending top-tier EMS/ODM firms performed been well proven for many years, on the product volume, cost, quality for 2015 (estimated and unaudited as evidenced by very few OEM requirements, and technical figures). Only one supplier, , companies planning or investing capabilities. Skilled and powerful performed very well; it is a leading in manufacturing automation any companies such as , , supplier of TVs and large-screen more, leaving the expertise of or Plexus exhibit better control, monitors and is still experiencing high electronics production to their whereas EMS suppliers like Foxconn, growth due to strong demand for contract manufacturing partners. Flextronics, and Sanmina struggle And more recently, this trend is starting to apply to new Asian OEM companies as ODMs and Some articles in this issue EMS companies line up to secure Cover Story…………………………………………………………………………………….1 contracts to manufacture new Trends for 2016 hardware innovations from such Some Quarterly Results…………………………...………………………………………….…….3 established OEMs as Samsung, Company News…………………………………………………………..………….…………….……5 Sony, NEC, and , which SVI Buys Seidel Electronics …………………………………………………..……………….…..7 new products each year. Plexus also broader connectivity, and big data Near-Shoring performed adequately as a result of its analytics, which are enabling the Last month (December 2015) industry diversity and carefully optimization of solutions, leading to MMI presented a brief exposé of the selected customer base. Quanta new consumer and customer trend by EMS companies to bring Computer survived the downturn of experiences with new business back manufacturing to regional low- the desktop industry by providing models. These developments have cost locations. While this helps the low-cost notebooks, Chromebooks, redefined the relationship between OEM customer and EMS supplier, it and tablet solutions to a sector that the OEM customer and the EMS also disrupts labor dynamics in Asia, requires frequent hardware upgrades manufacturing partner in ways that once the preferred manufacturing and replacements. By all indications, should allow the industry to become location, and elsewhere. Now it is for semiconductor components, more profitable and sustain long- clear, when we take into account the equipment purchases, and CAPEX term contracts. total cost of ownership, that near- spending, industry sector growth for shoring is more practical, efficient, 2015, and most likely for 2016, will Consolidation and cost effective. Thus we expect be flat and unspectacular. Throughout 2015, there was that this trend will continue for EMS increased interest among EMS companies with products that are not Design and Innovation Centers and suppliers in acquiring weak or commodities and, especially, price Value-Add Microelectronics strategic service providers. Several sensitive. This helps all parties A bright spot on the EMS horizon such purchases have been involved. has emerged in the last several years. completed, but many more are under Asia is not the only region From 2015 and going forward, we consideration. Only recently, SVI struggling with the near-shoring expect that EMS industry growth will acquired five Seidel Electronics trend. Working conditions in be equal to or slightly higher than that Group sites in Austria, Slovakia, Mexico and eastern Europe can be of the OEM electronics industry. It is and Hungary, adding approximately just as onerous and harsh, depending clear that EMS growth will continue USD$100 million in revenue and on the subcontractor. Shifts can be to exceed overall OEM electronics 700 people. Sparton Corporation 12 hours in length, as overtime sector growth as more of the R&D increased its revenue and hours are not regulated. Some South shifts away from OEM suppliers profitability as the result of several American governments seem to do (which have abandoned support for acquisitions, but is now emphasizing more than the leading/bleeding edge of CAPEX organic growth and taking a break investment) and toward EMS/ODM from its aggressive accumulation of specialists. A decade or two ago, the smaller companies of the last two Table 1: EMS and ODM Firms’ 2015 complaint was that manufacturing years. Scanfil reported triple-digit Performance ($ Millions) R&D was being forsaken by the growth as a result of its EMS Companies 2014 2015* Growth OEMs, and the EMS companies were merger/acquisition of PartnerTech, Foxconn 139.0 129.0 –7.2% not picking up the ball to continue completed in early 2016, making it Pegatron 33.6 38.4 14.0% manufacturing innovation anymore. the largest EMS supplier in 19.5 18.9 –3.4% But in the last two years that has Scandinavia. Key Tronic Corp. Flextronics 24.3 24.3 0.1% changed dramatically