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THE EMS SOLUTION 2.0:
HOW & WHY THE BUSINESS MODEL IS
CHANGING
Eric Miscoll
(817) 251-4929
Eric@CharlieBarnhart.com
IPC EM...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
“It is not the strong...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
TRENDS IMPACTING INDU...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
TRENDS IMPACTING EMS ...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
ODM SHIFT
• Acer & AS...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
Manufacturing costs i...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
HISTORICAL LABOR RATE...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
With the exception of...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
EXAMPLES OF REGIONALI...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
MARGIN DETERIORATION
...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
INSOURCING BY OEMS
11
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
BEYOND OUTSOURCING RO...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
IMPACT OF TRENDS
13
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
WHAT DOES THIS MEAN F...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
QUESTION FOR EMS
• Wh...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
EMS THAT ARE CHANGING...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
OEM-EMS RELATIONSHIP
...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
CBA’S ADVICE
18
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
WHAT TO DO?
1. Improv...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
MANAGEMENT METRICS
• ...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
CLOSING THOUGHT
“It i...
© 2013 Charlie Barnhart & Associates LLC
Insights into the world of global electronics manufacturing
Thank You.
Questions?...
Achieving Operational
Excellence for Electronics
Manufacturers
Speaker:
Matthew Littlefield
President and Principal Analys...
Agenda
• About LNS Research
• Industry Drivers and Challenges
• Operational Excellence Journeys
• Operational Excellence G...
©LNS Research 2014
Manufacturing industry research firm that helps clients
innovate and achieve Operational Excellence…
Pe...
Global Executive Council
 Starbucks – VP of Global Quality and Regulatory Affairs
 Onyx Pharmaceutical – VP of Global Qu...
Research Model
©LNS Research 2014
Industry Drivers and Challenges
©LNS Research 2013
Electronics Industry Overview
•Area of Focus
•Component Manufacturing, Printed Circuit Boards, and Final
Assembly
•Competi...
Major Industry Challenges
•Shrinking Operating Margins
•High competition/market concentration
•Pressures for large and sma...
Major Industry Challenges
•Short Product Lifecycles
•Rapidly changing consumer demands
•Collaboration and integration acro...
Research Demographics
300+ Respondents to LNS Research Manufacturing Survey,
500+ Respondents to Quality Survey
©LNS Resea...
Top Objectives & Challenges
©LNS Research 2014
• The top objectives are customer focused
• The top challenges are people &...
Operational Excellence Journeys
©LNS Research 2014
Operational Excellence Journeys
Operational Excellence Goals & Metrics
©LNS Research 2013
Goals & Metrics - Alignment & Deployment
Goals & Metrics - Alignment & Deployment Process
1.) Understand and Articulate Strategy: have a clear and universally
unde...
Categories/Sets of Operational Excellence Metrics
Top 28 Manufacturing KPIs within Categories/Sets
Improving Customer Experience & Responsiveness:
1. On-Time Delivery to Co...
Selecting and Implementing the Right
Operational Excellence Metrics
• Benchmark
• Decide / Commit
• Choose metrics that di...
Accelerating Success - People
©LNS Research 2014
Accelerating Success – People:
Building Organizational Capabilities
Knowledge Management Issues & Opportunities:
People, Process & Technology
People:
• Aging Workforce (10,000 retiring per
d...
Accelerating Success - Process
©LNS Research 2013
Accelerating Success - Process
Building Manufacturing Process Capabilities
• Most companies are using combinations of 2 to 4 programs
• Choose the most i...
Accelerating Success - Technology
Architectural Approach to Quality Software
©LNS Research 2013
Accelerating Success – Technology
Accelerating Success – MOM Software
Accelerating Success – Real-Time Performance
Role-Based OI / EMI Capabilities
OI / EMI – Dashboards & Analytics
• Functional expectations & opportunities are growing
Big Data Analytics
• Big Data Analytics is about harnessing a collection of
massive amounts of structured and unstructured...
Big Data – Manufacturing Application Examples
• Enabling better product/production forecasts that tie to
consumer trends
•...
Mobile Technologies
• Mobile devices and applications have removed the restrictions
of required on-site access, enabling w...
Cloud Adoption for MOM Applications
• Cloud / SAAS Adoption Rates More Than Doubling in
Manufacturer’s Future Plans
• 90% ...
Cloud Benefits for Manufacturers
• Benefits of Cloud versus On-Premise Solutions
• Proven in IT applications
• Requires le...
Top Selection Criteria for MOM Software
• Having Sufficient Functionality is Paramount
• Cost & Ease of Integration with E...
Case Studies
©LNS Research 2013
• Before Software Supporting Operational Excellence
• Heavy documentation requirements = management of
(literally) tons of...
• After Software Supporting Operational Excellence
• Automated electronic workflows and electronic data
management.
• Effi...
Market Leaders Create a Holistic SQM Strategy
©LNS Research 2013
Summary / Recommendations
©LNS Research 2013
Summary / Recommendations
• Start or refine your Operational Excellence journey
• Ensure alignment with strategy, goals, a...
Summary / Recommendations
Thank You!!
For More Information -
Contact:
Matthew Littlefield
Principal Analyst – LNS Research
matthew.littlefield@lnsre...
• Leading OEMs, Distributors, Suppliers &
EMSs use SiliconExpert Daily
• Our Electronic Component Database of
over 250 mil...
Reactive vs. Proactive Approaches to
Obsolescence Management
250 Million+ Orderable Part Numbers
Up to 42 Parametric value...
Identifying the Impacts of SEC
Regulations in the Electronics
Industry
Conflict Minerals
• Defined by Dodd-Frank Act Section 1502(e)(4)
• Tantalum, Tin, Tungsten, and Gold
• A mineral is conflict free if it did ...
Conflict Minerals- Products
Top 10 Products with 3TG Parts
SiliconExpert Research and Analysis
Conflict Minerals Process
• Determine the requirements for each supplier within the re...
Reactive vs. Proactive Approaches to
Obsolescence ManagementSiliconExpert & Conflict Minerals
Data Collection
Most Up to D...
New Module: Conflict Minerals
Market Outlook
Small & Medium EMS Companies
Custer Consulting Group
www.custerconsulting.com
March 2014
20140303
Challenges
Financial data on individual, small EMS
companies typically not publicly available
Markets can be very localized
Topics
Global & U.S. Economy
Electronic Equipment
- World overview
- Target Domestic Markets
Active & Passive Components
E...
Business Conditions
After a weak 1H’13 global business conditions improved in the
second half of the year
2013 finished st...
Global & U.S.
Economies
Industrial Production – World
% Change vs. One Year Earlier
Britain + 1.8 Dec
Czech Republic + 9.3 Dec
France + 0.5 Dec
Ge...
U.S. Industrial Production
Index (2007=100)
www.federalreserve.gov/releases/g17/table1_2.htm
60
65
70
75
80
85
90
95
100
1...
U.S. GDP Growth
% Change vs. Prior Quarter (2005 $)
-10
-8
-6
-4
-2
0
2
4
6
8
10
1/95
3/95
1/96
3/96
1/97
3/97
1/98
3/98
1...
Purchasing
Managers
Indices
(Leading Indicators)
Global "Purchasing Managers" Index
Diffusion Index, >50 = Growth
Markit Economics
30
35
40
45
50
55
60
Jan
May
Sep
Jan
May...
China "Purchasing Managers" Index
Diffusion Index, >50 = Growth
Markit Economics
20140303
40
45
50
55
60
Jan
Apr
Jul
Oct
J...
U.S "Purchasing Managers" Index
ISM
Diffusion Index, >50 = Growth
ISM
30
35
40
45
50
55
60
65
70
Jan
Jun
Nov
Apr
Sep
Feb
J...
PMI Leading Indicator
as
EMS Forecasting Tool
U.S PMI Leading Index vs
N American EMS Shipments
ISM & IPC
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
Jan
Mar...
Business
Cycles
Industry Dynamics
BUSINESS CYCLE
Electronic Equipment, EMS/ODM Companies,
Components, Materials & Capital Equipment
-6
-4
-2
0
2
4
6
0 30 60...
U.S. Electronic Equipment, N. American PCBs,
Small/Med EMS & PCB Process Equipment
$ Shipment Growth20140222
0.2
0.4
0.6
0...
World
Electronic Equipment
Production
World Electronic Equipment Shipments
by Region 2013 @ 2012 Exchange Rates
Electronic Outlook 10/13
20%
15%
6%
52%
7%
N Ame...
World Electronic Equipment Production by Type
@2012 Exchange Rates
Electronic Outlook 10/2013
2012 TOTAL: $1,991 Billion
2...
World Electronic Equipment Production
By Type20140221
0
100
200
300
400
500
600
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 ...
Electronic Equipment Suppliers
Composite of 141 Public Companies
Revenue, Net Income & Inventory
Computer 13, Internet 9, ...
Electronic Equipment Suppliers
Composite of 141 Public Companies
Quarterly Revenue Growth
Computer 13, Internet 9, Storage...
Global Electronic Equipment Shipment Growth
12/12 & 3/12 Rate of Change
141 OEM company sales composite
20140221
0.80
0.85...
Inventory/Sales Ratios
Large Component Distributors, Semiconductor, EMS & OEM Companies
Custer Consulting Group based upon...
Regional
Electronic Equipment
Production
European Computer, Electronic & Optical Products
Production
Eurostat, C26 category, EU 27 countries
20140212
80
85
90
95
1...
Japan Electronic Equipment Production
by Month 2000 to Present
0
200
400
600
800
1000
1200
1400
1600
1800
2000
1 5 9 1 5 9...
Taiwan/China Electronic Equipment Producers
Composite of 101 Manufacturers
Consolidated Revenue
Taiwan listed companies, o...
