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Sanmina-SCI Corp. - Contract
Manufacturing - Category Directory
(408)
964-3500
2700
North First Street
San
Jose, CA 95134
www.sanmina.com
Sales
$10
billion
Business Description
We
are a leading independent global provider of customized, integrated
electronics manufacturing services, or EMS. We provide these comprehensive
services primarily to original equipment manufacturers, or OEMs, in the
communications, computing, multimedia, industrial and semiconductor capital
equipment, defense and aerospace, medical, and automotive industries. The
combination of our advanced technologies, extensive manufacturing expertise
and economies of scale enables us to meet the specialized needs of our
customers in these markets in a cost- effective manner.
Our end-to-end services in combination with our global expertise in supply
chain management enable us to manage our customers’ products throughout
their life cycles. These services include:
• product design and engineering, including initial development, detailed
design and preproduction services;
• volume manufacturing of complete systems, components and subassemblies;
• final system assembly and test;
• direct order fulfillment and logistics services; and
• after-market product service and support.
Our volume manufacturing services are vertically integrated, allowing us to
manufacture key system components and subassemblies for our customers. By
manufacturing key system components and subassemblies ourselves, we enhance
continuity of supply and reduce costs for our customers. In addition, we are
able to have greater control over the production of our customers’ products
and retain incremental profit opportunities for the company. System
components and subassemblies that we manufacture include volume and high-end
printed circuit boards, printed circuit board assemblies, backplanes and
backplane assemblies, enclosures, cable assemblies, optical modules and
memory modules.
We manufacture products in over 20 countries on five continents. We seek to
locate our facilities near our customers and our customers end markets in
major centers for the electronics industry or in lower cost locations. Many
of our plants located near customers and their end markets are focused
primarily on final system assembly and test, while our plants located in
lower cost areas engage primarily in less complex component and subsystem
manufacturing and assembly.
We have become one of the largest global EMS providers by capitalizing on
our competitive strengths, including our:
• end-to-end services;
• product design and engineering resources;
• vertically integrated volume manufacturing services;
• advanced technologies;
• global capabilities;
• high quality manufacturing, assembly and test services;
• customer focused organization;
• expertise in serving diverse end markets; and
• experienced management team.
This business strategy enables us to win large outsourcing programs from
leading multinational OEMs. Our customers consist of OEMs that operate in a
range of industries, and include Alcatel, Cisco, Dell, EchoStar, Ericsson,
HP, IBM, McData, Nokia, Nortel and Roche. Our net sales, operating income,
long-lived assets, depreciation and amortization, and capital expenditures
attributable to geographic segments are presented in Note 11 to our
consolidated financial statements included in Item 15 of this report.
Industry Overview
EMS companies are the principal beneficiaries of the increased use of
outsourced manufacturing services by the electronics and other industries.
Outsourced manufacturing refers to OEMs’ use of EMS companies, rather than
internal manufacturing capabilities, to manufacture their products.
Historically, EMS companies generally manufactured only components or
partial assemblies. As the EMS industry has evolved, OEMs have increased
their reliance on EMS companies for additional, more complex manufacturing
services, including design services. Some EMS companies now often
manufacture and test complete systems and manage the entire supply chains of
their customers. Industry leading EMS companies offer end-to-end services,
including product design and engineering, volume manufacturing, final system
assembly and test, direct order fulfillment, after-market product service
and support and global supply chain management.
Increased outsourced manufacturing by OEMs is expected to continue because
it allows OEMs to:
Reduce Operating Costs and Capital Investment. In the current economic
environment, OEMs are under significant pressure to reduce manufacturing
costs and capital expenditures. EMS companies can provide OEMs with
flexible, cost-efficient manufacturing services. In addition, as OEM
products have become more technologically advanced, the manufacturing and
system test processes have become increasingly automated and complex,
requiring significant capital investments. EMS companies enable OEMs to
access technologically advanced manufacturing and test equipment and
facilities, without additional capital expenditures.
Focus on Core Competencies. The electronics industry is highly competitive
and subject to rapid technological change. As a result, OEMs increasingly
are focusing their resources on activities and technologies in which they
expect to add the greatest value. By offering comprehensive manufacturing
services and supply chain management, EMS companies enable OEMs to focus on
their core competencies, including next generation product design and
development as well as marketing and sales.
Access Leading Design and Engineering Capabilities. The design and
engineering of electronics products has become more complex and
sophisticated and in an effort to become more competitive, OEMs are
increasingly relying on EMS companies to provide product design and
engineering support services. EMS companies’ design and engineering services
can provide OEMs with improvements in the performance, cost and time
required to bring products to market. EMS companies are providing more
sophisticated design and engineering services to OEMs, including the design
and engineering of complete products following an OEM’s development of a
product concept.