as top-tier EMS improved revenue by its acquisition Jabil 18.7 18.6 –0.5% firms like Foxconn (robotics), Jabil of Ayrshire, while Swedish EMS Sanmina 6.2 6.4 2.5% (Blue Sky Innovation Center—see firm Hanza sold its subsidiary in Celestica 5.6 5.5 –2.4% May 2015 MMI), Flextronics Slovakia to a private investor. Plexus 2.5 2.6 3.9% (Customer and Product Innovation Flextronics acquired Farm Design, Total 249.5 243.6 –2.4% Centers), Celestica, Plexus, and even a full-service product design Sanmina are now making R&D company for medical devices and ODM Companies 2014 2015 Growth investments in advanced diagnostics. A more detailed 30.6 31.7 3.8% manufacturing automation and summary of all the M/A activity will Compal technology. As a result of these be presented in the February 2016 27.9 26.7 –4.4% Electronics moves, customers now enjoy shorter issue of MMI, but suffice it to say Inventec 14.4 12.0 –16.6% time to market, reduced inventories, that there are enough such events to TPV Technology 4.6 4.4 –6.1% and innovations in manufacturing support the trend that EMS Total 77.5 74.8 –3.5% while improving worker safety and companies and their OEM operational efficiencies. EMS customers, big and small, are Total 327.0 318.4 –2.6% companies have invested in advanced becoming attractive targets. It is

IC packaging technologies, break- evidence of an increasingly mature *unaudited - Source: Company reports - NT converted at 31.744 throughs in thin and thick films such and consolidating EMS industry. as conductive inks, integrated sensors,

Manufacturing Market Insider, January 2016 2 most to protect workers by requiring (WSTS) association pegs growth over manufacturers with the understanding paid holidays, annual bonuses, health the next few years at 0%—not an and resources to develop the insurance, and sometimes pension encouraging number. This figure technology and applications to drive plans. Also, labor organizations assist includes wafer fab equipment, innovation not yet developed. It is the in requiring good and safe working automated test equipment, and electronics contract manufacturers, conditions, but this naturally adds packaging and equipment assembly. and not the OEMs, who have overhead and cost. However, the Gartner, IDC, and other market emerged today as the primary labor market is fluid and wages vary research companies vary their innovators of the manufacturing according to demand. Yet forecasts almost monthly, essentially production that is giving life and considerations of transit time, projecting flat growth for 2015 and competitive advantage in electronics management issues, time zone 2016, yet optimistically stating that assembly to the EMS industry. The difficulties, and the cost of capital 7%+ growth for 2017 and 2018 will industry’s development of the “smart have demonstrated that when the total return (easy to say). factory” concept will keep the cost of ownership is taken into What is lacking in many of the profession vibrant with new account, outsourcing to China is high-cost regions is a well-oiled development, technology, and becoming less cost-effective. Near- supply chain like that so dominant in revenue growth. shoring in North America and Europe Asia today. Suppliers are as guilty as will become more prevalent over the OEM companies in moving to low- next few years. cost locations to manufacture Some Quarterly Results This trend was highlighted last year components, printed circuit boards, in MMI’s January issue, and today it and—more devastating—critical Plexus Corp. For its fiscal Q1 seems even more prescient. There is subsystems such as IC chips, ended Jan. 2, 2016, Plexus reported no question that subcontracted displays, and storage drives. These revenue of $617 million (down 7% y- manufacturing is moving closer to the assemblies will never return from any o-y and down 8% q-o-q), which was customer each year, as it no longer other geography than Asia, ostensibly above the midpoint of guidance makes economic or strategic sense to because the OEM manufacturers are ($600–625 million). Gross margin manufacture anything but commodity willing to sacrifice profit margins to was 8.1%, at the high end of guidance products abroad, where costs can be ensure market share and production of 7.7–8.1%, primarily due to pushed to the margin. Historically, revenue. The only component of any productivity improvements and almost two-thirds of all electronics significant intellectual value today is greater fixed-cost absorption. products manufactured by EMS and the IC semiconductor chip. All other Operating margin was 3.7%, down 60 ODM suppliers have been commodity parts are commodity, including EMS basis points q-o-q, but above the high computer and communications