U.S. Electronic Equipment Orders & Shipments
Computer, Communications, Measurement & Control and Military
www.census.gov/i...
Regional Electronic Equipment
Shipment Growth
20140301
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
Jan
May...
World Electronic Equipment Monthly
Shipments
Converted @ Constant 2012 Exchange Rates
Source: Custer Consulting Group & El...
World Electronic Equipment Monthly
Shipments
Converted @ Constant 2012 Exchange Rates
Source: Custer Consulting Group & El...
World Electronic Equipment Monthly
Shipments
Converted @ Fluctuating Exchange Rates
Source: Custer Consulting Group & Elec...
U.S. Electronic Equipment -
Orders, Shipments &
Inventories
U.S. Electronic Equipment Order & Shipment Growth
Computer, Communications, Measurement & Control and Military
www.census....
U.S. Electronic Equipment Orders & Shipments
Computer, Communications, Measurement & Control and Military
www.census.gov/i...
U.S. Electronic Equipment Orders
Monthly Data
www.census.gov/indicator/www/m3/
20140301
0
2
4
6
8
10
12
14
16
Jan
May
Sep
...
U.S. Electronic Equipment Orders
Monthly Data
www.census.gov/indicator/www/m3/
20140204
0%
10%
20%
30%
40%
50%
60%
70%
80%...
U.S. Electronic Equipment Inventories
Monthly Data
www.census.gov/indicator/www/m3/
20140301
0
2
4
6
8
10
12
14
16
18
20
J...
U.S. Electronic Equipment Inventories vs. Orders
www.census.gov/indicator/www/m3/
20140301
1.00
1.20
1.40
1.60
1.80
2.00
2...
Market Segments
Volume (Shift to Low Cost Areas)
Personal Computers
Mobile Phones
Other Consumer Electronics
Datacom/Telec...
Global Electronic Supply Chain Growth
4Q'13 vs. 4Q'12 (Preliminary)
6
-4
-8
3
0
17
-5
7
5
9
-4
32
5
3
6
12
8
8
13
6
4
-10 ...
European Electronic Supply Chain Growth
4Q’13 vs. 4Q’12
0
0
3
-6
-2
10
8
7
6
-2
5
-8 -6 -4 -2 0 2 4 6 8 10 12
Electronic E...
U.S Electronic Supply Chain Shipment Growth
4Q’13 vs. 4Q’12
0
4
-4
-3
-2
-6
14
6
1
17
0
3
1
3
-10 -5 0 5 10 15 20
Electron...
Electronic
Equipment
Markets of Interest
Changing
Electronic
Equipment
Markets
Smart Connected Device Shipments by Type
Gartner 1/14
20140114
2012 2013 2014 2015
Oth Ultramobile (Hybrid &
Clamshell)
9 ...
Automotive
Electronics
World Motor Vehicle Production by Geography
2013
Autos, Trucks & Busses
Electronic Outlook 10/13
TOTAL: 86.7 Million Units...
Automotive Equipment Suppliers
Composite of 11 Public Companies
Revenue, Net Income & Inventory
Autoliv, Borg Warner, Cont...
U.S. Vehicle Shipments
0
5
10
15
20
25
30
1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 ...
Aviation, Government
&
Military Electronics
U.S. Aircraft & Parts Shipments
0
2
4
6
8
10
12
14
16
18
20
1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 ...
Military Equipment
Composite of 6 Public Companies
Revenue, Net Income & Inventory
General Dynamics, Harris, Lockheed, Nor...
Global Military Equipment Shipment Growth
12/12 & 3/12 Rate of Change
Industry sector sales composite
20140209
0.85
0.95
1...
U.S. Defense Capital Goods
Orders & Shipments
www.census.gov/indicator/www/m3/
20140301
0
5
10
15
20
25
30
Jan
Jul
Jan
Jul...
U.S. Military Electronics Orders & Shipments
Defense Communication & Search & Navigation Equipment
www.census.gov/indicato...
U.S. Government & Military Electronics
Production by Type
2013
Electronic Outlook
TOTAL: $83.5 Billion
7.0%
7.7%
27.5%
25....
More Details
Available
for each
Category
U.S. Government & Military Electronics
Communication & Navigation
2013
Electronic Outlook
TOTAL: $23.2 Billion
9%
22%
22%9...
Instruments & Control
Equipment
U.S. Electromedical, Measurement & Control Equipment
Orders & Shipments
www.census.gov/indicator/www/m3/
20140204
4
5
5
6
...
U.S. Industrial Electronics Production
2013
Electronic Outlook
TOTAL: $69.8 Billion
26.6%
25.1%
9.7%
15.0%
0.6%
11.7%
11.2...
U.S. Instrumentation Equipment Production
2013
Electronic Outlook 11/2012
TOTAL: $63.8 Billion
8.0%
4.1%
53.2%
20.7%
1.3%
...
Instruments & Control Equipment
Composite of 12 Public Companies
Revenue, Net Income & Inventory
Agilent, Ametek, Emerson,...
Rank Company 2011 Sales $M 2011/2010 Growth
1 Danaher (T&M div) 3,391 19.7%
2 Agilent Technologies (EMG div) 3,316 19.1%
3...
Danaher Corp.
Revenue, Net Income & Inventory
CY
20140201
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Q1Q2Q3 Q4Q1Q2Q3Q4Q1 Q2Q3Q4Q1Q2Q3 Q4Q...
Medical Equipment
Composite of 23 Public Companies
Revenue, Net Income & Inventory
Analogic, Bio-Rad Laboratories, Boston ...
U.S. Medical Instrument Production
2013
Electronic Outlook 11/2012
TOTAL: $33.9 Billion
15.2%
4.1%
33.4%
22.5%
1.3%
Vehicl...
Medtronic Inc
Revenue, Net Income & Inventory
CY
20140221
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Q4 Q2 Q4 Q2 Q4 Q2 Q4...
Medical Semiconductor Market Forecast
IC Insights 12/13
3.2
3.6
4.0 4.1
4.4
4.9
5.6
6.5
6.8
-5%
14%
10%
5%
7%
12%
15% 16%
...
Communication
Equipment
Communication Equipment Suppliers
Composite of 20 Companies
10 mobile phone makers, 10 other telecom equipment makers plus...
U.S. Communication Equipment
Orders & Shipments
www.census.gov/indicator/www/m3/
20140301
0
2
4
6
8
10
12
14
16
Jan
May
Se...
Internet
Infrastructure
"Internet" Equipment Suppliers
Composite of 9 Public Companies
Revenue, Net Income & Inventory
ADTRAN, Cisco Systems, Extr...
Layer 2/3 Ethernet Switch Vendors
3Q’13
www.idc.com 3Q'13 World Total US$ 5.36 Billion
62.6%
9.4%
3.6%
2.7%
2.0%
19.8%
$
C...
Cisco Systems
Revenue, Net Income & Inventory
CY
20140214
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Q2 Q4 Q2 Q4 Q2 Q4 Q...
Computers &
Related Products
U.S. Computers & Related Products
Orders & Shipments
www.census.gov/indicator/www/m3/
20140301
0
2
4
6
8
10
12
Jan
May
Sep...
Makeup of Personal Computer Market
IC Insights 5/12
20121027
2009 2010 2011 2012 2013 2014 2015
Tablets 1 17 63 110 160 24...
World Server Shipment Revenue
Gartner Dataquest 2/14 & prior reports
0
2
4
6
8
10
12
14
16
18
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q...
World Server Shipments
4Q’13
Gartner Dataquest 2/2014
TOTAL: $13.7 Billion
28.1%
26.5%
15.2%
4.7%
4.2%
21.3%
HP
IBM
Dell
C...
Industrial Robots: Share by Market
IFR 1/14
39.7%
20.5%
8.6%
7.2%
3.1%
21.0%
Automotive
Electronics/Electrical
Metals/Mach...
Industrial Robots: Sales by Region
IFR World Robotics 2013
20140505
2006 2007 2008 2009 2010 2011 2012
Total 111.1 114.4 1...
Robots: Accelerating Demise of Factory Jobs?
Electronic
Components
Semiconductors
World Semiconductor Shipments
Monthly US$
SIA
20140303
0
5
10
15
20
25
30
Jan
Aug
Mar
Oct
May
Dec
Jul
Feb
Sep
Apr
Nov
Jun
...
Total Semiconductor Shipments to an Area
Monthly Shipments - Reporting Firms
SIA website: www.sia-online.org/
20140303
0.0...
N American Semiconductor Shipments
Monthly & 3-Month Average Shipments
SIA website: www.sia-online.org/
20140303
0.0
1.0
2...
Semiconductor Shipments to N. America
vs. U.S Electronic Equipment Production
Total $ Semiconductor Shipments from All Cou...
Semiconductor Fab, Assembly,
Packaging,Test & Measurement
Equipment
Semiconductor Capital Equipment Shipments
by Area
www.semi.org, www.seaj.or.jp/ 9/13
20130914
0.0
2.0
4.0
6.0
8.0
10.0
12....
Semiconductor Fab, Test & Measurement
Composite of 20 Public Companies
Revenue, Net Income & Inventory
Applied Materials, ...
Global Semiconductor & Semiconductor Capital Equipment
3-Month Shipment Growth Rates on $ Basis
Sources: SIA; Semiconducto...
Passive Components
Passive Components
Composite of 11 Companies
Revenue, Net Income & Inventory
AVX, Bel Fuse, Diodes, International Rectifie...
U.S. Production: "Other" Electronic Components
(excludes semiconductors)
Orders & Shipments
http://www.census.gov/indicato...
PCB
Fabrication
World PCB Monthly Shipments
Converted @ Fluctuating Exchange Rates
Source: Custer Consulting Group
20140221
0.0
1.0
2.0
3....
