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Electronics Production | November 25, 2008

Sanmina-SCI to expand in Sweden and Germany

Evertiq was invited to interview Oliver Digel, Senior Vice President Business Development EMEA at Sanmina-SCI, at this year’s electronica fair in Munich. The 4th biggest EMS provider is looking to expand capacities in Sweden and to expand its team in Germany.
How do you see Sanmina-SCI’s future in Europe in – say - the next 2-3 years?
T here are macro-economic developments in certain areas, which are influencing the EMS-business. So, ideally, we would think that over the next 6 to 12 months more companies will be thinking about more outsourcing. Reasons could be capital availability and maybe a stronger focus on core competencies. If you look into Sanmina’s business specifically, we are an absolute leader in certain market areas, such as Medical, Defence & Aerospace and Industrial. I think we have capabilities, which are unique in the EMS industry. We, for example, are building huge MRI or CT scanners within the medical segment. These are very complex products. And, we believe that there is more outsourcing –more opportunities – also coming in these areas. So again, we have a pretty strong focus in the Medical, in the Defence & Aerospace, as well as the Industrial market segment. These are also the segments, where we serve our European customers from our European manufacturing facilities.

So you would say that Medical is the primary core competency for Sanmina-SCI?
Yes, Sanmina-SCI manages organisations within product or market specific divisions. So we have a global organisation for Medical, for instance.

So I would see the future quite positive, even in high-cost locations. Sanmina still operates factories in Sweden, Finland, UK, Ireland, Germany and Israel. So we still have quite a few high-cost locations and we are actually growing in these locations.

We are expanding right now in Sweden. We are expanding the facility and we are hiring people. In Germany we are expanding out aviation and aerospace team. Our manufacturing facility in Gunzenhausen, Germany has recently been certified for this market segment. So from that perspective, we see a quite positive future in front of us.

Does Sanmina-SCI plan to increase staff numbers in Europe or are the mentioned staff increases attached to new projects?
It is hard to say this in general, because every company in this business has ambitions to grow. But than on the other side, you need to pick your spots where you can differentiate. If you look into some of the European markets, some of the North American markets – we have capabilities which allow us to grow the business in these markets. And from that point of view, we clearly – as a company – have strong intention and strong plans to grow. Let’s say – over the next few years by 10% - 15% annually. In revenues, in capacities in staff – it comes all together.

How much does the European manufacturing contribute to the global turnover of Sanmina-SCI?
We have a long history in Europe and our European share, if I take the business coming out of European customers as a contribution to our global share of business, it is approx. 30%. This also includes other services for our European customers worldwide.

Do you also see a lot of consolidations or restructuring heading towards Europe?
I think that the last 5 6 years have been a pretty tough environment for the EMS-industry. If I go back to 2002, 75% of our capacity was more or less in high-cost – Western European or North American – locations. And this has shifted over the last 5 years – to now 75% in low-cost locations such as Asia, Eastern Europe or Mexico. This has brought a lot of restructuring with it. So from our perspective, we don’t foresee significant further restructuring. We think our footprint is well aligned with the markets and we believe we are perfectly positioned to serve – with local capabilities local requirements. This also comes in combination with low-cost capabilities serving low-cost requirements. So, I would not foresee any more restructuring.

Hungary seems to be the biggest, European location for Sanmina-SCI. What sort of manufacturing do you operate in your Hungarian facilities?
If you look at our footprint, you see that our biggest European footprint is in Hungary and we believe in the advantages of Hungary – even if the salary structure and the cost structure is moving slightly up - and we still see Hungary as the most competitive option in Eastern Europe. The logistics, the technical talent available, the general infrastructure available is perfect and it is working pretty well. We run after sales, logistics and repair services out of Hungary. We can reach the majority of Europe within 36 hours. So that’s a very economic location.

We are continuously investigating other countries in Europe. We have investigated the Ukraine, Belarus, Romania, Bulgaria, but based on what we see today, we still believe that Hungary is a very competitive location.

Do you have further plans to invest in Eastern Europe? If so, where and when?
We don’t have concrete plans. We are continuously monitoring the development in these countries and when the time is right and if there is a compelling event to do something in another Eastern European country, we will certainly consider and do that. And that’s why we are always paying attention. Keeping options open.

Does the general economic downturn affect Sanmina-SCI?
I think it’s hard to say. So there clearly are uncertainties, which are coming with the overall financial crisis. Right now, everyone is seeing some impacts coming out of the automotive business. There are the car makers that are shutting down factories for several weeks, which means they are also shutting off the supply. The immediate affect is going straight through the entire supply chain. Beyond that – in the other industries – we don’t really see a significant impact right now.

In longer term I would personally see positive elements for our industry – for the EMS-industry – coming out of this. I certainly believe companies will go back or rethink where they invest their capital, where they tie down their capital and how they reduce potentially future capital expenditures. This might lead to more outsourcing. So why should I put my money into – let’s say brick and mortar, into machines, into inventory – if I can buy that from an outside service provider. So I personally would think that we will see some positive trends coming our way.

How important is the automotive sector for Sanmina-SCI?
The automotive sector is our smallest market sector. It’s a niche market segment for us. We are focussed, we are serving a few customers, but as I said it’s a very small, single digit percentage of our total revenue.

Is there something that you would like to share with our readers?
A single key point from my perspective would be that the EMS-industry is a service business. I think that one of the key advantages that Sanmina brings to that industry is that we are customer orientated. I would say that we have – by far – the largest sales and account management organisation inside the EMS-industry. Our top 20 customers are making up between 60% and 65% of our revenue. This shows that we are focussed on a broader range of customers and we really believe in relationships and also proximity to our customers. We have more than 300 staff that are working in customer interface, business development, account management and infrastructure.

At least we should have a strong relationship to the place where the customer is located. This could mean that we have a customer in Germany. We help this customer to develop a new product, introduce a new product in Germany as our local manufacturing presence. But than, if the market is demanding a low-cost solution or a global footprint solution to serve local markets somewhere else we can transfer the product internally to locations such as China, Indonesia, India or Mexico. And I think this is one of our strengths. Sanmina is one of the companies that operate a single ERP system. It is one instance, which is exactly the same configuration in all our manufacturing operations, which makes it easier to move products from one location to the other.

Thank you for the interview.

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