assembly. end of guidance of 3.3–3.6%. Note products. So while many complex and that unlike many of its peers, Plexus high-mix products found in the Manufacturing Innovation includes stock‐based compensation industrial, medical, and transportation Over the last several years, it has (55 basis points) in its operating industries are finding their way back become clear that EMS companies results. into local production, a large must provide the guidance and On an annual basis, management is percentage (such as motherboards, innovation that OEMs used to drive in targeting between $24 million and $32 cell phones, and consumer the fields of materials science (e.g., million in annual cost savings from electronics) will remain offshore and printed electronics, exotic inks, (a) productivity improvements and be produced in the lowest cost polymers, transparent and conductive cost reductions by plant; (b) the regions (China, Mexico, Vietnam, thin films, and the latest breakthrough closure of the Fremont facility and Poland, and Romania). Having said technology in 3D (or additive) downsizing of the Livingston, this, there are token efforts by manufacturing). Additive Scotland facility; and (c) reduction in Foxconn and a few ODMs to green manufacturing technology allows for discretionary expenses (SG&A). field manufacturing facilities in high- rapid and iterative prototypes to be In order to protect margins, Plexus cost regions such as the US, developed in hours instead of days or chose to disengage with two Germany, and France. weeks, giving an OEM a definitive customers in the midst of an overall Despite this trend, as we begin 2016 competitive edge not previously demand meltdown. Furthermore, to we are seeing no improvement in thought possible. These are high- address the weak demand electronics industry growth as potential technologies that provide environment, Plexus also chose to CAPEX investment is flat, and the 3- electronics companies the tools to shut down its highest cost plant in the month book-to-bill ratio is down produce new and leading-edge world (Fremont), and downsize a slightly, indicating weakness in products not previously possible. plant in Livingston, Scotland by market demand. The Worldwide What is lacking are certain contract eliminating high-volume production Semiconductor Trade Statistics

Manufacturing Market Insider, January 2016 3 at the facility but maintaining design Manufacturing Segment (EMS) from The company reiterated its full-year and prototyping capabilities. DMS and $2.6 billion (consistent FY16E revenue guide of $20 billion in Plexus reported revenue based on revenue y-o-y, –3% q-o-q) from EMS. revenue and raised its EPS guide from the market sector breakout set forth was up much less (+3% y-o-y, –2% q-o- $2.60 to $2.65. here: Revenue in q). Operating margins came in at 4.3%; Sanmina (SANM) reported 1Q2016 Networking/Communications (N/C) DMS operating margins were 6.7% (up revenue of $1.53 billion (down 8% y-o- was down 12% q-o-q, slightly better 260 basis points q-o-q) and EMS margins y and down 6% q-o-q), which was than guidance of down in the high were 3.1% (up 10 basis points q-o-q). below the midpoint of guidance ($1.55– teens, with four of the top five DMS revenues were up 31% y-o-y; 1.60 billion). Gross margin was 8.2%, at customers performing better than growth was likely driven by continued the high end of guidance of 7.9–8.3%, expectations, though performance in strength at Apple (AAPL). The sequential primarily due to favorable mix and the rest of the sector was mixed. revenue growth was due to strength in execution in Integrated Manufacturing Revenue in Industrial/Commercial demand in the DMS mobility and lifestyle Solutions (gross margin was 7.7%, a (I/C) was down 14% q-o-q, slightly businesses. AAPL was a 24% customer in record high, up 60 basis points q-o-q), worse than guidance of down in the FY15, up from 18% in FY14 and up 50% which offset depressed gross margins in low teens, as a result of broad‐based y-o -y. EMS revenues were up 3% y-o-y. Components, Products, and Services weakness. Eight of the top 10 The EMS business is expected to ramp (8.7%, down 60 basis points q-o- customers were down q-o-q in the strongly in the second half of the fiscal q). Gross margins in Components, quarter. Revenue in Healthcare/Life year, driven by automotive and Products, and Services were down q-o-q Science (HC/LS) was up 4% q-o-q, healthcare. and y-o-y due to unabsorbed overhead slightly better than guidance of up in Management seemed the most positive from lack of revenue. the low single digits, with demand about opportunities for the Electronics Non‐GAAP SG&A and R&D was $65 stable within the quarter. Revenue in Manufacturing