World PCB Shipments (with forecast)
Converted @ Fluctuating Exchange Rates
20140222
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
Ja...
2012 World PCB Production by Region
IPC 8/13
5.0%
4.5%
14.7%
42.8%
12.6%
13.4%
6.6%
0.4%
N America
Europe
Japan
China/HK
T...
2012 World PCB Production by End Market
IPC 9/13
20.1%
34.2%
17.8%
3.9%
9.3%
2.5%
4.5%
7.7%
PC/Office
Communication
Consum...
Rank Maker Country US$M
1 Nippon Mektron Japan 2,888
2 Unmicron Taiwan 2,383
3 SEMCO Korea 2,002
4 Young Poong Group Korea...
N American Rigid & Flexible PCB
Shipments & Orders
20140204
0
50
100
150
200
250
1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 ...
U.S. Electronic Equipment vs. Rigid & Flex PCBs
$ Order Growth
20140301
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
Jan
Jun
Nov
Ap...
2012 Vertical Markets for PCBs in N America
(US$)
WECC 8/2013
26%
15%
11%
11%
32%
2%
11.0%
Military/Aerospace
Computers
In...
EMS & ODM
Companies
EMS & ODM Estimated Global Revenue
vs. Total Available Market
20131119
2009 2010 2011 2012 2013 2014 2015
ODM 227 308 299 ...
2013/2012
2012 2013 Growth %
Hon Hai (Foxconn) Taiwan 141,122 133,349 -6%
Flextronics Singapore 24,670 24,197 -2%
Jabil Ci...
Large EMS Providers
Composite of 9 Public Companies
Revenue, Net Income & Inventory
Benchmark+Pemstar, Celestica, Flextron...
Large EMS Providers
Composite of 8 Public Companies
Quarterly Revenue Growth
Benchmark+Pemstar, Celestica, Flextronics+Sol...
Foxconn Electronics (Hon Hai), Taiwan
Revenue, Net Income & Inventory
CY
20140115
0
200
400
600
800
1000
1200
1400
Q1 Q3 Q...
Flextronics
Revenue, Net Income & Inventory
CY
20140201
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Q4 Q2 Q4 Q2 Q4 Q2 Q4 ...
Plexus Corp
Revenue, Net Income & Inventory
CY
20140126
-100
0
100
200
300
400
500
600
700
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q...
Medium Size EMS Providers
Composite of 10 Public Companies
Revenue, Net Income & Inventory
CTS, Keytronic, LaBarge, NamTai...
Nortech Systems Inc
Revenue, Net Income & Inventory
CY
20131119
-5
0
5
10
15
20
25
30
35
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 ...
Raven Industries Inc
Revenue, Net Income & Inventory
CY
20131127
0
20
40
60
80
100
120
140
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q...
Sypris Solutions
Revenue, Net Income & Inventory
CY
20131119
-150
-100
-50
0
50
100
150
200
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 ...
SigmaTron International, Inc
Revenue, Net Income & Inventory
CY
-20
-10
0
10
20
30
40
50
60
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 ...
SMTC
Revenue, Net Income & Inventory
CY
20131119
-100
-50
0
50
100
150
200
250
300
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 ...
Sparton Corporation
Revenue, Net Income & Inventory
CY
20140207
-20
0
20
40
60
80
100
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 ...
EMS Inventories/Sales
9 Large & 12 Medium Sized Companies
Large: Benchmark+Pemstar, Celestica, Flextronics+Solectron, Foxc...
2013/2012
2012 2013 Growth %
Foxconn (Hon Hai) 136,515 133,238 -2%
Pegatron 30,800 32,029 +4%
Quanta Computer 33,400 29,66...
Taiwan ODM Companies
Composite Sales of 11 Large Manufacturers
20140114
0
100
200
300
400
500
600
700
800
900
1,000
Jan
Ma...
Large ODM Companies
Composite of 10 Public Manufacturers
Quarterly Revenue Growth
Asustek Computer, Compal Electronics, Fo...
Structure of European EMS Industry
2012
Reed Electronics Research 12/12
13.27
3.39
3.75
5.55
Group 1 Group 2
Group 3 Group...
European EMS by Region
Reed Electronics Research 1/14
2201401180131020
14.6 14.4 14.7 14.9 15.3
15.8
11.0 11.1 11.3 11.4 1...
Forecasting EMS
Sales
using
Leading Indicators
Global EMS & ODM Companies
Composite of 53 Public Companies
Revenue
0
20
40
60
80
100
120
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1...
IPC Small & Medium N American EMS
Company Revenue Index
0
20
40
60
80
100
120
140
1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1...
IPC Small/Medium EMS vs
Composite of 53 Public EMS/ODM Companies
Revenue
0
5000
10000
15000
20000
0
20
40
60
80
100
120
Q1...
IPC EMS Small & Medium Company
N. American Shipments & Bookings
Markit Economics & ISM
0.70
0.80
0.90
1.00
1.10
1.20
1.30
...
IPC Small & Medium Company EMS
vs N. American PCB Shipments
Markit Economics & ISM
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40...
IPC N American Small/Medium EMS vs
Composite Sales of 53 Global EMS/ODM Companies
Markit Economics & ISM
0.60
0.70
0.80
0....
U.S Purchasing Managers Leading Index vs
IPC EMS shipments & bookings
Markit Economics & ISM
0.70
0.80
0.90
1.00
1.10
1.20...
Global PMI Leading Index vs
Composite Sales of 53 Global EMS/ODM Companies
Markit Economics & ISM
0.60
0.70
0.80
0.90
1.00...
U.S PMI Leading Index vs
N American EMS Shipments
ISM & IPC
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
Jan
Mar...
U.S PMI Leading Index vs
N American EMS, PCB & Semiconductor Shipments
Markit Economics & ISM
0.70
0.80
0.90
1.00
1.10
1.2...
Using This
Information to
Forecast Your
Company’s Sales
Data Sources
• Trade Organizations
• IPC, ZVEI, SIA, SEMI
• Government Statistics
• US Department of Commerce, Eurostat
• ...
Forecasting Your Company Sales
• Organize monthly or quarterly sales in spreadsheet
• Obtain related industry time series ...
Forecasts
Walt
World 2.5 2.5 3.2 3.9 3.7
USA 2.8 1.9 2.7 3.4 3.3
EU -0.4 0.0 1.2 1.5 1.9
Japan 1.4 1.8 1.9 1.6 1.2
Four Tigers 1.9 2.5 3....
World 1.0 -2.9 4.7 5.9 5.7
USA -0.9 -3.3 2.7 4.9 5.1
W. Europe -3.4 -4.6 1.6 3.2 3.4
Japan -2.6 -10.3 4.3 4.1 3.2
Four Tig...
World Rigid & Flex PCB Production
Converted @ 2012 Exchange Rates except Japan @ 100Y/US$
H Nakahara 2/14
20131111
59.9 59...
N. American Supply Chain Forecast
2014 vs. 2013
0 2 4 6 8
Small/Medium
EMS
Semiconductors
PCBs
Electronic
Equipment
Combin...
Key Points
Ability to target each end market sector by
key companies, size and growth rate
Size & growth of each sector of...
Future Presentations
Financial data on small EMS companies
not publicly available
Markets can be very localized
Leading in...
Custer Consulting Group Products
Daily News Services (6 days/week)
- Global electronics supply chain
- Solar/Photovoltaic ...
Strictly private & confidential
Lincoln International’s Presentation Regarding:
The Dynamic EMS Industry
March 24, 2013
Lincoln International Snapshot
Paris
Frankfurt
Chicago
New York
Los Angeles
London
Vienna
Madrid
Mumbai
Tokyo
Amsterdam
Mo...
Contents
Section 1 General Middle Market M&A Environment 1
Section 2 EMS Industry Financial Metrics 3
Section 3 EMS Indust...
T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V ...
9,035
7,250
10,448
11,836 11,455
10,812
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2008 2009 2010 2011 2012 2013
Numbe...
T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V ...
Sparton Corporation (NYSE:SPA) Acquisition History
November
15th, 2012
June
6th, 2013
August
30thth, 2013
December
11thth,...
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14
Sparton Corporation (NY...
T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V ...
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Q1-03 Q1-04 Q1-05 Q1-06 Q1-07 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-13
...
(30.0%)
(20.0%)
(10.0%)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
Q1-03 Q4-03 Q3-04 Q2-05 Q1-06 Q4-06 Q3-07 Q2-08 Q1-09 Q4-09 Q3-...
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Q1-03 Q4-03 Q3-04 Q2-05 Q1-06 Q4-06 Q3-07 Q2-08 Q1-09 Q4-09 Q3-10 Q2-11 Q1-12 Q4-1...
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13
MultipleofEBI...
T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V ...
51
48
24
46
32
29
24
0
10
20
30
40
50
60
2007 2008 2009 2010 2011 2012 2013
#ofTransactions
Total EMS Merger and Acquisiti...
9 9
8
7
2 2
4
5
6
1
0
5
10
2012 2013
#ofTransactions
U.S./Canada Europe Asia Cross-Border (High/High) Cross-Border (High/L...
13
15
14
10
3 1 1
15
7
10
77
1
2
1
8 8
3
5
0
2
4
6
8
10
12
14
16
2010 2011 2012 2013
#ofTransactions
EMS Consolidations OE...
T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V ...
Traditional Drivers of Value
Drivers Commentary
Margin
Growth
 Highest EMS valuations occurred when industry growth rates...
Current Buyer Interest Trends
Trend Commentary
Outside Acquirers
Looking in the EMS
Industry
Tier I Providers Looking
Outs...
T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V ...
Valuation of Large Industrial Conglomerates
Section 6: Long-Term Strategic Outlook: Eliminating the “E” from EMS 20
EV / E...
