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Electronics Production | December 01, 2009

Flextronics invests in Sweden

evertiq has interviewed Mattias Lindhe (Vice President,SBS) and Andreas Bergström (General Manager SBS, Swedish Operations).
What does the global EMS-provider Flextronics plan for its rather local operations in Sweden?

To grow with our customers……it is that simple.

As you know we are proud to have maintained a strong presence in Sweden over many years. The market has continued to shift and evolve during this time, and we have been part of this ever changing landscape. For Flextronics, the Swedish market remains a key area of focus and we have strong relationships with several leading companies across various sectors. Therefore we believe that having this local presence is essential to our future success, not only with our existing customers, but also those new or emerging players that we are currently engaged with or that we hope to work with in the future.

There is no shortage of emerging technology based companies in Sweden, so we strongly believe that there is a future for SBS in this region.

And what is the Karlskrona facility in particular?

It is interesting that you focus on Karlskrona. However we should clarify for your readers that Flextronics SBS actually operates two manufacturing sites in Sweden. Our second location is Linköping. This site was added to the SBS Network earlier this year, and was previously involved in NPI and Development for Mobile and Hand Held Devices.

We made a strategic decision to integrate Linköping into the SBS “family”, we identified that having two sites allowed us to target an increased share of the available target markets and customers. For SBS, this is key part of our growth plans. We are always looking at new or emerging markets, trying to understand what gaps we need to fill to compete successfully.

While the 2 units have their own standalone capabilities and core skills and services, combined they form our SBS Sweden Operations.

So we would like to share with you a little further our overall strategy for Sweden if that is ok, rather than focus on just one site.

How much floor space do you have in each of the facilities?

The site in Karlskrona is around 27 000m2 and Linköping is close to 3 500m2. So we believe that we have sufficient capacity and room for new business. In general terms, production capacity is often measured by the number of SMT lines you have, between both sites we have 9 lines.

While we cannot disclose financial data, we can confirm that there has been substantial investment made over the last year, not only to improve existing services provided, but also to expand our equipment and technical capabilities, again allowing us to target a wider range of customers.

This would most likely buck the trend in the local EMS market, but we feel confident to invest in our future.

What is the Hybrid-House-Concept and how do you implement it in Karlskrona?

You may recall that we actually introduced this concept several months back. We have been working both internally and externally with our customers and suppliers to improve this model, learning and adapting this along the way.
So let me try and provide you with a short update.

Hybrid-House is as the name suggests a “hybrid” or mixed business model that is basically built around the following principle: to provide the customer with the “lowest total cost of ownership” by providing local interface but the opportunity to leverage and utilise lower cost manufacturing for their products as part of a complete end to end supply chain strategy.Sounds simple right?

Let me try and explain some more. Over the years, we have learned through our engagement with our customers and through our experience with product life cycle trends, that every customer has different requirements and challenges that we must help them to balance in the most cost effective manner. For some, having products manufactured in Sweden is the ideal strategy, and we support this fully. While others may chose to have their production off-shore in Eastern Europe or China.

Again, we always look to find the best fit solution. But what about those customers who need to take advantage of some lower cost manufacturing, but without the time zone differences or travel requirements that may be needed to implement design or engineering changes for example?

This is where the Hybrid House model comes into play. Effectively, it is the best of both worlds, where we can provide local interface, even NPI or partial product assembly while at the same time, we seamlessly manage our own internal supply chain for production assemblies using our low cost footprint. Depending on the customers end markets, product complexity and their own requirements, we may chose to have all final product configuration or box build done locally in Sweden. We will help the customer to define what the most optimal solutions for them is.

But the customer will have one local interface and a single point of contact – in short our Hybrid House.

Will you invest any more in the Karlskrona facility or hire any new staff?

This is always a difficult question to answer as our business model is based on the market dynamics surrounding our end customers. Simply put, we believe that we have the right size organisation structure to maintain the competitive advantages that our customer expect from us. It is always difficult to predict future staffing needs, but Flextronics will always invests in staff, technology as well as equipment when required.

What specific differences exist between your two Swedish facilities?

Historically both sites have been focused on unique customers and end markets. As stated earlier, our site in Linköping was mainly involved in Mobile type applications. However the techniques and skills developed for such are now readily deployed across many more sectors as part of our overall market strategy in Sweden. As you know, our site in Karlskrona has been mainly involved in high level assembly and build to order for Industrial and Infrastructure markets. Perhaps the key difference between the sites is that Karlskrona also provides our customers with complete end to end services including full logistics management and product fulfilment. So, as well as making the products, we actually also ship these on behalf of our customers. This is probably the main difference between the sites today.

From a product development perspective, between both sites we have more than 100 engineers involved in R&D, test development, hardware and software design. Again, each site has unique or specialist skills gained over many years of working with particular sectors, but when you add this together it allows us to provide a complete range of capabilities to all customers.

We believe that having these skills is key to our future growth plans in Sweden.

How and why has Flextronics developed the SBS concept?

The SBS concept has been working successfully for 4 years now. We have shared how and why this was created many times. But if we reflect on our core business activities for a second, we have remained faithful to our basic principles of supporting local customers in our local markets while providing them with the benefits of a global company such as Flextronics.

This is what we believe makes us stand out from the crowd.

We have demonstrated over these last few years that through the SBS concept, smaller local OEM’s can successfully engage with a Global EMS provider and get the same, if not better levels of service that they perhaps would have enjoyed working with small privately held EMS providers. While at the same time, gaining access to a much larger knowledge pool. That ultimately helps them with their own product design, manufacturing or service requirements.

Where do you see potential growth segments for Flextronics SBS in Sweden and in EU?

In Sweden, we will continue to focus mainly on Industrial and Infrastructure markets. Both of these sectors are probably the most attractive for SBS due to the high number of companies who are active in this space in the local market. There are many Global established companies based in Sweden, but there is also a second tier of OEM’s who have begun to capture market share and create increased brand awareness in their respective sectors. Overall this leads us to conclude that there is strong future for Sweden in the electronics markets.

Staying with the Nordic region, there is also great opportunities for Renewable Energy Markets such as Solar, Wind and Wave Energy.

For the rest of Europe, Industrial is definitely a strong focus for SBS as this covers so many sub-sectors, many of which are untapped potential for EMS providers today. Other key sectors for SBS include Medical, Automotive, Aerospace and Defence.

To summarize, really we don’t see any market sector boundaries. If we have the capabilities or can provide value add services then we will always look to develop our strategy to penetrate the markets and expand our solutions portfolio.

What is unique about the Swedish SBS unit?

Another great question: We believe that there is no other EMS-provider in Sweden, who can provide its customers with the same global presence as we do, or can provide its customers with the complete range of services offered by Flextronics. Furthermore, we continue to invest in technology, our vertical integration and services. While all of these skills may not be in our facilities in Sweden, it is part of the global Flextronics, and therefore easily accessible byour local customers.

At the same time we also acknowledge that we face several extremely competent local competitors in our daily business, many of them focused on niche sectors or technology. So we are not blind to the market, we know that we must remain competitive and focused on the execution of our own strategy.

Are there differences between the SBS units in Eastern & Western Europe?

To summarize, the regions that SBS has local presence in Europe today share similar characteristics in terms of customer profiles and end market sectors. So the challenges and opportunities are actually pretty close across the different countries. I think what is important to consider is that we are strategically located close to our customers for a reason, they want us to be close, this provides them with stability and flexibility. We will continue to develop our Hybrid House Concept across Western European sites to allow us to further penetrate local markets and capture new customers.

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