Segment’s business this million, or 4.2% of sales. Operating Defense/Security/Aerospace (D/S/A) year, expecting healthy growth in margin (excluding stock‐based was down 9% q-o-q, worse than 2H16 driven by both existing customers compensation) was 4.0%, up 20 basis guidance of down in the low single (70%) and new opportunities (30%). points q-o-q, at the midpoint of guidance digits, with several aerospace firms In the Diversified Manufacturing of 3.8%–4.2%. lowering demand from expectations at Segment, ongoing efforts to diversify The acquisition should the beginning of the quarter. away from Apple (24% of sales) are close mid‐February, with partial New manufacturing wins of $179 driving investments in healthcare, contribution in the March quarter and million increased 7% q-o-q from $167 packaging, and the acquisition of Israeli then full contribution in the June million, up q-o-q for the past two manufacturer Shemer. While these quarter. The business is very stable and quarters, with the mix still favorable opportunities are expected to yield longer- also very profitable, especially given (88% of wins in I/C, HC/LS, and term growth opportunities, expenses that there is a high degree of after- D/S/A, and 12% of wins in N/C). related to new program ramps will weigh market repair and warranty work for Plexus has yet to see any real on margins through 1H17, creating some ruggedized communications gear for benefit from the repeal of the medical variability in margins. Despite these puts municipalities and the military. device tax; however, there should be and takes, management expects healthy Revenue in Industrial/Medical/ some benefits over the next 12 4.0% operating margins for FY16. Defense (I/M/D) was 40% of total sales months, which should impact roughly JBL generated $145 million in cash and decreased 7.5% q-o-q. This was half of its Healthcare/Life Science flow from operations for the quarter, worse than guidance of down slightly q- segment (30% of total sales). With its which was offset by $249 million in o-q, with weakness across all three sub- strong engineering organization that capital expenditure (CAPEX), causing segments. Revenue in Communications helps customers design new products, FCF to come in at –$104 million. In Networks (C/N) was 39% of total sales Plexus expects a resurgence in R&D addition, the company reiterated CAPEX and decreased 3.4% q-o-q, which was spending from its medical device guidance of $800–1,000 million for FY16, worse than guidance of flat q-o- customers. split $250 million in q. Weakness was in older products, but Jabil Circuit (JBL). The company capacity/infrastructure, $150 million in new products in networking, optical, and reported first-quarter net revenue of mobility, $100 million in Nypro, $200 mobile broadband were stable. Revenue $5.2 billion, a 14% increase from the million in Other, $150 million in EMS, in Embedded Computing & Storage was first quarter of fiscal year 2015. and $50 million in capabilities. 21% of total sales and decreased 8.9% Revenues were up 14.5% y-o-y and JBL provided a February 2016 q-o-q, which was slightly worse than 11.3% q-o-q. On a segment basis, the estimated revenue guide at $4.40–4.70 guidance of down slightly q-o-q. This Diversified Manufacturing Segment billion/$0.54–0.70. From a segment result was driven by weak demand from (DMS) was up (+31% y-o-y, +30% q- standpoint, the company is calling for automotive and storage, with the rest of o-q), while the Electronics $1.9 billion (+14% y-o-y, –23% q-o-q) in the segment stable. revenue

Manufacturing Market Insider, January 2016 4 Company News Moore said it was important to the million LCD TVs in 2015, slipping company to expand its manufacturing 42.5%. Compal expects global base without disrupting the day-to-day notebook shipments in 2016 to decline

Foxconn Wants Sharp business of the companies and vendors it 5% year on year, but the company’s Taiwanese EMS giant Foxconn has made serves… Inventec Appliances, a shipments will remain unchanged, Chen an offer to acquire Japanese electronics subsidiary of Inventec, recently indicated, as reported by DigiTimes. company Sharp for about $5.3 billion. completed the second phase of its Sharp, which hasn’t been thriving over factory in Nanjing, doubling its handset Partnerships… LACROIX the years, has been bailed out repeatedly production capacity to 86 million units a Electronics (France) and MicroEJ by banks. The company recently received year, according to the company. Total (France) have entered into a partnership a competing offer from Innovation investment for the second-phase to accelerate the development and Network Corp. of Japan (INCJ)—a expansion project, which has a floor production of Internet of