Long Term Trend: “DMS”
Section 6: Long-Term Strategic Outlook: Eliminating the “E” from EMS 21
The 3D vs. Virtual World
“T...
Jabil: an Emerging DMS Company
Section 6: Long-Term Strategic Outlook: Eliminating the “E” from EMS 21
 Focusing the comp...
T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V ...
Key Takeaways Heading Into 2014
 Expect favorable EMS M&A environment in 2014
 Consolidations will continue
 Increased ...
Bios
Appendix A
T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M ...
Jack Calderon
Advisory Expertise
Jack has extensive experience in advising
companies on merger and acquisitions,
restructu...
2014 IPC APEX EXPO EMC Management Council
2014 IPC APEX EXPO EMC Management Council
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2014 IPC APEX EXPO EMC Management Council
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2014 IPC APEX EXPO EMC Management Council
2014 IPC APEX EXPO EMC Management Council
2014 IPC APEX EXPO EMC Management Council
2014 IPC APEX EXPO EMC Management Council
2014 IPC APEX EXPO EMC Management Council
2014 IPC APEX EXPO EMC Management Council
2014 IPC APEX EXPO EMC Management Council
2014 IPC APEX EXPO EMC Management Council
2014 IPC APEX EXPO EMC Management Council
2014 IPC APEX EXPO EMC Management Council
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Transcript of "2014 IPC APEX EXPO EMC Management Council"

  1. 1. THE EMS SOLUTION 2.0: HOW & WHY THE BUSINESS MODEL IS CHANGING Eric Miscoll (817) 251-4929 Eric@CharlieBarnhart.com IPC EMS MANAGEMENT COUNCIL MEETING 2014
  2. 2. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” - Charles Darwin 2
  3. 3. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing TRENDS IMPACTING INDUSTRY 3
  4. 4. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing TRENDS IMPACTING EMS INDUSTRY 1. Demand Cycle has Shortened 2. Risk in the Supply-Chain at Unprecedented Levels 3. EMS/ODM Prices Are Converging 4. Costs in China Are Rising Far Faster Than Predicted 5. Regionalization Is Gaining Momentum 6. Global Capacity Utilization Is Increasing 7. Margin deterioration across sectors 8. Slower Rate of Growth of Electronics Outsourcing 9. Insourcing by OEMs 10. OEMs are reclaiming the supply chain 11. EMS Are Trying to Diversify Their Revenue Stream 4
  5. 5. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing ODM SHIFT • Acer & ASUSTeK: – Computer OEM • HTC: – Smartphone OEM • Inventec & Quanta: – Servers • Pegatron: – Consumer electronics (e.g., tablets) • Wistron: – Cloud computing, after-sales service, medical equipment, and recycling “For the sake of increasing margins, people are eyeing diversification and vertical integration and looking for new cornerstones in this competitive landscape.” - Elton Yang, CFO, Quanta 5
  6. 6. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing Manufacturing costs in China continue to rise with the potential for much larger increases should labor pressures continue to escalate or should the Yuan be allowed to float against global currencies. ESCALATING COSTS IN CHINA 6
  7. 7. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing HISTORICAL LABOR RATES PCBA CY2009 CY2010 CY2011 CY2012 CY2013 Australia $46.50 $42.70 $42.40 $43.20 $43.32 Brazil $26.45 $30.23 $31.00 $31.45 $32.32 Canada $49.12 $41.78 $42.15 $44.17 $43.67 China $10.15 $11.31 $12.45 $13.38 $17.26 E. Europe € $47.30 $50.10 $51.00 $53.76 $55.57 E. Europe non € $26.13 $30.02 $30.40 $32.23 $33.75 India $9.21 $9.91 $9.95 $10.37 $10.79 Israel $35.97 $34.81 $34.89 $34.83 $37.43 Malaysia * * $16.29 $16.88 $17.26 Mexico - Border * * $16.80 $17.51 $18.28 Mexico - Central * * $11.32 $11.99 $12.50 Philippines * * * * $8.98 Singapore $25.15 $26.10 $28.15 $29.20 $29.96 Thailand * * * $19.39 $20.08 Turkey * * * * $16.13 United Kingdom $93.63 $93.11 $92.75 $95.49 $95.49 USA $37.96 $39.30 $39.40 $39.61 $39.78 Vietnam $8.75 $8.80 $8.95 $9.36 $10.11 W. Europe $89.37 $92.16 $90.10 $92.99 $95.81 Historical Cost of Labor/PCBA (EMS only) 7
  8. 8. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing With the exception of large low-mix/high volume projects it is now cheaper, on a landed- cost basis, to utilize low-cost regional versus cross-hemispheric solutions. RETURN TO REGIONALIZATION (Build in the region for the region) 8
  9. 9. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing EXAMPLES OF REGIONALIZATION 9
  10. 10. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing MARGIN DETERIORATION Sector <1$ $1 $5 $10 $25 $50 $100 $250 $500 $750 $1K Mil/Aero -7.0% -5.0% -3.0% -3.0% -2.0% -1.0% -1.5% -1.5% -1.0% -1.0% -1.0% Ind/Med/Auto -4.0% -3.0% -2.0% -2.0% -1.0% -1.0% -0.5% -0.5% 0.0% 0.0% 0.0% Com/Comp/Cons -5.0% -3.0% -1.0% -1.0% -0.5% -0.5% -0.5% 0.0% 0.0% 0.0% -0.2% 10
  11. 11. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing INSOURCING BY OEMS 11
  12. 12. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing BEYOND OUTSOURCING ROADMAP 12
  13. 13. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing IMPACT OF TRENDS 13
  14. 14. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing WHAT DOES THIS MEAN FOR EMS? • Change is already happening • Margins will not return to what they were • If you are not already seeing this or planning for the future, then you better GET BUSY! • Innovative thinking is required 14
  15. 15. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing QUESTION FOR EMS • What percentage of your revenue stream have you converted from commodity services? – E.g., PCBA & Box Build 15
  16. 16. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing EMS THAT ARE CHANGING • Lightspeed MFG: Repair services • CTS Corporation: Components & Sensors • Tepcomp: LED modules • Stadium Group: Displays OEM • Circuitronics Inc.: Prototyping • Foxconn: Components, retail outlets, etc. • Celestica: Supply Chain as a Service • Nam Tai: Property development and mgmt 16
  17. 17. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing OEM-EMS RELATIONSHIP • Change by one party in a relationship impacts the other party, whether desired or not. (e.g., child, partner, supplier) • So as EMS diversify their revenue stream, OEMs will be impacted. – Fewer external options – Higher prices – Lower leverage 17
  18. 18. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing CBA’S ADVICE 18
  19. 19. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing WHAT TO DO? 1. Improve your bottom line 2. Fire or renegotiate unprofitable customers 3. Make “lean” part of your fabric 4. If small (<$100M) stay small 5. Innovate 6. Diversify revenue stream 19
  20. 20. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing MANAGEMENT METRICS • Revenue per Employee – $300K-$350K • Customer Base – Top 5 more than 50%of Revenue – Bottom 5 not less than 5% of Revenue – No customer over 25% of Revenue (>2 years) – No customer under .25% of Revenue 20
  21. 21. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing CLOSING THOUGHT “It is not necessary to change. Survival is not mandatory.” - W. Edwards Deming 21
  22. 22. © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing Thank You. Questions? 22
  23. 23. Achieving Operational Excellence for Electronics Manufacturers Speaker: Matthew Littlefield President and Principal Analyst, LNS Research
  24. 24. Agenda • About LNS Research • Industry Drivers and Challenges • Operational Excellence Journeys • Operational Excellence Goals & Metrics • Accelerating Success – People • Accelerating Success – Process • Accelerating Success – Technology • Summary / Recommendations • Q&A ©LNS Research 2014
  25. 25. ©LNS Research 2014 Manufacturing industry research firm that helps clients innovate and achieve Operational Excellence… People, Processes & Technology Research & Consulting Areas:  Enterprise Quality  Sustainability / Energy Management  Manufacturing Operations Management Differentiators:  Experienced analysts  Primary research – large data sets  Interactive analysis & data visualizations  Deep industry executive contacts  Social media activity About LNS Research - www.lnsresearch.com
  26. 26. Global Executive Council  Starbucks – VP of Global Quality and Regulatory Affairs  Onyx Pharmaceutical – VP of Global Quality  Whirlpool – Director of Quality  Lindt Chocolate – VP R&D and Quality  Oriflame – Corporate Quality Lead  Champion Technology – VP Quality and EH&S  Gurwitch Products – VP Research and Quality  Newell Rubbermaid – Director of Quality  Hygia Health Service – VP of Operations  Discount Tire – VP of Quality  Daikin McQuay – Director, Corporate Quality  Bio-Rad Laboratories – Director of Quality Assurance  Owens-Illinois – VP of Global Quality  Harley-Davidson – Director Corporate Quality  Alcoa – Director Corporate Quality  Bridgelux – VP Corporate Quality  Plexus – VP Corporate Quality  Fresenius – VP Corporate Quality  Alent – VP Corporate Quality  Corbian – VP Quality  Kellogs – VP Quality
  27. 27. Research Model ©LNS Research 2014
  28. 28. Industry Drivers and Challenges ©LNS Research 2013
  29. 29. Electronics Industry Overview •Area of Focus •Component Manufacturing, Printed Circuit Boards, and Final Assembly •Competitive Landscape •Global •All sizes: multi-billion dollar companies to small job shops •Market leaders include: Flextronics, Celestica, Sanmina-SCL, Jabil, and Plexus •Customers •Generally large, powerful, and demanding •Regulated and unregulated industries •Medical Device, Aerospace and Defense, Industrial Equipment, etc. ©LNS Research 2012
  30. 30. Major Industry Challenges •Shrinking Operating Margins •High competition/market concentration •Pressures for large and small players in U.S., Europe, Mexico, and Asia •Balancing Cost and quality •Complex Supply Chains •Keeping operating margins low •Issues with traceability and quality •Disparate compliance standards •Service and Warranty Management •Quality and traceability issues surface as higher warranty reserves and increased use of service ©LNS Research 2012
  31. 31. Major Industry Challenges •Short Product Lifecycles •Rapidly changing consumer demands •Collaboration and integration across the value chain: MOM, CRM, SCM, PLM, and EH&S •Uncertain Demand •Cyclical and economic volatility •Changing consumer tastes/preferences •Sustainability/Regulatory Requirements •Tightening laws/regulations in electronics • Companies are beginning to consider the product lifecycle beyond disposal • Example: EU passed REACH and RoHS to protect environment ©LNS Research 2012