Improve Supply Chain Management and Purchasing Power. OEMs face challenges
in planning, procuring and managing their inventories efficiently due to
fluctuations in customer demand, product design changes, short product life
cycles and component price fluctuations. EMS companies employ sophisticated
production management systems to manage their procurement and manufacturing
processes in an efficient and cost-effective manner so that, where possible,
components arrive on a just-in-time, as-and-when needed basis. EMS companies
are significant purchasers of electronic components and other raw materials,
and can capitalize on the economies of scale associated with their
relationships with suppliers to negotiate price discounts, obtain components
and other raw materials that are in short supply, and return excess
components. EMS companies’ expertise in supply chain management and their
relationships with suppliers across the supply chain enable them to help
OEMs reduce their cost of goods sold and inventory exposure.
Access Global Manufacturing Services. OEMs seek to reduce their
manufacturing costs by having EMS companies manufacture their products in
the lowest cost locations that are appropriate for their products and end
customers. OEMs also are increasingly requiring particular products to be
manufactured simultaneously in multiple locations, often near end users, to
bring products to market more quickly, reduce shipping and logistics costs
and meet local product content requirements. Global EMS companies are able
to satisfy these requirements by capitalizing on their geographically
dispersed manufacturing facilities, including those in lower cost regions.
Accelerate Time to Market. OEMs face increasingly short product life cycles
due to increased competition and rapid technological changes. As a result,
OEMs need to reduce the time required to bring their products to market.
OEMs can bring a product to market faster by using EMS companies’ expertise
in new product introduction, including manufacturing design, engineering
support and prototype production. OEMs can more quickly achieve volume
production of their products by capitalizing on EMS companies’ manufacturing
expertise and global presence and infrastructure.
Competitive Strengths
We believe that our competitive strengths differentiate us from our
competitors and enable us to better serve the needs of OEMs. Our competitive
strengths include:
• End-to-End Services. We provide services throughout the world to support
our customers’ products during their products’ entire life cycles, from
product design and engineering, through volume manufacturing, to direct
order fulfillment and after-market product service and support. We believe
that our end-to-end services are more comprehensive than the services
offered by our competitors because of our focus on adding value before and
after the actual manufacturing of our customers’ products. Our end-to-end
services enable us to provide our customers with a single source of supply
for their EMS needs, reduce the time required to bring products to market,
lower their product costs and allow them to focus on those activities in
which they expect to add the highest value. We believe that our end-to-end
services allow us to develop closer relationships with our customers and
more effectively compete for their future business.
• Product Design and Engineering Resources. We focus on product design and
engineering technologies to produce advanced electronic systems. Our global
technology solutions group includes approximately 600 designers and
engineers located in 14 design and new product introduction centers in eight
countries. Our designers and engineers work closely with our customers to
develop new products and manage products throughout their life cycles. Our
design centers provide both hardware and software engineering services for a
range of technologies, including products using high-speed digital, analog,
radio frequency, wireless, mixed signal, optical and electro-mechanical
technologies. We also provide design services in connection with our
vertically integrated volume manufacturing services, including the design of
complex printed circuit boards and printed circuit board assemblies,
backplanes and backplane assemblies, enclosures, cable assemblies and memory
modular solutions.
• Vertically Integrated Volume Manufacturing Services. We provide a range of
vertically integrated volume manufacturing services. Key system components
that we manufacture include complete printed circuit boards and printed
circuit board assemblies, backplanes and backplane assemblies, enclosures,
cable assemblies, memory modules and optical modules. By manufacturing these
system components and subassemblies ourselves, we enhance continuity of
supply and reduce costs for our customers. In addition, we are able to have
greater control over the production of our customers’ products and retain
incremental profit opportunities for us. Examples of products that we
manufacture using our full range of services include wireless base stations,
network switches and optical switches.
• Advanced Technologies. We are a leader in providing services utilizing
advanced technologies, which we believe allows us to differentiate ourselves
from our competitors. These advanced technologies include the fabrication of
complex printed circuit boards and backplanes having over 60 layers and
process capabilities for a range of low loss, high performance materials,
buried capacitors and resistors, and high density interconnects using micro
via holes that are formed using laser drills. Our printed circuit board
assembly technologies include micro ball grid arrays, fine pitch discretes,
and small form factor radio frequency and optical components, as well as
advanced packaging technologies used in high pin count application specific
integrated circuits and network processors. We use innovative design
solutions and advanced metal forming techniques to develop and fabricate
high-performance indoor and outdoor chassis, enclosures and frames. Our
assembly services use advanced technologies, including precision optical
alignment, multi-axis precision stages and machine vision technologies. We
use sophisticated procurement and production management tools to effectively
manage inventories for our customers and ourselves. We have also developed
build-to-order, or BTO, and configure-to-order, or CTO, systems that enable
us to manufacture and ship finished systems within 48 to 72 hours after
receipt of an order. To coordinate the development and introduction of new
technologies and facilitate the dissemination of existing manufacturing
know-how throughout our facilities, we have established a centralized global
technology group to develop and implement new technologies to meet our
customers’ needs in various locations and increase collaboration among our
facilities.