Things (IoT) government-backed investment fund—of area of 89,244 square meters, reached devices and embedded electronic $2.56 billion, according to a report in the $50 million, the company noted. The products for the European market. This Wall Street Journal. new facilities are expected to begin partnership enables LACROIX Sharp is reportedly leaning more volume production of handsets in March Electronics to offer its services and its toward accepting the offer from INCJ, the 2016. Market sources indicated that electronic assembly production report continues, citing a person familiar Inventec Appliances has landed orders resources for the design and production with the matter. A report in Bloomberg from China-based Xiaomi Technology of “turnkey” electronic assemblies also states that Sharp is considering for production of the forthcoming using MicroEJ software technologies accepting rescue from the government- Xiaomi Mi 5 smart phones, which are to for customers wanting to subcontract all backed investment fund rather than the be launched after the Lunar New Year or part of their projects. The partnership bigger offer from Foxconn. holiday in February. Inventec aims to offer customers ways of saving

Appliances has secured about 60% of time and cost in the development and Facility expansion… Kabel-Technik- Xiaomi Mi 5 orders, the sources added. production of their products, Polska has officially opened a new In addition to smart phones, the Nanjing particularly for the R & D software production facility. The company, part of plant also produces telecommunication part, which represents an increasing the PKC Group, has rented the new modules for machine-to-machine share of investments and innovation, 3,000-square-meter facility from (M2M) and IoT applications, according and for the production costs of Białogardzki Park Inwestycyjny, aka to the company. Inventec shipped over materials (bill of materials). “Invest-Park.” The company will employ 55 million smart phones in 2015, of about 370 people for the new premises by which 30 million units were produced the end of 2016. Kabel-Technik-Polska Quanta to Increase by Inventec Appliances, as reported by has also recently signed another lease DigiTimes…Compal Electronics will Investment in Subsidiary contract with Białogard for additional set up a factory in New Delhi, India, production premises of 2,500 square ThinkTech specifically for assembly of smart meters. With these facilities, KTP will Quanta Computer will increase its phones for 3–4 vendors, with production rent a combined area of 5,500 square investment in subsidiary ThinkTech to begin in March 2016, according to meters. Construction on the second Ind. E Com. DE Informatica SA by company president Ray Chen. The premises has already started. The US$27.2 million. factory will assemble smart phones from premises will be completed in May ThinkTech is based in Brazil and semi-knockdown (SKD) units shipped 2016… MC Assembly, a Florida-based mainly focuses on manufacturing and from Compal’s factory in eastern China EMS provider, is expanding its selling PCs and peripherals. and will have initial monthly capacity of manufacturing presence within the high- 500,000 units, Chen said. But Compal technology business hub in Billerica, has suspended a plan to establish smart Ducommun Sells Massachusetts. The move almost doubles phone production lines in Vietnam, Pittsburgh Operation the company’s manufacturing presence in Chen noted. Compal has been Ducommun, Inc. announced the sale Billerica. The new facility offers the diversifying its business in response to a of its Pittsburgh, PA business unit to a company 58,000 square feet of space. shrinking global notebook market. private investment group for $38.5 This capacity expansion will allow the Compal has set up a smart Medicare million in cash, subject to customary company to achieve its growth objectives R&D office, a healthcare technology post-closing adjustments. The with both its existing customer base and development office, and an IoT business Pittsburgh business, acquired in 2011 as new clients. Coupled with the extensive office, Chen said. Compal shipped 40 part of the company’s purchase of capital equipment investments it million notebooks and 37 million tablets, LaBarge, Inc., supplies printed circuit continues to make in the Northeast, the smart phones, and other types of smart cards and related assemblies to company will have a compelling handheld devices in 2015, respectively industrial and energy markets. The manufacturing option for its clients. MC decreasing 7% and increasing 32.1% for business had sales in 2015 of Assembly CEO and President George the year, Chen said. Compal shipped 2.3 approximately $42 million.