  32. 32. Research Demographics 300+ Respondents to LNS Research Manufacturing Survey, 500+ Respondents to Quality Survey ©LNS Research 2014
  33. 33. Top Objectives & Challenges ©LNS Research 2014 • The top objectives are customer focused • The top challenges are people & systems related
  34. 34. Operational Excellence Journeys ©LNS Research 2014
  35. 35. Operational Excellence Journeys
  36. 36. Operational Excellence Goals & Metrics ©LNS Research 2013
  37. 37. Goals & Metrics - Alignment & Deployment
  38. 38. Goals & Metrics - Alignment & Deployment Process 1.) Understand and Articulate Strategy: have a clear and universally understood manufacturing strategy that is in support of the corporate business strategy 2.) Translate Strategy into Specific Goals: turn that strategy into specific goals for business groups and associated supply chains, as well as plants, units, and production lines 3.) Map Goals and Specific Measures for Success: use a cross- functional team to map each detailed translation across the enterprise 4.) Determine Key Performance Indicators: develop a set of manufacturing KPIs to measure progress toward your goals 5.) Establish Communication Procedures for KPIs: make sure the right information is getting to the right people in a timely manner 6.) Set Processes for How to Act on KPI Information: determine best practices for individuals from the shop to top floor to interact with KPIs 7.) Match Performance Incentives to Aligned Goals: reinforce the effectiveness of measuring KPIs by incentivizing progress
  39. 39. Categories/Sets of Operational Excellence Metrics
  40. 40. Top 28 Manufacturing KPIs within Categories/Sets Improving Customer Experience & Responsiveness: 1. On-Time Delivery to Commit 2. Manufacturing Cycle Time 3. Time to Make Changeovers Improving Quality: 4. Yield 5. Customer Rejects/Return Material Authorizations/Returns 6. Supplier’s Quality Incoming Improving Efficiency: 7. Throughput 8. Capacity Utilization 9. Overall Equipment Effectiveness (OEE) 10. Schedule or Production Attainment Reducing Inventory: 11. WIP Inventory/Turns Ensuring Compliance: 12. Reportable Health and Safety Incidents 13. Reportable Environmental Incidents 14. Number of Non-Compliance Events / Year Reducing Maintenance: 15. Percentage Planned vs. Emergency Maintenance Work Orders 16. Downtime in Proportion to Operating Time Increasing Flexibility & Innovation: 17. Rate of New Product Introduction 18. Engineering Change Order Cycle Time Improve Financial Performance: 19. Total Manufacturing Cost per Unit Excluding Materials 20. Manufacturing Cost as a Percentage of Revenue 21. Net Operating Profit 22. Productivity in Revenue per Employee 23. Average Unit Contribution Margin 24. Return on Assets/Return on Net Assets 25. Energy Cost per Unit 26. Cash-to-Cash Cycle Time 27. EBITDA 28. Customer Fill Rate/On-Time delivery/Perfect Order Percentage
  41. 41. Selecting and Implementing the Right Operational Excellence Metrics • Benchmark • Decide / Commit • Choose metrics that directly relate to SMART goals • Ensure that the metrics can be reliably and efficiently produced • Create team-based and role- based metrics • Most people can only optimize their own time/activities around 5-6 metrics • Plan, Do, Check, Act • Reward
  42. 42. Accelerating Success - People ©LNS Research 2014
  43. 43. Accelerating Success – People: Building Organizational Capabilities
  44. 44. Knowledge Management Issues & Opportunities: People, Process & Technology People: • Aging Workforce (10,000 retiring per day in US – Pew Research Center) • Knowledge Capture • Knowledge Transfer • Training & Certification • JIT Information Access • Leveraging SMEs • Team, Partner and Customer Collaboration Process & Technology:
  45. 45. Accelerating Success - Process ©LNS Research 2013
  46. 46. Accelerating Success - Process
  47. 47. Building Manufacturing Process Capabilities • Most companies are using combinations of 2 to 4 programs • Choose the most important programs by industry and issues • Training, certification, widespread engagement, collaboration
  48. 48. Accelerating Success - Technology
  49. 49. Architectural Approach to Quality Software ©LNS Research 2013
  50. 50. Accelerating Success – Technology
  51. 51. Accelerating Success – MOM Software
  52. 52. Accelerating Success – Real-Time Performance
  53. 53. Role-Based OI / EMI Capabilities
  54. 54. OI / EMI – Dashboards & Analytics • Functional expectations & opportunities are growing
  55. 55. Big Data Analytics • Big Data Analytics is about harnessing a collection of massive amounts of structured and unstructured data from across the enterprise • Exponential explosion of manufacturing data coming from connected devices / IoT – estimated 13.5 Billion manufacturing devices connected by 2022 (Cisco) • Previously unknown interrelationships between data will come to light with new analytics technologies like Hadoop
  56. 56. Big Data – Manufacturing Application Examples • Enabling better product/production forecasts that tie to consumer trends • Improving interactions with suppliers based on dynamic sourcing needs • Providing faster customer service and support - harnessing knowledge • Better understanding customer requirements for new products • Better correlations of performance across multiple plants • Better understanding plant performance across multiple metrics • Performing predictive modeling of manufacturing data • Enabling real-time alerts based on analyzing manufacturing data • Correlating manufacturing and business performance information together • Mining combinations of manufacturing and other enterprise data to uncover new improvement and business opportunities
  57. 57. Mobile Technologies • Mobile devices and applications have removed the restrictions of required on-site access, enabling workers to access the performance and decision support information applicable to their respective role, including: • Executives • Plant Managers/Supervisors • Plant Operators • Technical/Quality Personnel • Can create an entirely paperless manufacturing environment • Allows information to be shared between suppliers and customers via similar mobile capabilities • 18% currently have Mobile Operations Visualization & Management capabilities • 14% have Mobile Operations Visualization & Management capabilities planned within 1 Year
  58. 58. Cloud Adoption for MOM Applications • Cloud / SAAS Adoption Rates More Than Doubling in Manufacturer’s Future Plans • 90% of MOM Vendors Either Have or Are Developing Cloud-based Solutions
  59. 59. Cloud Benefits for Manufacturers • Benefits of Cloud versus On-Premise Solutions • Proven in IT applications • Requires less internal IT resources • Automatic software updates • Unlimited capacity upgrades • Built-in disaster recovery • Universal remote access • Easier to aggregate information across plants • Little to no capital expenditures • Lower lifecycle / maintenance costs
  60. 60. Top Selection Criteria for MOM Software • Having Sufficient Functionality is Paramount • Cost & Ease of Integration with Existing Applications Come Next
  61. 61. Case Studies ©LNS Research 2013
  62. 62. • Before Software Supporting Operational Excellence • Heavy documentation requirements = management of (literally) tons of data and paper. • Cumbersome and time-consuming work flows to ensure tracking • Reactionary approach to quality issues, struggles to meet ISO-9001 and AS-9100 requirements • Reliance on nearly 40 stand-along spreadsheets to track all company data but each was a silo of information, lots of redundancies Real-Life Example
  63. 63. • After Software Supporting Operational Excellence • Automated electronic workflows and electronic data management. • Efficient, non-redundant process flows • Improved productivity • Exceeding standards for traceability, document management and process controls • 25% cycle time reduction for audits • Eliminated manual processes and duplication of effort • Leaner operations • 32.5% reduction in scrap/waste Case Study: Real-Life Example
  64. 64. Market Leaders Create a Holistic SQM Strategy ©LNS Research 2013
  65. 65. Summary / Recommendations ©LNS Research 2013
  66. 66. Summary / Recommendations • Start or refine your Operational Excellence journey • Ensure alignment with strategy, goals, actions and metrics • Empower people with both team-based and role-based, real-time performance information • Build organizational capabilities for sustainable success • Implement the most important process / programs to accelerate progress • Over time, build a continuous improvement culture • Support process improvements and knowledge management with technology – in particular, MOM software integrated with information in Enterprise and Automation Systems • Investigate and experiment with new technologies – Cloud, Mobile, Big Data Analytics • The appropriate scope of your journey may be at the plant, line of business or enterprise level
  67. 67. Summary / Recommendations
  68. 68. Thank You!! For More Information - Contact: Matthew Littlefield Principal Analyst – LNS Research matthew.littlefield@lnsresearch.com
  69. 69. • Leading OEMs, Distributors, Suppliers & EMSs use SiliconExpert Daily • Our Electronic Component Database of over 250 million components powers our: o Comprehensive software tools o Integrated solutions o Professional services About Us
  70. 70. Reactive vs. Proactive Approaches to Obsolescence Management 250 Million+ Orderable Part Numbers Up to 42 Parametric values/product line Risk Analysis & Obsolescence Forecasting Algorithms developed with CALCE Environmental Data tracked: EU & China RoHS, REACH, WEEE compliance & Material Declarations Parametrically-derived cross-references for millions of parts Our Database
  71. 71. Identifying the Impacts of SEC Regulations in the Electronics Industry Conflict Minerals
  72. 72. • Defined by Dodd-Frank Act Section 1502(e)(4) • Tantalum, Tin, Tungsten, and Gold • A mineral is conflict free if it did not originate in the DRC or surrounding countries Definition of Conflict Minerals Environmental Team Access to this information is quickly becoming imperative as the first report is due on May 31, 2014 for the 2013 calendar year and then annually.