• Global Capabilities. Most of our customers compete and sell their products
on a global basis. As such, they require global solutions to include
regional manufacturing solutions for their end markets, especially when time
to market is critical or local manufacturing content provides a competitive
advantage, and low cost solutions for competitive advantages. Our global
network of approximately 100 plants in more than 20 countries provides our
customers a combination of sites to maximize both the benefits of regional
and low costs manufacturing. This global solution is coordinated and managed
by one IT platform, which enables our customers to access key data and
status relative to individual programs.
• Customer-Focused Organization. We believe customer relationships are
critical to our success, and our organization is focused on providing our
customers with responsive services. Our key customer accounts are managed by
a dedicated account team, including a global business manager directly
responsible for account management. Global business managers coordinate
activities across divisions to effectively satisfy our customers’
requirements and have direct access to our senior management to quickly
address customer concerns. Local customer account teams further support the
global teams and are linked by a comprehensive communications and
information management infrastructure. Our senior management, including our
chief executive officer, Jure Sola, and our president and chief operating
officer, Randy Furr, are heavily involved in customer relations and devote
significant attention to broadening existing, and developing new, customer
relationships.
• Expertise in Serving Diverse End Markets. We have experience in serving
our customers in the communications, computing, multimedia, industrial and
semiconductor systems, defense and aerospace, medical and automotive
markets. Our diversification across end markets reduces our dependence upon
any one customer or industry. We have obtained a number of key
certifications, where appropriate, in the communications, medical, defense
and aerospace and automotive markets.
• Experienced Management Team. We believe that one of our principal assets
is our experienced management team. Our chief executive officer, Jure Sola,
co-founded Sanmina in 1980. Randy Furr, our president and chief operating
officer, has been with us for over 10 years, including previously as our
chief financial officer. The managers of our key business units each have
more than 10 years of experience with us or with predecessor companies that
we acquired. We believe that the significant experience of our management
team better enables us to capitalize on opportunities in the current
business environment.
Our Business Strategy
Our objective is to maintain and enhance our leadership position in the EMS
industry. Key elements of our strategy include:
Capitalizing on Our Comprehensive Services. We intend to capitalize on our
end-to-end services, which we believe will allow us to both sell additional
services to our existing customers and attract new customers. Our end-to-end
services include product design and engineering, volume manufacturing, final
system assembly and test, direct order fulfillment, after-market product
service and support and supply chain management. Our vertically integrated
volume manufacturing services enable us to manufacture additional system
components and subassemblies for our customers. When we provide a customer
with a number of services, such as component manufacturing or higher
value-added services, we often are able to improve our margins and
profitability. Consequently, our goal is to increase the number of
manufacturing programs for which we provide multiple services. To achieve
this goal, our sales and marketing organization seeks to cross-sell our
services to customers.
Extending Our Technology Leadership. We rely on advanced processes and
technologies to provide our vertically integrated volume manufacturing
services. We strive continually to improve our manufacturing processes and
have adopted a number of quality improvement and measurement techniques to
monitor our performance. We work with our customers to anticipate their
future manufacturing requirements and align our technology investment
activities to meet their needs. We use our design expertise to develop
product technology platforms that we can customize by incorporating other
components and subassemblies to meet the needs of particular OEMs. These
technologies enhance our ability to manufacture high value added, complex
products, allowing us to continue to win business from existing and new
customers.
Original Design Manufacturing Solutions. As a result of customer demand, and
their desire to contain research and development expenses, we have begun to
offer product designs that the customer can either brand or integrate into
their own system solution. In this model, we play the role of the original
design manufacturer, or ODM, provider to the customer. For ODM products, we
retain the intellectual property rights and earn royalty or licensing fees,
in addition to the manufacturing revenue associated with building and
shipping the product. Our current ODM portfolio covers several end markets,
including enterprise computing, communications, and multimedia. For example,
in the enterprise computing market, our two-processor 64 bit Opteron server
developed by Newisys, a wholly-owned subsidiary, is currently being shipped
to multiple customers. The ODM server product roadmap includes
multi-processor designs that will be scalable up to 32-processor systems.
Continuing to Penetrate Diverse End Markets. We focus our marketing efforts
on major end markets within the electronics industry. We have targeted
markets that offer significant growth opportunities and for which OEMs sell
complex products that are subject to rapid technological change, as the
manufacturing of these products requires higher value added services. Our
approach to our target markets is two-fold — we intend to strengthen our
significant presence in the communications and computing markets, while also
focusing on other under-penetrated target markets, including the medical,
industrial and semiconductor capital equipment and defense and aerospace
industries, many of which have not extensively relied upon EMS companies in
the past. Our diversification across market segments and customers reduces
our dependence on any particular market.