Manufacturing Market Insider, January 2016 5

PartnerTech Closing Shop and keyboards, and follow-on orders rail transport and LED lighting. received by the company’s Power Group Commenting on the acquisition, in Norway in excess of $900,000 for various Chemigraphic’s CEO, Stephen Perkins, On November 17, 2015, PartnerTech commercial products as well as new noted that CRS complements its strategy AB (Sweden) announced its intent to orders for its VPXtra power supplies. to become the UK’s leader in supporting reorganize the operations at its Deliveries for the awards received during complex products and electronic Norwegian subsidiary, PartnerTech AS. December are scheduled to commence in systems on behalf of global OEMs. Concurrent with that announcement, the the first quarter of 2016 and continue company stated that it would start through the first quarter of 2017. Fire at Foxconn’s negotiations with representatives of the staff. The possibility of closing down the Zhengzhou Plant production of the plant was also Foxconn Plans to Make A fire broke out at Foxconn’s discussed during these negotiations. Now India Hub for Africa, Zhengzhou plant in China, but no it’s been finalized that the owner, West Asia casualties were reported. The factory, Scanfil, intends to shut down the unit. Taiwanese electronics major Foxconn which is responsible for a substantial The negotiation process ended on 11 intends to make India a key global amount of iPhone production, was January 2016. Based on its results, manufacturing hub for servicing markets affected by a fire that broke out in the PartnerTech’s board of directors has across Africa and West Asia, which may facility’s air-conditioning system and decided to start closing down production result in an inflow of billions of dollars. then spread to several floors, of the plant. Foxconn, which has already started Techcrunch writes. The plan is to conclude most of the making phones and in India as However, representatives from the actions by 30 June 2016. The impact on part of its contract manufacturing company later told reporters that no earnings will be mainly in the first business, intends to widen its engagement casualties were reported and that the quarter of 2016. with the market. manufacturing won’t be affected. The world’s largest electronics In a statement, Foxconn said that the New orders… Camtek, Ltd. (Israel) manufacturer is making products for fire “was brought under control by the received repeat orders for multiple companies such as Sony, Xiaomi, fire department shortly after it was systems totaling over $3 million from a Gionee, and Microsoft at its Indian units reported,” Techcrunch concludes. global OSAT (outsourced semiconductor and has plans to increase the number of assembly and test) company. The systems locations. Currently, it has operations at Foxconn Interconnect will be installed during the first quarter of Sri City in Andhra Pradesh, Technology Acquires Avago 2016 and will be used for inspection and Sriperumbudur in Tamil Nadu, and Navi metrology of advanced packaging Mumbai in Maharashtra. Optical Module Business applications… Altus Group has received Exports will become a key strategy for Foxconn Interconnect Technology, a a significant new order from Exception the company as it builds scale. Africa and connector and cable harness maker EMS (United Kingdom) to provide the West Asia can be serviced from India. belonging to the Foxconn Group, company with a nitrogen-capable The company will also create a network announced on January 26 that it has production reflow soldering system. The of suppliers while looking at new product finished acquisition of the optical system will be installed in the UK facility segments to add to its manufacturing module business unit and related assets of Exception EMS, a contract electronics portfolio. of US-based Avago Technologies. manufacturing solutions provider. The New categories of products for Foxconn Interconnect pointed out that chosen oven has 14 zones (10 heating Foxconn to consider in India include the acquisition will enable the company and 4 cooling), and its size and modular , tablets, digital boxes, and to extend its products to fiber-optic design will cater to any demands that the devices related to the Internet of Things. networks and satisfy clients’ demand for company receives from its customer network-related products. base… Orbit International’s Latest acquisitions… UK-based EMS consolidated bookings for both its provider Chemigraphic has acquired Foxconn Invests in High- Electronics and Power Groups exceeded CRS Electronics, Ltd., a Hertfordshire- $2.4 million for the month of December based contract manufacturing business, Tech Construction 2015. In addition, the company for an undisclosed sum. CRS has been in Company Katerra announced that consolidated