  73. 73. Conflict Minerals- Products Top 10 Products with 3TG Parts
  74. 74. SiliconExpert Research and Analysis Conflict Minerals Process • Determine the requirements for each supplier within the regulations • Determine due diligence responsibilities of each supplier/OEM • Establish communication with supplier • Determine documentation available and data collection procedures
  75. 75. Reactive vs. Proactive Approaches to Obsolescence ManagementSiliconExpert & Conflict Minerals Data Collection Most Up to Date Conflict Mineral Statuses -Over 1,000 suppliers All Documents & Templates -EICC, COC, Conflict Minerals Policy, Responsibility Report, History Search by Supplier or Smelter - Access to smelter & mining information * EICC stands for: Electronic IndustryCitizenship Coalition * COC stands for : certificate of compliance (company statement) Conflict Mineral Module
  76. 76. New Module: Conflict Minerals
  77. 77. Market Outlook Small & Medium EMS Companies Custer Consulting Group www.custerconsulting.com March 2014 20140303
  78. 78. Challenges Financial data on individual, small EMS companies typically not publicly available Markets can be very localized
  79. 79. Topics Global & U.S. Economy Electronic Equipment - World overview - Target Domestic Markets Active & Passive Components EMS/ODM Markets - Global - N America Summary & Forecasts
  80. 80. Business Conditions After a weak 1H’13 global business conditions improved in the second half of the year 2013 finished strong U.S. economy is currently expanding but there are signs of slower global growth Weaker domestic military market offset by continued growth in instrument & control sectors Encouraging Signs: - Electronic equipment shipments growing in all regions - Leading indicators are generally positive except for China. - Some re-shoring to N America 20140303
  81. 81. Global & U.S. Economies
  82. 82. Industrial Production – World % Change vs. One Year Earlier Britain + 1.8 Dec Czech Republic + 9.3 Dec France + 0.5 Dec Germany + 2.9 Dec Italy - 0.7 Dec Netherlands + 1.8 Dec Russia - 0.2 Jan Spain + 3.5 Dec Euro Area + 0.5 Dec Canada + 2.6 Nov USA + 2.9 Jan China + 9.7 Dec India - 0.6 Dec Malaysia + 4.8 Dec Singapore + 3.9 Jan S Korea + 2.6 Dec Taiwan - 1.8 Jan Thailand - 6.1 Dec Japan + 7.1 Dec www.economist.com + Eurostat 20140301
  83. 83. U.S. Industrial Production Index (2007=100) www.federalreserve.gov/releases/g17/table1_2.htm 60 65 70 75 80 85 90 95 100 105 110 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 IP 20140214
  84. 84. U.S. GDP Growth % Change vs. Prior Quarter (2005 $) -10 -8 -6 -4 -2 0 2 4 6 8 10 1/95 3/95 1/96 3/96 1/97 3/97 1/98 3/98 1/99 3/99 1/00 3/00 1/01 3/01 1/02 3/02 1/03 3/03 1/04 3/04 1/05 3/05 1/06 3/06 1/07 3/07 1/08 3/08 1/09 3/09 1/10 3/10 1/11 3/11 1/12 3/12 1/13 3/13 www.bea.gov/national/ 20131221
  85. 85. Purchasing Managers Indices (Leading Indicators)
  86. 86. Global "Purchasing Managers" Index Diffusion Index, >50 = Growth Markit Economics 30 35 40 45 50 55 60 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 PMI 20140303
  87. 87. China "Purchasing Managers" Index Diffusion Index, >50 = Growth Markit Economics 20140303 40 45 50 55 60 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 PMI
  88. 88. U.S "Purchasing Managers" Index ISM Diffusion Index, >50 = Growth ISM 30 35 40 45 50 55 60 65 70 Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 PMI ISM Growth >50 20140303
  89. 89. PMI Leading Indicator as EMS Forecasting Tool
  90. 90. U.S PMI Leading Index vs N American EMS Shipments ISM & IPC 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 1.70 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar 2007 2008 2009 2010 2011 2012 2013 2014 PMI Leading Indicator EMS Shipments Zero Growth 20140303 3/12 Growth 1 year Lead
  91. 91. Business Cycles
  92. 92. Industry Dynamics
  93. 93. BUSINESS CYCLE Electronic Equipment, EMS/ODM Companies, Components, Materials & Capital Equipment -6 -4 -2 0 2 4 6 0 30 60 90 120 150 180 210 240 270 300 330 360 Electronic Equipment EMS/ODM Components Raw Materials Capital Equip Expansion ContractionTime -> 20130915 % Growth + - 0
  94. 94. U.S. Electronic Equipment, N. American PCBs, Small/Med EMS & PCB Process Equipment $ Shipment Growth20140222 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 PCB Elec Equip PCB Process Equipment Zero Growth Small/Med EMS 3/12 Rate of Change IPC, U.S. Dept of Census & Process Equipment Financial Reports
  95. 95. World Electronic Equipment Production
  96. 96. World Electronic Equipment Shipments by Region 2013 @ 2012 Exchange Rates Electronic Outlook 10/13 20% 15% 6% 52% 7% N America W Europe Japan Rest of Asia ROW Total Production: $2,002 Billion Final Assembly
  97. 97. World Electronic Equipment Production by Type @2012 Exchange Rates Electronic Outlook 10/2013 2012 TOTAL: $1,991 Billion 2.3% 22.0% 13.1% 7.5%26.4% 9.0% 10.1% 9.7% Business Communication Consumer Auto Computer Gov/Military Industrial Instrument 20130101
  98. 98. World Electronic Equipment Production By Type20140221 0 100 200 300 400 500 600 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Millions industr+instru gov/mil Computer & Peripherals automotive consumer Telecom/Datacom Business based upon some historical estimates +5.6%
  99. 99. Electronic Equipment Suppliers Composite of 141 Public Companies Revenue, Net Income & Inventory Computer 13, Internet 9, Storage 10, Communication 20, SEMI 20, Medical 23, Instruments 11, Military 6, Business & Office 3, Consumer 13, Automotive 11 20140221 -100 0 100 200 300 400 500 600 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory +5.6%
  100. 100. Electronic Equipment Suppliers Composite of 141 Public Companies Quarterly Revenue Growth Computer 13, Internet 9, Storage 10, Communication 20, SEMI 20, Medical 23, Instruments 11, Military 6, Business & Office 3 + Media tablets from all vendors, Consumer 13, Automotive 11 20140221 -20 -15 -10 -5 0 5 10 15 20 25 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 %Growth
  101. 101. Global Electronic Equipment Shipment Growth 12/12 & 3/12 Rate of Change 141 OEM company sales composite 20140221 0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.25 1.30 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 RateofChange 12/12 3/12 0 Growth
  102. 102. Inventory/Sales Ratios Large Component Distributors, Semiconductor, EMS & OEM Companies Custer Consulting Group based upon company financials 20140222 0.15 0.25 0.35 0.45 0.55 0.65 0.75 0.85 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Semiconductor EMS OEM Component Distrib Ratio: Inventories/Sales
  103. 103. Regional Electronic Equipment Production
  104. 104. European Computer, Electronic & Optical Products Production Eurostat, C26 category, EU 27 countries 20140212 80 85 90 95 100 105 110 115 120 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Index (2010=100), Seasonally Adjusted
  105. 105. Japan Electronic Equipment Production by Month 2000 to Present 0 200 400 600 800 1000 1200 1400 1600 1800 2000 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Elec Application Equip Electronic Measuring Instrumentation Communications Equipment Computers & Related Equipment Electronic Business Machines Consumer Electronic Equipment JEITA www.jeita.or.jp/ 20140221 Yen Billion
  106. 106. Taiwan/China Electronic Equipment Producers Composite of 101 Manufacturers Consolidated Revenue Taiwan listed companies, often with significant manufacturing in China 20140212 0 100 200 300 400 500 600 700 800 900 1000 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Dec 2013 up 10.3% compared to Dec 2012 and up 1.1% compared to Nov 2013 NT$ Billions
  107. 107. U.S. Electronic Equipment Orders & Shipments Computer, Communications, Measurement & Control and Military www.census.gov/indicator/www/m3/ 20140301 14 16 18 20 22 24 26 28 30 32 34 Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Thousands Orders Shipments $ Billions (monthly, seasonally adjusted)
  108. 108. Regional Electronic Equipment Shipment Growth 20140301 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2.0 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Taiwan/China Japan USA Europe (EU27) Zero Growth 3/12 Rate of Growth (in local currency) Sources: IPC, JPCA, Taiwan/China composite; Eurostat "wiring devices" for Europe Calendar Year
  109. 109. World Electronic Equipment Monthly Shipments Converted @ Constant 2012 Exchange Rates Source: Custer Consulting Group & Electronic Outlook Corp 20140221 0 10 20 30 40 50 60 70 80 90 100 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 USA W Europe Japan Taiwan+China ROA ROW US$ B
