Evertiq’s industry pulse report – Kitron

In this article series, Evertiq has reached out to a number of European EMS providers to see how the challenges from the last two years have affected everyday operations. This time we will hear from Kitron's COO, Kristoffer Asklöv Given the fact that we have battled the pandemic for close to two years now, what lessons have been learned and what changes have been made in your company? “Kitron has done very well during the pandemic, despite all the constraints of doing business in the traditional way. We have really seen that our long-term strategy, to have a balanced customer portfolio in a wide range of market areas, has paid off. This has given us not only stability, but we're also providing tremendous growth and bottom line during 2020, especially in the MedTech segment. We were also not that much affected by the downturn in automotive-related business in early 2020.” “As a traditional way of doing business, including physical meetings and on-site factory visits, have been impossible during the pandemic, we have learned that our organization really stands on their feet when it comes to develop and adapt to the changing conditions. I'm extremely proud to see how quickly our organization adopted the new digital life and developed new and creative ways in how to continue to build trust with our existing and new customers. We also took early counteractions to keep our production sites running, and that has worked very well. The positive thing by having a global site structure is that we can share best practices between our production sites to quickly learn and adapt to the new situations much faster than the society in general.” Kristoffer Asklöv says. As soon as we entered 2021, it became very clear that the pandemic isn't the only problem weighing down on the industry, the shortage of components have greatly affected our industry and adjacent ones, how is your company working to overcome the issues of tight supply? “This unprecedented material allocation is by far the worst one in history, and of course, we, like everyone else, have been affected by it. That said, Kitron has held webcasts regularly for more than four years to all our customers to give our latest view on the electronic market situation. This, together with our strong supplier partnership network, gave us a platform to reach out to our customers very early. By urging them to place orders covering longer periods than normal, we had a strong position when dealing with the allocations. Our customers within our defense segment were the ones that adopted the fastest to the new market situation as they are used to securing and putting materials on stock for long periods and are not at all working according to the just-in-time principles. It has been a good practice in the past for many companies that today seems like an outdated philosophy that must be transformed to deal with the "new normal" in the electronic component market.” “It is in these times everyone realizes who brings value to the table and that no one is strong on their own. Our services towards our customers to find alternatives, creative solutions and give support to make tough but necessary decisions, such as re-designs to secure component availability, have increased dramatically for more or less all our customers.” As a European manufacturer, what is your opinion on the fact that the European electronics industry is still very much dependent on Asia in terms of semiconductor supply? “There are many discussions on the topic of regionalization and securing our independence in Europe from Asia and the US. I think it's an important topic that I hope will create awareness and wise political decisions in the future. When it comes to the semiconductor industry, there needs to be an extremely strong collaboration in the EU and an enormous amount of long-term investment and commitment to start that journey, and I doubt that will happen. And even if it did, we would still not achieve independence to Asia. Whether we like it or not, the European electronic market is still relatively small compared to Asia, which makes a fight like that even more difficult.“ Has the pandemic highlighted the need for closer and shorter supply chains in your opinion? “Yes, even though we will be dependent from areas outside the EU, there is still a lot of focus to create stronger local supply chains, whether they are in Europe, Asia, or the US. Our customer's focus on sustainability is increasing rapidly as well as the focus on lead times, transportation cost and the unproductiveness of political taxes. All contribute to the need for a more solid regional supply chain.” What is the general feeling now that we are drawing close to the end of 2021 and approaching 2022? “From a demand point of view, the situation looks very good for Kitron with record-high order backlog and a steady inflow of new customers. At the same time, it is also true for the entire electronic market, and that is also a part of the challenge. The manufacturer's heavy investments in capacity will most likely start to realize at the end of 2022. Still, if demand increases at the same pase as we have seen in the last 1,5 years, then it is most uncertain when we will see a rebalancing of the market. It's all going to be about the market demand and how that will develop.” Kristoffer Asklöv says and continues. “The battle against Covid19 is far from over, and we have full focus on protecting our people and keeping our factories running. On top of that, there are bottlenecks and allocations in other areas as well, and there will be a lot of topics to solve along the way,” “Despite all the challenges, I have a very good feeling entering 2022, and in Kitron, we are well prepared to continue the short- and long-term battles to serve our customers and to use this opportunity to continue our journey to develop our company. I'm confident that Kitron will come out of these challenges as a much stronger company than when we started almost two years ago”, Kristoffer Asklöv concludes.