bookings for the electronics manufacturing services Icreate Investments, an investment the fourth quarter of 2015 exceeded $6.3 business for the last 40 years and has arm of Foxconn, has invested US$51 million. The bookings for December built up a strong base of customers. million to take a 10.7% stake in the US- were highlighted by previously Products that CRS supports range from based smart building solution vendor announced orders in excess of $1.3 maritime communication systems and Katerra, according to a -based million received by its Electronics Group marine electronics to control systems for Central News Agency (CNA) report. for follow-on orders for its switch panels, displays, Manufacturing Market Insider, January 2016 6

Inventec to See Server in proportion to the amount of countries. Seidel Electronics Group unemployment insurance paid in 2014. employs about 700 people at its sites in Revenues Grow 5–10% The Wall Street Journal reported that Austria, Hungary, Slovenia, and in 2016 Foxconn will receive CNY81.9 million Slovakia, and has a turnover of €90 According to DigiTimes, Inventec to minimize layoffs arising from iPhone million. () is expecting to see its server production cuts in 1Q16. revenues grow 5–10% year on year in MMI’s Most Recent Interview with 2016, buoyed by orders from the data Second-Generation Apple SVI Executive on Seidel Acquisition center sector as well as from branded MMI’s recent interview with Robert server vendors. OEM orders from brand Watch to Enter Mass Sawyer, CEO of SVI (Austria) GmbH, server vendors accounted for 85% of the Production in 2Q16 stated that Seidel’s customers are very server revenues and those from the data The second-generation Apple Watch is attractive and include some marquee center sector made up the remaining expected to enter mass production in the names, including global leaders in the 15%. Inventec’s server orders are second quarter, with Quanta Computer industrial and medical markets. Like coming from clients mainly in the US to be the sole manufacturer of the SVI, Seidel has no consumer electronics and China and will further strengthen its device, according to sources from the business. As a result, Seidel’s focus cooperation with China-based vendors. upstream supply chain. markets line up perfectly with SVI’s (This contradicts our cover article Apple originally considered shifting interests, although Seidel has better showing total company revenue growth some second-generation Apple Watch penetration in medical devices/ being negative.) orders to Foxconn Electronics (Hon Hai equipment, transportation (especially Precision Industry), but decided to keep trains), and power electronics. Ninety Toshiba to Sell Part of Its all the orders with Quanta, as volumes percent of Seidel’s customers are in will not be high, the sources noted. GSA (Germany, Switzerland, and Chip Operations, Reuters Quanta and Foxconn both declined to Austria), where SVI is currently Reports comment on their orders. underpenetrated. Eighty percent of SVI’s European business comes from Japan’s Toshiba plans to sell part of its Because of Apple Watch’s weaker Scandinavia, where Seidel had zero. So chip business as it seeks to recover from than expected shipments, Apple recently this represents a perfect geographical a $1.3 billion accounting further reduced the device’s shipment and market match. scandal. The company has reportedly forecast for 2016 from its estimate in the Sawyer also told MMI that the started accepting bids, with early interest fourth quarter of 2015. acquisition was accretive from day one. shown by the Development Bank of However, compared to other smart He sees huge potential for revenue Japan. watches, the Apple Watch still synergies now that SVI can offer new The sale would exclude Toshiba’s performed rather strongly and had an customers manufacturing locations in mainstay NAND flash memory over 50% share in the smart watch eastern Europe as well as new operations. On the block are market at the end of 2015, as reported by customers and low-cost/high-volume businesses that handle system LSI and DigiTimes. manufacturing in Asia. discrete chips, which are widely used in The impetus for this acquisition was cars, home appliances, and SVI Buys Seidel Electronics the need to create a worldwide industrial machinery. The loss-making Group manufacturing solution, and SVI operations posted sales of JPY330 billion EMS provider SVI Public Company, expects revenue growth to double. ($2.78 billion) in the year ended March Limited will, via one of its subsidiaries, The acquisition also brings to SVI 2015. acquire Austrian EMS provider Seidel strong design and development teams