  110. 110. World Electronic Equipment Monthly Shipments Converted @ Constant 2012 Exchange Rates Source: Custer Consulting Group & Electronic Outlook Corp 20140221 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 ROW ROA Taiwan+China Japan W Europe USA % of US$ Total
  111. 111. World Electronic Equipment Monthly Shipments Converted @ Fluctuating Exchange Rates Source: Custer Consulting Group & Electronic Outlook Corp 20140301 80 100 120 140 160 180 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 January 2014 up 8.4% vs January 2013 US$ M
  112. 112. U.S. Electronic Equipment - Orders, Shipments & Inventories
  113. 113. U.S. Electronic Equipment Order & Shipment Growth Computer, Communications, Measurement & Control and Military www.census.gov/indicator/www/m3/ 20140301 0.70 0.80 0.90 1.00 1.10 1.20 1.30 Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Shipments Orders Zero Growth 3/12 Rate of Change
  114. 114. U.S. Electronic Equipment Orders & Shipments Computer, Communications, Measurement & Control and Military www.census.gov/indicator/www/m3/ 20140301 14 16 18 20 22 24 26 28 30 32 34 Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Thousands Orders Shipments $ Billions (monthly, seasonally adjusted)
  115. 115. U.S. Electronic Equipment Orders Monthly Data www.census.gov/indicator/www/m3/ 20140301 0 2 4 6 8 10 12 14 16 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Search & Navigation Electromedical, Instr & Control Communication Computer Defense $ Billions (monthly, seasonally adjusted)
  116. 116. U.S. Electronic Equipment Orders Monthly Data www.census.gov/indicator/www/m3/ 20140204 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Medical, Measuring & Control Search & Navigation - non Military Communication- non Military Computer & Related Military-Search & Navigation Military-Communications $ Billions (monthly, seasonally adjusted)
  117. 117. U.S. Electronic Equipment Inventories Monthly Data www.census.gov/indicator/www/m3/ 20140301 0 2 4 6 8 10 12 14 16 18 20 Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Thousands Search & Navigation Electromedical, Instr & Control Communication Computer Defense $ Billions (monthly, seasonally adjusted)
  118. 118. U.S. Electronic Equipment Inventories vs. Orders www.census.gov/indicator/www/m3/ 20140301 1.00 1.20 1.40 1.60 1.80 2.00 2.20 2.40 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Ratio Inventories/Orders
  119. 119. Market Segments Volume (Shift to Low Cost Areas) Personal Computers Mobile Phones Other Consumer Electronics Datacom/Telecom Automotive "Protected" Military Medical Instruments & Controls High IP Content Prototype, Quick Response, Short Run, Need for Local Support
  120. 120. Global Electronic Supply Chain Growth 4Q'13 vs. 4Q'12 (Preliminary) 6 -4 -8 3 0 17 -5 7 5 9 -4 32 5 3 6 12 8 8 13 6 4 -10 0 10 20 30 40 Electronic Equipment Military Business & Office Instruments & Controls Medical Communication Internet Computer Data Storage Automotive Consumer SEMI Equip Semiconductors (SIA) Passive Components PCBs Component Distributors Large EMS (excl Foxconn) ODM PCB Process Equipment Materials PCB Laminate % Change 20140302 US$ equivalent at fluctuating exchange; based upon industry composites including acquisitions
  121. 121. European Electronic Supply Chain Growth 4Q’13 vs. 4Q’12 0 0 3 -6 -2 10 8 7 6 -2 5 -8 -6 -4 -2 0 2 4 6 8 10 12 Electronic Equipment Office equipment Instruments & Controls Medical electronics Domestic Electric Appliances Motor Vehcles Airplane/Aerospace Semiconductors (SIA in euros) Electronic components & boards Loaded electronic boards Wiring devices % Change 20140212 Euro denominated growth rates; Eurostat, SIA & Custer Consulting Group
  122. 122. U.S Electronic Supply Chain Shipment Growth 4Q’13 vs. 4Q’12 0 4 -4 -3 -2 -6 14 6 1 17 0 3 1 3 -10 -5 0 5 10 15 20 Electronic Equipment Electromedical, Measurement & Control Search & Navigation Computer Related Communication Defense Automotive Airplane/Aerospace - non Defense Airplane/Aerospace - Defense Semiconductors to N America Small EMS PCBs Passive components Industrial Production % Change 20140304 Custer Consulting Group
  123. 123. Electronic Equipment Markets of Interest
  124. 124. Changing Electronic Equipment Markets
  125. 125. Smart Connected Device Shipments by Type Gartner 1/14 20140114 2012 2013 2014 2015 Oth Ultramobile (Hybrid & Clamshell) 9 17 40 64 Mobile Phone 1,746 1,804 1,893 1,965 Tablet (ultramobile) 120 180 263 325 PC (Desktop & Notebook) 341 299 278 268 0 500 1,000 1,500 2,000 2,500 3,000 Units (millions)
  126. 126. Automotive Electronics
  127. 127. World Motor Vehicle Production by Geography 2013 Autos, Trucks & Busses Electronic Outlook 10/13 TOTAL: 86.7 Million Units 18.8% 14.3% 10.6% 24.8% 17.3% 14.3% Vehicles N America W Europe Japan China (PRC) Rest of Asia ROW
  128. 128. Automotive Equipment Suppliers Composite of 11 Public Companies Revenue, Net Income & Inventory Autoliv, Borg Warner, Continental AG, Delphi, Federal Mogul, Gentex, Johnson Controls, Lear, TRW Automotive, Valeo, Visteon 20140225 -10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory +9.4%
  129. 129. U.S. Vehicle Shipments 0 5 10 15 20 25 30 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Lt Trucks & Utility Vehicles Heavy Duty Trucks Automobiles www.census.gov/indicator/www/m3 20140204 US$ Billion
  130. 130. Aviation, Government & Military Electronics
  131. 131. U.S. Aircraft & Parts Shipments 0 2 4 6 8 10 12 14 16 18 20 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Non-Defense Defense www.census.gov/indicator/www/m3 US$ Billion 20140301
  132. 132. Military Equipment Composite of 6 Public Companies Revenue, Net Income & Inventory General Dynamics, Harris, Lockheed, Northrop Grumman, Raytheon, Rockwell Collins 20140209 -5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory - 4.1%
  133. 133. Global Military Equipment Shipment Growth 12/12 & 3/12 Rate of Change Industry sector sales composite 20140209 0.85 0.95 1.05 1.15 1.25 1.35 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 RateofChange 12/12 3/12 0 Growth
  134. 134. U.S. Defense Capital Goods Orders & Shipments www.census.gov/indicator/www/m3/ 20140301 0 5 10 15 20 25 30 Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Thousands Orders Shipments $ Billions (monthly, seasonally adjusted)
  135. 135. U.S. Military Electronics Orders & Shipments Defense Communication & Search & Navigation Equipment www.census.gov/indicator/www/m3/ 20140204 0 1 2 3 4 5 6 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Thousands Orders Shipments $ Billions (monthly, seasonally adjusted)
  136. 136. U.S. Government & Military Electronics Production by Type 2013 Electronic Outlook TOTAL: $83.5 Billion 7.0% 7.7% 27.5% 25.7% 0.7% 10.6% 14.4% 0.8% 5.6% Vehicles RADAR GUIDANCE/CONTROL COMM & NAVIGATION ELECTRONIC WARFARE SIMULATION & TRAIN COMPUTER ELECTRO-OPTICAL
  137. 137. More Details Available for each Category
  138. 138. U.S. Government & Military Electronics Communication & Navigation 2013 Electronic Outlook TOTAL: $23.2 Billion 9% 22% 22%9% 14% 15% 2% 5% 2% Vehicles Telecommunication Radio Communication Microwave communication Comm Checkout & Support Other Communication Airborn Navigation Surface/marine/ground nav. Underwater navigation Nav checkout & support
  139. 139. Instruments & Control Equipment
  140. 140. U.S. Electromedical, Measurement & Control Equipment Orders & Shipments www.census.gov/indicator/www/m3/ 20140204 4 5 5 6 6 7 7 8 8 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Orders Shipments $ Billions (monthly, seasonally adjusted)
  141. 141. U.S. Industrial Electronics Production 2013 Electronic Outlook TOTAL: $69.8 Billion 26.6% 25.1% 9.7% 15.0% 0.6% 11.7% 11.2% Vehicles Controls Production Equipment Production Support/Serv Environmental Systems Appliance Controls Other Ind Elec All Other Note: Similar data available for other electronic equipment sectors
  142. 142. U.S. Instrumentation Equipment Production 2013 Electronic Outlook 11/2012 TOTAL: $63.8 Billion 8.0% 4.1% 53.2% 20.7% 1.3% 1.4% 8.2% 3.3% $ Test & Measurement Automatic Tester Medical Analytical Nuclear Instrument Optical & Ultrasonic Avionic Other Note: Similar data available for other electronic equipment sectors
  143. 143. Instruments & Control Equipment Composite of 12 Public Companies Revenue, Net Income & Inventory Agilent, Ametek, Emerson, Itron, Keithly, LeCroy, PerkinElmer, Rockwell Automation, Teledyne, ThermoFisher, Varian, Woodward Govenor 20140222 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory 3.4%