Pursuing Focused Acquisition Strategy. We seek acquisitions that give us the
opportunity to access new customers, manufacturing and service capabilities,
technologies and geographic markets and further develop existing customer
relationships. In some cases, OEMs may not be willing to outsource
manufacturing without engaging in a divestiture transaction. In light of the
current market environment, we are pursuing a disciplined acquisition
strategy that focuses on OEM divestiture transactions in which we can
augment existing strategic customer relationships with favorable supply
agreement terms or build new relationships with customers in attractive end
markets. We intend to continue to evaluate and pursue acquisition
opportunities on a highly selective and strategic basis.
Continuing to Seek Cost Savings and Efficiency Improvements. We seek to
optimize our facilities to provide cost-efficient services for our
customers. We provide extensive operations in lower cost locations,
including Latin America, Eastern Europe, China and Southeast Asia, and we
plan to expand our presence in these lower cost locations, as appropriate to
meet the needs of our customers. We believe that we are well positioned to
take advantage of future opportunities on a global basis as a result of our
vertically integrated volume manufacturing strategy.
Our Products and Services
We offer our OEM customers end-to-end services that span the entire product
life cycle. Examples of products that we manufacture for OEMs include
wireless and wireline communications switches, personal computers, high-end
computers and servers, avionics, medical imaging systems and digital
satellite set-top boxes. The manufacture of these products may require us to
use all or some of our end-to-end services.
Each element of our end-to-end services is described in greater detail
below.
Product Design and Engineering. Our design and engineering group, which we
believe is one of the strongest in the EMS industry, provides customers with
design and engineering services for initial product development, detailed
product design and preproduction. This group complements our vertically
integrated volume manufacturing capabilities by providing manufacturing
design services for the manufacture of printed circuit boards, backplanes
and enclosures. We provide initial product development and detailed product
design and engineering services for products such as communications base
stations, optical switches and modules, radio frequency amplifier modules,
network switches, personal computers and servers.
• Initial Product Development. We provide a range of design and engineering
services to customers to complement their initial product development
efforts. During this phase, our design engineers work with our customers’
product development engineers to assist with design reviews and product
concepts.
• Detailed Product Design. During the detailed product design phase, we work
with our customers’ product development engineers to optimize product
designs to improve the efficiency of the volume manufacturing of these
products and reduce manufacturing costs. We further analyze product design
to improve the ability of tests used in the manufacturing process to
identify product defects and failures. We provide software development
support for product development, including installing operating systems on
hardware platforms, developing software drivers for electronic devices, and
developing diagnostic, production test and support software. We design
components that are incorporated into our customers’ products, including
printed circuit boards, backplanes and enclosures.
• Preproduction. After a detailed product design has been completed and the
product is released for prototype production, we can build a prototype on a
quick turn around basis. We then analyze the feasibility of manufacturing
the product prototype and make any necessary design modifications to the
prototype and test the prototype to validate its design. We also provide
early-stage test development during the prototype phase. We evaluate
prototypes to determine if they will meet safety and other standards, such
as standards published by Underwriters Laboratories, an independent product
safety testing and certification organization, and other similar domestic
and international organizations. We review the material and component
content of customers’ designs with a view to designing in alternative
components that may provide cost savings. Our preproduction services help
our customers reduce the time required to bring new products to market.
• Manufacturing Design Services. We provide our own designs for our
vertically integrated system components and subassemblies, including:
— Printed Circuit Board and Backplane Design. We have a dedicated printed
circuit board design group that designs and engineers complex printed
circuit boards and backplanes. These printed circuit boards and backplanes
incorporate high layer counts and large form factors and are used in complex
products such as optical networking products and communications switches.
Our designs also incorporate component miniaturization technologies and
other advanced technologies that increase the number and density of
components that can be placed on a printed circuit board. These technologies
enable OEMs to provide greater functionality in smaller products. We also
provide signal integrity engineering services, which involve the maintenance
of the quality and integrity of high speed electrical signals as they travel
through a system.
— Enclosure Design. We have a dedicated enclosure design group that designs
and engineers complex enclosures. We can design custom enclosures to meet
customer specifications and offer a range of proprietary designs tailored to
particular applications. Our enclosure design services include the design of
thermal management systems, which dissipate heat generated by the components
within an enclosure. We design enclosures that are used in both indoor and
outdoor environments. We also design enclosures that include both stackable
and rackmount chassis configurations. In stackable configurations, component
modules are stacked on top of each other, while in rackmount configurations,
component modules slide into racks within the enclosure. Rackmount
configurations often are used for complex products, such as communications
switches that are frequently upgraded in the field by inserting new
components. Our design engineers work with a range of materials, including
metal, plastic and die-cast material. We design indoor and outdoor wireless
base station cabinets, enclosures for high-end servers and data storage
systems and enclosures for magnetic resonance imaging systems. We recently
developed a sophisticated proprietary enclosure with a thermal management
system for high density servers used for managed hosting in data center
applications. We offer this enclosure platform to our customers who can then
customize it with modules and subsystems designed and manufactured to their
specifications. By using our common platform customers reduce their
enclosure costs.