Electronics Group. and capabilities in Europe that will Foxconn Says Employment SVI will acquire Seidel—which has accelerate its strategy to move from Subsidy Was for FY14, manufacturing facilities in Austria, pure EMS to DMS (design and Slovakia, and Hungary—as well as a manufacturing services) so it can Denies Early Leave minority interest in Seidel’s two product provide more value-added services to Employment incentives received by the design and development companies, its customers throughout product life Henan government in China were for located in Austria and Slovenia. cycles (but not as an ODM, as SVI will FY2014, and not any recent period, The transaction supports the expansion not compete with its customers). Foxconn has said. Foxconn refuted of SVI’s business in European markets, According to Sawyer there will be no the reports of an early Lunar New Year in particular in the German-speaking significant restructuring at the holiday, and said the break didn’t regions where the company is currently company, as the sites and facilities are commence in December. Foxconn was underpenetrated. The acquisition brings ideal and SVI intends to build further on among 135 companies in Henan’s a solid design, manufacturing, and them. Along with the acquisition comes Zhengzhou City to receive employment logistics platform to SVI in Austria and an experienced and successful team incentives and the incentives granted are in cost-competitive eastern European with strong customer relationships. 7 Manufacturing Market Insider, January 2016 Compal Electronics to existing businesses, the New Kinpo Apple to Help Build AU Group is planning to expand its Adjust ODM Organization semiconductor-related business in Optronics into AMOLED into Two Business Groups Brazil. Supplier for Future iPhones Compal Electronics will adjust its The company’s subsidiary According to AppleInsider, Apple is ODM organization into PC and smart XYZprinting will also expand its reportedly planning to invest in AU device business groups, with the former businesses from 3D printing products Optronics (Taiwan) and build the firm to cover notebooks, desktops, and to service and education robots and into an AMOLED screen supplier for servers and the latter tablets, smart smart devices, and will create a brand future iPhones. phones, and LCD TVs, according to the in an attempt to improve its gross AUO has been developing AMOLED company. margin, as reported by DigiTimes. displays for over a decade, and last year In addition, some market watchers began shipping units to some Chinese believe the adjustment will facilitate the New CEO for Swedish companies like . company’s search for a successor to Note company president Ray Chen when he Publisher: Randall Sherman retires, as reported by DigiTimes. Swedish EMS provider Note AB has appointed Stefan Hedelius as Editor: Anna Reynolds new President and CEO of Note. New Kinpo Group Sees Stefan will take up his position on 7 Research Analyst: Vivek Sharma Growing Contributions March 2016. He is replacing Peter Board of Advisors: Michael Thompson, Laveson, who will be leaving the CEO, I. Technical Services; Ron Keith, from Southeast Asia company. CEO, Riverwood Solutions; Andy Leung, The New Kinpo Group is seeing its Henrik Nygren will remain as CEO, VTech Communications Ltd. investments in southeast Asian countries acting President and CEO after the Manufacturing Market Insider is a monthly such as Thailand and the Philippines end of Peter Laveson’s parental newsletter published by New Venture starting to make contributions and is leave, and will stay in this position Research Corp., 337 Clay St., Suite 101, planning to expand its investments in until Stefan joins Note. Nevada City, CA 95959. Phone (530) 265- the Philippines in 2016. With this Stefan will be joining Note from 2004, Fax (530) 265-1998. Copyright 2016 growth, the New Kinpo Group expects his current position as Vice President by NVR™. ISSN 1072-8651 its revenues to increase by single-digit Brand and Marketing at SAS. He was The information and analysis presented percentages in 2016 and to see better previously Vice President Marketing here are based on sources believed to be growth in profits than revenues, and Communications at Ericsson’s reliable, but content accuracy is not according to group chairman Rock Hsu. Support Solutions business unit. guaranteed. The publisher shall not be held Hsu pointed out that the Philippines is Stefan has lengthy experience with liable for any business decisions influenced by this publication. suitable for electronics manufacturing Ericsson in Austria, Brazil, Hungary, service (EMS) businesses due to the Sweden, and Switzerland, in leading E-mail: [email protected] advantages of its political environment, roles with responsibility for Website: www.newventureresearch.com stable supply chain, manpower supply, operations, service, and sales. and costs. Meanwhile, in addition to

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