Electronics Production | April 14, 2009

Siemens EDM commits to German manufacturing sites

evertiq spoke to Jörg Jungbauer, head of the Siemens division I IS MS EDM, about the developments in the Siemens business unit EDM. The EMS-provider sees itself in a very good position – despite the current downturn – and relies on innovation to participate in the market.

How did 2008 go for Siemens EDM?
Siemens EDM has continued to develop very positively and was able to generate a sales growth last year. We are very happy with the way 2008 went. As you know, we end our fiscal year at the end of September (30.09.2008). During the first fiscal quarter – from October to December 2008 – the global collapse of the markets has also affected us negatively. We had to experience declining orders too.

Many companies in Germany have implemented short-work since the beginning of January. What does the picture at Siemens EDM look like?
Currently, we do not have short-work. However, we have implemented a number of measures to improve our cost position. A long-term forecast of market trends us currently very difficult, because the different elements of the crisis mutually reinforce each other. For this reason – we observe the market and the development of our sales very closely. Where appropriate, we will probably need to use the flexibility of working hours. This might include shorter working hours, reduction of work-time accounts or the termination of temporary contracts.

The European EMS industry has to cope with a few blows. In what way is Siemens EDM affected by the general economic downturn?
The decline differs in each segment. The segment Infrastructure reported a growth; Industrial Electronics – and here particular the Automation Technology – had to report a significant restraint from customers. In contrast to this, we were quite successful in attracting new customers in the area Development and EMS-service. This is also the area where we differ greatly from our competitors.

Are investments planned for 2009? If yes, in what areas?
All investments have been reduced, but we will certainly realise important projects. We will keep our investment level in the area of Innovations, which means that we will stick to our R&D budget. This is important to us. Our differentiation within the EMS-market is based on technology – to offer engineering solutions to our customers. This is also the area that the customer has the biggest advantage in.

What does this mean for your customers?
We have developed – at an early stage – from an EMS-provider to an ODM division. This means that we add to the production portfolio also the development services for our customers. We employ 100 development engineers, which have a solid competence – especially within Industrial Electronics. We are also cooperating with Siemens Corporate Technology. Here, about 1900 developers workout 1,900 developers on key and cross-cutting issues. This shows a high degree of innovations for Industrial Electronics.

We share the development costs among multiple applications. This has advantages in terms of prices and also on the quality of each application. The customer also benefits in multiple ways. We provide patent protection for innovations and the customer has a free usage right with this. Upon request, we will also provide global patent researcher, so that patent disputes are not an issue.

Through the use of the platforms we can offer even more benefits: e.g. the issue of time to market. Especially in terms of innovation, this is an important argument – to be fast and on time with a new product on the market. The customer profits on the market through the application or through the formfactor of the equipment and systems. The fact that we use a switching power supply, etc. more than once is not a disadvantage.

You will assume responsibility of the Siemens division Electronic Design and Manufacturing (I IS MS EDM) from the beginning of April. What changes will follow?
We have developed to ODM at a very early stage – the development and manufacturing services for our customers. I was able to participate in the decision marking for several years as sales and marketing director. We have pursued a lot of innovations in this area. This is today’s success. In manufacturing we focused on the modernisation of the machinery on all our sites. Now we concentrate on innovations in the manufacturing sector.

What do you mean by innovation in the manufacturing sector?

Our development unit is organised in technology cluster. Each cluster has a responsible product manager is a product manager responsible. The results must be beneficial for the customer. We plan to implement the same system for the manufacturing unit. We have the cluster PCB, the cluster Test, Robust Process and Soldering. Here we will focus on innovation and the results will go into products and platforms.

You operate sites in Hanover, Erlangen, Munich, Essen and Stuttgart. What are the plans regarding this?
We believe in all locations and can increase capacity if need should arise. The location in Stuttgart houses a part of our development team. It is important to have a presence in this technology hot spot. A close customer contact is also important to us. We also operate nice distribution sites in Germany.

Where do you see the market for EDM products? Is this something to be developed further?
Siemens EDM will continue to focus on Industrial Electronics – as a provider of ODM and EMS solutions. As a service provider, we develop and manufacture customized electronics, which are individually tailored to different applications. Our main customer base is medium-sized enterprises, but also companies in the industrial electronics industry. These make up around 95% of our turnover. The rest is automotive and telecommunications.

Industrial electronics applications can be found in e.g. automation, but also in energy and medical engineering. We remain faithful to this portfolio and strengthen our activities here – specifically in Europe. We also provide Embedded Electronic for our customers – electronics with varying formfactor exactly tailored to the application of the customer. Our customers will use the electronic in their own devices and systems. The electronics are an integral part of customer products. Here we cooperate closely – on the basis of market requirements. This system will stay in place and we want to generate growth in this way.

Where do you see Siemens EDM and the European EMS industry in the next 3-5 years?
I believe that Siemens EDM will continue as strong ODM service provider for the Embedded Electronic for the segments Industry, Energy and Medical. We concentrate on the business activities in Europe. We also see potential in the development of the mentioned technology clusters and in platform development. The goal is to provide a highly flexible modular system for our customers.

In SiP Technology (System-in-Package), we see a great potential for innovation in the development and manufacturing area. The use of SiP in the electronics industry is not yet widespread. Here we want to provide new technologies to our customers.

The European EMS industry will certainly develop more and more into an EMS full-service provider. The pure contract manufacturer will drift into the background with time. Competencies in the field of consulting, development and manufacturing technology will shape to support, secure and further expand the quality and innovation.

Many European EMS providers are already well-positioned with their strategy and achieve higher profits than global EMS-companies. As to the economic development in terms of layoffs in Europe – we can not predict at the moment. Temporary adjustments within the industry will probably not be avoided. From a medium term position – the industry will developed positively however.

Thanks for the interview.


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