Volume Manufacturing. Volume manufacturing includes our vertically
integrated manufacturing services described in greater detail below.
• Printed Circuit Boards. Our ability to reliably produce printed circuit
boards with high layer counts and narrow circuit track widths makes us an
industry leader in complex printed circuit board fabrication. Printed
circuit boards are made of laminated materials and contain electrical
circuits and connectors that interconnect and transmit electrical signals
among the components that make up electronic devices. We are among a small
number of manufacturers that specialize in manufacturing complex multi-layer
printed circuit boards. Multi-layering, which involves placing numerous
layers of electrical circuitry on a single printed circuit board, expands
the number of circuits and components that can be contained on a printed
circuit board and increases the operating speed of the system by reducing
the distance that electrical signals must travel. Increasing the density of
the circuitry in each layer is accomplished by reducing the width of the
circuit tracks and placing them closer together on the printed circuit
board. We are currently capable of efficiently producing printed circuit
boards with up to 60 layers and circuit track widths as narrow as three
mils. We use sophisticated circuit interconnections between certain layers
to improve the performance of printed circuit boards. We have developed a
proprietary material technology known as buried capacitance as well as
various other processes that are designed to provide improved electrical
performance and greater connection densities on printed circuit boards.
• Printed Circuit Board Assembly and Test. Printed circuit board assembly
involves attaching electronic components, such as integrated circuits,
capacitors, microprocessors, resistors and memory modules, to printed
circuit boards. The most common technologies used to attach components to
printed circuit boards are surface mount technology, or SMT, and
pin-through-hole assembly, or PTH. SMT involves the use of an automated
assembly system to solder components to the printed circuit board. In PTH,
components are placed on the printed circuit board by insertion into holes
punched in the circuit board. Components also may be attached using
press-fit technology in which components are pressed into connectors affixed
to the printed circuit board. We use SMT, PTH, press-fit as well as new
attachment technologies that are focused on miniaturization and increasing
the density of component placement on printed circuit boards. These
technologies, which support the needs of our OEM customers to provide
greater functionality in smaller products, include chip-scale packaging,
ball grid array, direct chip attach and high density interconnect. We
perform in-circuit and function testing of printed circuit board assemblies.
In-circuit testing verifies that all components have been properly inserted
and attached and that the electrical circuits are complete. We perform
functional tests to confirm that the board or assembly operates in
accordance with its final design and manufacturing specifications. We either
design and procure test fixtures and develop our own test software, or we
use our customers’ test fixtures and test software. In addition, we provide
environmental stress tests of the board or assembly that are designed to
confirm that the board or assembly will meet the environmental stresses,
such as heat, to which it will be subject.
• Backplanes and Backplane Assemblies. Backplanes are very large printed
circuit boards that serve as the backbones of sophisticated electronics
products and provide interconnections for printed circuit boards, integrated
circuits and other electronic components. We fabricate backplanes in our
printed circuit board plants. Backplane fabrication is significantly more
complex than printed circuit board fabrication due to the large size of
backplanes. We manufacture backplane assemblies by attaching electronic
components and printed circuit boards to backplanes using SMT, PTH,
press-fit and other advanced component attachment technologies. We also
perform in-circuit and functional tests on backplane assemblies. We
manufacture complex optical backplanes that are 30 by 50 inches in size,
have 48 layers and 65,000 holes for component placement, as well as our
10-gigabit copper-based backplane design. These are among the largest and
most complex commercially manufactured backplanes, and we are one of a
limited number of manufacturers of these complex backplanes.
• Enclosures. Enclosures are cabinets that house and protect complex and
fragile electronic components, modules and subsystems. Our enclosure
manufacturing services include fabrication of cabinets and chassis and racks
that are placed inside the cabinets to hold the subassemblies and modules
that comprise electronic devices. We integrate power and thermal management
subsystems into our enclosures. We manufacture a broad range of enclosures
with a broad range of materials including metal, plastics and die cast
materials. Enclosures we manufacture range from basic enclosures, such as
enclosures for personal computers, to large and highly complex enclosures,
such as those for indoor and outdoor communications base station products.
We have recently developed a proprietary enclosure with a thermal management
system designed for high density servers for managed hosting in data center
applications. Our customers can have their unique products built on this
platform by inserting their proprietary modules and subsystems.
• Cable Assemblies. Cable assemblies are used to connect modules, assemblies
and subassemblies in electronic devices. We provide a broad range of cable
assembly products and services. We design and manufacture a broad range of
high-speed data, radio frequency and fiber optic cabling products. Cable
assemblies that we manufacture are often used in large rack systems to
interconnect subsystems and modules.
• Optical Modules. Optical modules are integrated subsystems that use a
combination of industry standard and/or custom optical components. We are a
leading provider of complete optical systems for customers in
telecommunications, networking, and military markets. Our recent experience
in optical communications and networking products spans long haul/ultra long
haul and metro regions for transport, access and switching applications,
including last mile solutions. Our service offerings for optical
communications customers are designed to deliver end-to-end solutions with
special focus on system design, optical module assembly, optical test and
integration, ranging from traditional OC3-12-48 to OC192 and OC768
applications.
