Electronics Production | December 02, 2008

Flextronics sees High Level Assembly as Europe’s future

evertiq talked to Mattias Lindhe, Vice President for Flextronics SBS, about future developments in the EMS-industry. The EMS-giant sees Europe’s future in High Level Assembly and is to focus on the development of its European operations, especially on Germany and the UK.
How do you see the development of Flextronics SBS in Europe?

We constantly work to adapt to the needs of our customers and their markets. We are trying to adapt the whole time and make sure that we have resources in all the places, where our customers need them. We make sure that we have the capability and capacity where they need it and when they need it. We now have to face a strong financial headwind in Europe and the only thing I can say is that we will do our utmost to constantly monitor our clients’ need. This is very important.

In which European region has Flextronics SBS a strong presence?

Europe, as a region, is important for us – absolutely. And above all, we have a very large customer base in Europe. There are a lot of companies in the electronics and services industries that are based in Europe. For them it becomes more and more important to have a local presence. It has become more expensive to travel and also many people don’t want to spend time away from their families. So a local presence will be very important. And that is want we are trying to achieve at Flextronics SBS. We are located where our customers are. But I should stress that does not mean that we have to produce in Sweden, because you are in Sweden. I can also produce your products for you in – let’s say the Ukraine, Hungary or China. But it is the local presence that we want. Just like being a local family business, but with a big help in the background. We realize that this is important for our customers in Europe.

Before Flextronics operated its SBS Division, Flextronics felt more like an American giant in Sweden. Now it feels like you are also competing on a more local basis with other local EMS-providers, says evertiq.

The SBS organization – in respect to turnover – feels like a company in a company. And when I judge myself, than I see that we have grown twice as much as our local competitors in Sweden. This makes me happy and it also means that the market appreciates what we do..

In which European region do you feel Flextronics (as a whole) has the strongest presence?

I think we have a good and levelled presence throughout Europe. We have at least one facility in most European countries. If you look at the markets for Flextronics SBS, then Scandinavia – notably Sweden – is doing very well and we have added several new client relationships and truly diversified our business. Now we work hard to achieve the same success in the UK Germany and other parts of Europe. Germany is the one market that we primarily focus on. Germany is Europe's largest market and so we continue to focus efforts to grow our business in this region

Are you planning to invest in Eastern Europe?

We have two factories in Eastern Europe in the Special Business Solutions Division – one in Hungary and one in the Ukraine. We will continue to offer customers our so called ‘Hybrid Solutions’. If customers need to increase production, we will also expand into Eastern Europe. However, we currently see no need for that. But if the Hybrid Solution is being accepted well – which I think it will – we will adapt to our customers’ needs.

What type of production will Flextronics offer in Europe in the future?

Everything evolves more and more towards what we call the HLA (High Level Assembly). It is this type of production that we focus on. We are traditionally strong on assembled PCB manufacturing. Assembled PCBs will continue to be a key area of focus, but for much more diversified products as the volume products continue to migrate into lower cost regions

As customers increasingly tend to partner with companies such as Flextronics to build their complete product, assembled PCB production will change to system configuration. So this is the future for Europe. And it is linked to our ability to help customers to get closer to their end markets; to help customers with logistics solutions and more after sales services. We usually say that we are the only company that can offer everything – from design to after sales services and we are well position in all these areas.

What type of product has the greatest potential in the European markets?

High Level Assembly – or HLA – is one of the future strategies for Europe. Flextronics has something that we call ‘Value Proposition’ and we believe that this will help us to continue to diversify our customer strategy. And it is precisely this concept of ‘Value Proposition’ that we are trying to convey to our customer. If we succeed in this, we will manufacture the entire product, even the underlying components; manufacturing as close as possible to the end market and manufacturing as fast as possible to deliver it all to the customers. Everything is about the total cost of capital.

Our customers want to have as little capital tied up as possible; for as short a time as possible so for many of these large systems, it makes more sense to have these produced locally in Europe rather than spending weeks on a container ship coming from other parts of the world,

Logistics is also something that we offer. EMS for us is not just electronics, but it is really a manufacturing service; all the services that are connected to electronics – everything from purchasing components to shipping the finished product. So everything that is high-end from a technology perspective or HLA.

To reduce freight costs, the use of oil, the use of air travel increasingly turns into a major concern for people – from an environmental perspective, but also from a cost perspective. And I believe this is where we come in.

Does Flextronics plan to reduce or restructure the European operations in the next 3 - 5 years?

Again, it is about adjustment. We will constantly strive to adapt to market needs. If we need to grow – we will grow; if we need to scale down – we will scale down.

How much does European manufacturing contribute to the global turnover of Flextronics?

European manufacturing is about 25% of Flextronics’ total global turnover. The global turnover is around $35 billion, so there is a lot of money coming from Europe.

Is Flextronics planning to increase staff numbers in Europe?

Key features are something you always need. If we focus on a certain area or region we also have to make reinforcements. We adapt to the needs of the market; when the market needs X, than we acquire resources that can support X, and so on.

Is Flextronics affected by the general slowdown of the global economy?

Yes we have seen the effects both internally and externally. But what feels good about working for Flextronics is that we drive the car ourselves – "we are driving our own destiny" so to speak. We have a management that is working hard and we will come out stronger than ever; we have a very strong cash position.

We do notice, but we are so focused that we should get out of this ‘economic winter’ stronger than ever; with more customers – more satisfied customers – than ever. When you stand strong in difficult times, you can use this strength to attract new customers. .We have processes, we have the staff and we have the capital to sail through this so called recession.

Do you see a difference in the business of Flextronics – before and after the acquisition of Solectron?

We acquired Solectron, because our businesses matched very well – from a footprint perspective, a capacity perspective and from a customer base perspective. Also on where production facilities were located, which customers each of the companies had and which capabilities we were able to offer – it was a perfect match.

And SBS has been stronger after the acquisition of Solectron, just as the rest of Flextronics has. We have a wider footprint with additional sites in Japan, Singapore and Bay Area becoming part of the Global SBS network.

We have also learned a lot from those guys in lean supply chain & manufacturing techniques & processes which are now fully implemented across our sites. And our customers see this too, many of them have commented on how our service offering has improved. Overall we believe that our value proposition has improved and our success on the local markets would seem to back this.

evertiq wants to thank Mattias Lindhe and all others at Flextronics, who helped to make this interview.
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