• Memory Modules. Memory modules are integrated subsystems that use industry
standard integrated circuits including digital signal processors, or DSPs,
non-volatile flash memory and random access memory, or RAM. These modules
consist of standard products that are sold for a range of applications to a
broad base of customers and custom modules that are built for use in a
particular OEM’s product or system. We design and manufacture a variety of
modular solutions, including standard and custom DSP, flash memory modules
and RAM. In addition, we are a leading supplier of solutions to increase
memory component density on printed circuit boards. We offer advanced NexMod
memory modules that contain multiple memory layers vertically stacked and
mounted to a printed circuit board. NexMod solutions are tailored for
network infrastructure and complex server applications. We also provide
innovative DDRI and DDRII DRAM modules utilizing stacked CSP technology
offering high densities and small form factors. We provide custom module
solutions including mixed memory and our proprietary foldable rigid assembly
microelectronics module, or FRAMM. Our FRAMM technology incorporates two
memory modules with a flexible cable between them. The module folds over
itself, effectively doubling the memory capacity that can be plugged into a
memory slot. We integrate both standard and custom modules in products that
we manufacture.
Final System Assembly and Test. We provide final system assembly and test in
which assemblies and modules are combined to form complete, finished
products. We often integrate printed circuit board assemblies manufactured
by us with enclosures, cables and memory modules that we also produce. Our
final assembly activities also may involve integrating components and
modules that others manufacture. The complex, finished products that we
produce typically require extensive test protocols. Our test services
include both functional and environmental tests. We also test products for
conformity to applicable industry, product integrity and regulatory
standards. Our test engineering expertise enables us to design functional
test processes that assess critical performance elements, including
hardware, software and reliability. By incorporating rigorous test processes
into the manufacturing process, we can help to assure customers that their
products will function as designed. Products for which we currently provide
final system assembly and test include wireless base stations, wireline
communications switches, optical networking products, high-end servers and
personal computers.
Direct Order Fulfillment. We provide direct order fulfillment for our OEM
customers. Direct order fulfillment involves receiving customer orders,
configuring products to quickly fill the orders and delivering the products
either to the OEM, a distribution channel (such as a retail outlet) or
directly to the end customer. We manage our direct order fulfillment
processes using a core set of common systems and processes that receive
order information from the customer and provide comprehensive supply chain
management, including procurement and production planning. These systems and
processes enable us to process orders for multiple system configurations,
and varying production quantities, including single units. Our direct order
fulfillment services include BTO and CTO capabilities. BTO involves building
a system having the particular configuration ordered by the OEM customer.
CTO involves configuring systems to an end customer’s order. The end
customer typically places this order by choosing from a variety of possible
system configurations and options. We are capable of meeting a 48 to 72 hour
turn-around-time for BTO and CTO by using advanced manufacturing processes
and a real-time warehouse management system and data control on the
manufacturing floor. We support our direct order fulfillment services with
logistics that include delivery of parts and assemblies to the final
assembly site, distribution and shipment of finished systems, and processing
of customer returns. Our systems are sufficiently flexible to support direct
order fulfillment for a variety of different products, such as desktop and
laptop computers, servers, workstations, set-top boxes, medical devices,
scanners, printers and monitors.
After-Market Product Service and Support. We provide a range of after-market
product service and support services, including replacing products at
customer locations, product repair, re-manufacturing and maintenance at
repair depots, logistics and parts management, returns processing,
warehousing and engineering change management. We also provide support
services for products that are nearing the end of their life cycles. These
end-of-life support services involve both customer support and manufacturing
support activities. We support the customer by providing software updates
and design modifications that may be necessary to reduce costs or design-in
alternative components due to component obsolescence or unavailability.
Manufacturing support involves test engineering support and
manufacturability enhancements. We also assist with failure product
analysis, warranty and repair and field service engineering activities.
Global Supply Chain Management
Supply chain management involves the planning, purchasing and warehousing of
product components. The objective of our supply chain management services is
to reduce excess component inventory in the supply chain by scheduling
deliveries of components on a just-in-time, as-and-when-needed basis. We use
sophisticated production management systems to manage our procurement and
manufacturing processes in an efficient and cost effective manner. We
collaborate with our customers to enable us to respond to their changing
component requirements for their products and to reflect any changes in
these requirements in our production management systems. These systems often
enable us to forecast future supply and demand imbalances and develop
strategies to help our customers manage their component requirements. Our
enterprise-wide software systems provide us with company-wide information
regarding component inventories and orders to standardize planning and
purchasing at the plant level. These systems enable us to transfer product
components between plants to respond to changes in customer requirements or
to address component or other raw material shortages.
We purchase large quantities of electronic components and other raw
materials from a range of suppliers. As a result, we often receive volume
discounts or other favorable terms from suppliers, which can enable us to
provide our customers with greater cost reductions than they can obtain
themselves. Our supplier relationships often enable us to obtain electronic
components and other raw materials that are in short supply or return excess
inventories to suppliers even when they are not contractually obligated to
accept them.
Our End Markets
We have targeted markets that offer significant growth opportunities and for
which OEMs sell complex products that are subject to rapid technological
change, as the manufacturing of these products requires higher value added
services. We believe that markets involving complex, rapidly changing
products offer us opportunities to produce products with higher margins
because these products require higher value added manufacturing services and
may also include our advanced vertically integrated components. Our approach
to our target markets is two-fold — we intend to strengthen our significant
presence in the communications and computing markets, while also focusing on
other under-penetrated target markets, including the medical, automotive,
industrial and semiconductor capital equipment and defense and aerospace
industries, many of which have not extensively relied upon EMS companies in
the past. Our diversification across market segments and customers reduces
our dependence on any particular market.
Communications: Wireless, Optical and Wireline Transmission and Enterprise.
In the communications sector, we focus on wireless transmission systems,
optical networking and wireline transmission systems and enterprise
networking systems. Our product design and engineering staff has extensive
experience designing advanced communications products for these markets.
Products we manufacture include optical switches, wireless base stations,
wireline switches, routers, transceivers, satellite receivers, radio
frequency and point-to-point microwave systems, and Bluetooth appliances
among others. Selected customers in communications equipment include
Alcatel, Cisco, Ericsson, Lucent, Nokia, Nortel, and Tellabs.
Computing: Personal and Business (Enterprise) Computing and Storage Systems.
We provide services for OEMs of personal computer, or PC, systems,
enterprise computing, and storage systems.
We provide services to multiple major PC manufacturers. These services
include primarily BTO and CTO manufacturing of desktop PC systems serving
primarily the enterprise markets. Our PC manufacturing plants can build and
configure systems and have them ready for shipment within 48 to 72 hours of
receipt of a customer order. These plants are typically located in the
geographic region to which the finished system will be shipped to rapidly
deliver finished products. We manufacture a wide variety of desktop and
laptop PCs and other PC components for our customers, including Dell, HP and
IBM.
We also provide services to the storage and server markets. Our expertise in
manufacturing products for the storage and server markets stems from our
technological capabilities and vertical integration. We are also the leading
vertically integrated supplier of complex, multilayer printed circuit boards
and backplanes, and many high-end computer designs incorporate these
components. We have developed a proprietary enclosure design for high
density servers used in data center applications. High-end computing
products we manufacture include complex, fault tolerant servers and
enterprise storage. Our customers in the storage and server markets include
EMC, HP, IBM and Sun.
Multimedia. We manufacture digital satellite set-top boxes, personal video
recorders, digital home gateways and internet protocol entertainment
devices. For our multimedia OEM customers, we manage the production process
for multimedia products, including product design and engineering, test
development, supply chain management, manufacturing of printed circuit
boards and assemblies, final system assembly and test, and direct order
fulfillment, including our BTO and CTO capabilities. Our major multimedia
customers include EchoStar, Nokia, and Royal Philips Electronics.
Industrial and Semiconductor Systems. Our expertise in manufacturing
industrial instrumentation products includes production of semiconductor
capital equipment, front-end environmental chambers, computer controllers,
and test and inspection equipment. We also have significant experience
manufacturing scanning equipment and devices, flat panel display test and
repair equipment, optical inspection and x-ray equipment for use in the
printed circuit board assembly industry, and deep ultraviolet
photolithography equipment. Our industrial and semiconductor systems
customers include GE and Honeywell International Inc, or Honeywell.
Defense and Aerospace. In December 2001, we merged with SCI Systems, Inc.,
or SCI. SCI began operations as Space-Craft, Inc., in the early 1960’s and
was then principally a supplier to the defense and aerospace industries. We
continue to offer our end-to-end services to the defense and aerospace
industry. We believe that this industry currently represents a significant
growth opportunity due to increased defense spending, as well as the growing
desire of defense and aerospace OEMs to outsource non-core manufacturing
activities to reduce costs. Our experience in serving the aerospace
industry, as well as our product design and engineering capabilities,
represent key competitive strengths for us in the defense and aerospace
market. Defense and aerospace products that we manufacture include avionics
systems, weapons guidance systems, cockpit communications systems, spread
spectrum communications systems, and space systems. Key defense and
aerospace customers include The Boeing Company, Honeywell, Lockheed Martin
Corporation and Raytheon Company.
Medical. We provide comprehensive manufacturing and related services to the
medical industry, including design and regulatory approval support. The
manufacturing of products for the medical industry requires compliance with
domestic and foreign regulations, including the Food and Drug
Administration’s, or FDA’s, quality system regulations and the European
Union’s medical device directive. In addition to complying with these
standards, our medical manufacturing facilities comply with ISO 13485
(formerly EN 46002) and ISO 9001:2000. Medical products that we manufacture
include magnetic resonance imaging equipment, blood glucose meters, computer
tomography scanners, respiration monitors, ventilators, anesthesia
workstations, infusion pumps, thermo-regulation devices, and
cardio-resuscitation systems. Our medical customers include GE Medical
Systems, Philips Medical Systems, Siemens Medical Health Services
Corporation and Roche Pharmaceuticals.
Automotive. In recent years, the electronics content in automobiles has
increased substantially as new entertainment, wireless communication and
navigation systems are being offered as standard features or factory
options. We believe that this increased usage of electronic devices in
automobiles will continue, and that there will be significant opportunities
for EMS companies to manufacture automotive electronics. Accordingly, we
have formed an automotive products group to focus on these opportunities.
Customers
Our ten largest customers (listed in alphabetical order) are Alcatel, Dell,
EchoStar, Ericsson, Hitachi, HP, IBM, Nokia, Nortel and Roche.
A relatively small number of customers historically have been responsible
for a significant portion of our net sales. Sales to our ten largest
customers accounted for 68.5% of our fiscal 2003 net sales and 65.8% of our
fiscal 2002 net sales. For fiscal 2003, our two largest customers, IBM and
HP, accounted for approximately 28.8% and 9.6%, respectively, of our net
sales.
We seek to establish and maintain long-term relationships with our customers
and have served many of our principal customers for several years.
Historically, we have had substantial recurring sales from existing
customers. We have also expanded our customer base through acquisitions and
our marketing and sales efforts. We have been successful in broadening
relationships with customers by providing vertically integrated products and
services, as well as multiple products and services in multiple locations.
We typically enter into supply agreements with our major OEM customers with
terms ranging from three to five years. Many of these supply agreements were
entered into in connection with divestiture transactions, which are
transactions in which we also acquire plants, equipment and inventory from
the OEM. In these divestiture-related supply agreements, the customer
typically agrees to purchase its requirements for particular products in
particular geographic areas from us. Our OEM customer supply agreements that
were not entered into in connection with divestitures typically do not
require the customer to purchase their product requirements from us, and in
these cases customers may have alternate sources of supply available to
them. Our supply agreements with our OEM customers generally do not obligate
the customer to purchase minimum quantities of products. However, the
customer typically remains liable for the cost of the materials and
components that we have ordered to meet the customer’s production forecast
but which are not used, provided that the material was ordered in accordance
with an agreed-upon procurement plan. In some cases, the procurement plan
contains provisions regarding the types of materials for which our customers
will assume responsibility. Our supply agreements typically contain
provisions permitting cancellation and rescheduling of orders upon notice
and subject, in some cases, to cancellation and rescheduling charges. Order
cancellation charges typically vary by product type and depend upon how far
in advance of shipment a customer notifies us of the cancellation of an
order. In some circumstances, our supply agreements with customers provide
for cost reduction objectives during the term of the agreement.
We generally do not obtain firm, long-term commitments from our customers
under supply agreements. As a result, customers can cancel their orders,
change production quantities or delay orders. Uncertain economic conditions
and our general lack of long-term purchase contracts with our customers make
it difficult for us to accurately predict revenue over the longer-term. Even
in those cases where customers are contractually obligated to purchase
products from us or repurchase unused inventory from us that we have ordered
for them, we may elect not to immediately enforce our contractual rights
because of the long-term nature of our customer relationships and for other
business reasons, and instead may negotiate accommodations with customers
regarding particular situations.
Competition
We face competition from other major global EMS companies such as Celestica,
Inc., Flextronics International Ltd., Jabil Circuit, Inc. and Solectron
Corporation, as well as other EMS companies that often have a regional or
product, service or industry specific focus. In addition, our potential
customers may also compare the benefits of outsourcing their manufacturing
to us with the merits of manufacturing products themselves.
We compete with different companies depending on the type of service or
geographic area. We believe that the primary basis of competition in our
target markets is manufacturing technology, quality, responsiveness, the
provision of value-added services and price. To remain competitive, we must
continue to provide technologically advanced manufacturing services,
maintain quality levels, offer flexible delivery schedules, deliver finished
products on a reliable basis and compete favorably on the basis of price. We
believe that our primary competitive strengths include our ability to
provide global end-to-end services, our product design and engineering
resources, advanced technologies, high quality manufacturing assembly and
test services, customer focus, expertise in serving diverse end markets and
an experienced management team.
In addition to EMS companies, we also compete, with respect to certain of
the EMS services we provide, with ODMs. These companies, typically based in
Asia, design products and product platforms that are then sold to OEMs,
system integrators and others who configure and resell them to end users. To
date, ODM penetration has been greatest in the personal computer, including
both desktop and notebook computers, and server markets.
Contract Manufacturers in the Directory
Benchmark Electronics
Celestica
Flextronics
Jabil Circuit
Sanmina-SCI Corp.
Solectron
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