  144. 144. Rank Company 2011 Sales $M 2011/2010 Growth 1 Danaher (T&M div) 3,391 19.7% 2 Agilent Technologies (EMG div) 3,316 19.1% 3 Teradyne 1,429 -8.8% 4 Rohde & Schwarz 1,300 private 5 Advantest (semiconductor test div) 1,272 52.6% 6 National Instruments 1,024 17.3% 7 Anritsu (T&M div) 882 31.9% 8 Yokogawa (T&M div) 436 -0.7% 9 Aeroflex (ATS div) 348 -1.6% 10 Electro Rent 220 43.1% 11 LeCroy 194 25.7% 12 LTX-Credence 179 -30.3% 13 McRath RentCorp (TRS RenTelco div) 125 16.2% Test & Measurement Equipment Suppliers Public Companies Frost & Sullivan 6/12
  145. 145. Danaher Corp. Revenue, Net Income & Inventory CY 20140201 0.0 1.0 2.0 3.0 4.0 5.0 6.0 Q1Q2Q3 Q4Q1Q2Q3Q4Q1 Q2Q3Q4Q1Q2Q3 Q4Q1Q2Q3Q4Q1 Q2Q3Q4Q1Q2Q3Q4 Q1Q2Q3Q4Q1Q2 Q3Q4 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory DHR + 6%
  146. 146. Medical Equipment Composite of 23 Public Companies Revenue, Net Income & Inventory Analogic, Bio-Rad Laboratories, Boston Scientific, Bruker, CareFusion, Covidien, Draeger, Guidant, Hill-Rom, Intuitive Surgical, Invacare, Kinetic Concepts, Medtronic, ResMed, St Jude Medical, Smith & Nephew, STERIS, Stryker, Varian Medical, Waters, Zimmer, Zoll 20140222 -5 0 5 10 15 20 25 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Millions Revenue Income Inventory +0.1%
  147. 147. U.S. Medical Instrument Production 2013 Electronic Outlook 11/2012 TOTAL: $33.9 Billion 15.2% 4.1% 33.4% 22.5% 1.3% Vehicles Diagnostic Therapeutic Other Medica Instr Radiologic Nuclear Medicine Note: Similar data available for other electronic equipment sectors
  148. 148. Medtronic Inc Revenue, Net Income & Inventory CY 20140221 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 19992000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory MDT + 3%
  149. 149. Medical Semiconductor Market Forecast IC Insights 12/13 3.2 3.6 4.0 4.1 4.4 4.9 5.6 6.5 6.8 -5% 14% 10% 5% 7% 12% 15% 16% 4% -0.1 -0.05 0 0.05 0.1 0.15 0.2 0.25 0.3 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 US$ billions 20131222 % Change
  150. 150. Communication Equipment
  151. 151. Communication Equipment Suppliers Composite of 20 Companies 10 mobile phone makers, 10 other telecom equipment makers plus estimate of other mobile makers Revenue, Net Income & Inventory 3COM, ADC Telecom, Alcatel+Lucent, Ciena, Ericsson, Motorola Solutions,, Nokia, Polycom, TellLabs, Palm ; Apple iPhone, HTC, Huawei Device, LG, Motorola Mobility, Nokia, RIM, Samsung, Sony Mobility, ZTE; Euros & Krona converted at fluctuating exchange; mobile phone volumes from company reports & Gartner Dataquest quarterly unit shipment estimates; historical data included for acquired companies 20140209 -40 -20 0 20 40 60 80 100 120 140 160 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Millions Revenue Income Inventory + 16.8%Preliminary 4Q’13 results; smartphones driving growth
  152. 152. U.S. Communication Equipment Orders & Shipments www.census.gov/indicator/www/m3/ 20140301 0 2 4 6 8 10 12 14 16 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Thousands Orders Shipments $ Billions (monthly, seasonally adjusted)
  153. 153. Internet Infrastructure
  154. 154. "Internet" Equipment Suppliers Composite of 9 Public Companies Revenue, Net Income & Inventory ADTRAN, Cisco Systems, Extreme Networks, Juniper Networks, Mattson Technology, Netgear, Sierra Wireless, Sonus Networks, Sycamore 20140222 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory -4.9% Large Cisco Decline
  155. 155. Layer 2/3 Ethernet Switch Vendors 3Q’13 www.idc.com 3Q'13 World Total US$ 5.36 Billion 62.6% 9.4% 3.6% 2.7% 2.0% 19.8% $ Cisco HP Alcatel-Lucent Juniper Dell Others
  156. 156. Cisco Systems Revenue, Net Income & Inventory CY 20140214 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory CSCO - 8% $639 M due to Scientific Atlanta acquisition
  157. 157. Computers & Related Products
  158. 158. U.S. Computers & Related Products Orders & Shipments www.census.gov/indicator/www/m3/ 20140301 0 2 4 6 8 10 12 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Thousands Orders Shipments $ Billions (monthly, seasonally adjusted)
  159. 159. Makeup of Personal Computer Market IC Insights 5/12 20121027 2009 2010 2011 2012 2013 2014 2015 Tablets 1 17 63 110 160 249 341 Netbooks 26 27 15 8 6 5 4 Notebooks 137 167 184 205 225 253 279 Desktops 146 155 154 155 153 156 159 0 100 200 300 400 500 600 700 800 900 1,000 2010-2015 CAGR Tablets + 82.9% Netbooks - 31.7% Notebooks + 10.8% Desktops + 0.5% Units (millions)
  160. 160. World Server Shipment Revenue Gartner Dataquest 2/14 & prior reports 0 2 4 6 8 10 12 14 16 18 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2005 2006 2007 2008 2009 2010 2011 2012 2013 Revenue US$ Billions 20140226 -6.6%
  161. 161. World Server Shipments 4Q’13 Gartner Dataquest 2/2014 TOTAL: $13.7 Billion 28.1% 26.5% 15.2% 4.7% 4.2% 21.3% HP IBM Dell Cisco Oracle Others
  162. 162. Industrial Robots: Share by Market IFR 1/14 39.7% 20.5% 8.6% 7.2% 3.1% 21.0% Automotive Electronics/Electrical Metals/Machinery Chemical, Rubber & Plastics Food & Beverage Other 159.3 Million Units in 2012
  163. 163. Industrial Robots: Sales by Region IFR World Robotics 2013 20140505 2006 2007 2008 2009 2010 2011 2012 Total 111.1 114.4 113.0 60.0 120.6 166.0 159.3 India 0.8 0.9 0.9 0.4 0.8 1.5 1.5 ROW 2.6 2.8 1.7 1.0 3.7 9.2 7.2 Asia Pacific 5.9 4.3 6.8 3.6 8.7 11.1 12.0 China 5.8 6.6 7.9 5.5 15.0 22.6 23.0 S Korea 10.8 10.1 11.6 7.8 23.5 25.5 19.4 N America 17.4 18.7 16.2 8.4 16.4 24.3 26.3 Japan 37.4 36.1 33.1 12.8 21.9 27.9 28.7 Europe 30.4 34.9 34.7 20.5 30.7 43.8 41.2 111.1 114.4 113.0 60.0 120.6 166.0 159.3 0 20 40 60 80 100 120 140 160 180 200 Units (000)
  164. 164. Robots: Accelerating Demise of Factory Jobs?
  165. 165. Electronic Components
  166. 166. Semiconductors
  167. 167. World Semiconductor Shipments Monthly US$ SIA 20140303 0 5 10 15 20 25 30 Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 1314 Thousands 3-Month AvgUS$ Billions (3-month average) 2009 recession much sharper but shorter than 2001
  168. 168. Total Semiconductor Shipments to an Area Monthly Shipments - Reporting Firms SIA website: www.sia-online.org/ 20140303 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Japan N America Europe Asia-Pac $B (3-month average) SE Asia
  169. 169. N American Semiconductor Shipments Monthly & 3-Month Average Shipments SIA website: www.sia-online.org/ 20140303 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Thousands Month 3-Month Avg $ Billions
  170. 170. Semiconductor Shipments to N. America vs. U.S Electronic Equipment Production Total $ Semiconductor Shipments from All Countries to N. America www.sia-online.org/ U.S. Electronic Equipment Shipments www.census.gov/indicator/www/m3/ 20140303 0.3 0.5 0.7 0.9 1.1 1.3 1.5 1.7 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Semiconductors El Equip 3/12 Rate of Change(US$)
  171. 171. Semiconductor Fab, Assembly, Packaging,Test & Measurement Equipment
  172. 172. Semiconductor Capital Equipment Shipments by Area www.semi.org, www.seaj.or.jp/ 9/13 20130914 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 ROW China Taiwan S Korea N America Japan Europe $ Billions
  173. 173. Semiconductor Fab, Test & Measurement Composite of 20 Public Companies Revenue, Net Income & Inventory Applied Materials, ASM Intl, ASML, Advantest, KLA Tencor, Novellus, Hitachi Hi Tech, Lam Research, BTU, LTX-Credence, FEI, FSI, Intervac, Kulicke & Soffa, MKS Instruments, Rudolph, Teradyne, Ultratech Stepper, Varian semiconductor, Veeco 20140222 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 US$ Billions @ fluctuating exchange Chart Title Revenue Income Inventory +33%
  174. 174. Global Semiconductor & Semiconductor Capital Equipment 3-Month Shipment Growth Rates on $ Basis Sources: SIA; Semiconductor Equipment Association of Japan, www.semi.org, Custer Consulting Group SEMI equipment sector composite growth 20140303 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Semiconductors SEMI Capital Equip Zero Growth 3/12 Rate of Change
  175. 175. Passive Components
  176. 176. Passive Components Composite of 11 Companies Revenue, Net Income & Inventory AVX, Bel Fuse, Diodes, International Rectifier, Littlefuse, Murata, RF Micro, Rohm, Vishay, TDK, Yageo; Euros, Yen & NT$ converted to US$ at fluctuating exchange rates 20140214 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory +1.8%
  177. 177. U.S. Production: "Other" Electronic Components (excludes semiconductors) Orders & Shipments http://www.census.gov/indicator/www/m3/ 20140208 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Thousands Orders Shipments $B (Seasonally Adjusted) Calendar Year
  178. 178. PCB Fabrication
  179. 179. World PCB Monthly Shipments Converted @ Fluctuating Exchange Rates Source: Custer Consulting Group 20140221 0.0 1.0 2.0 3.0 4.0 5.0 6.0 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Thousands ROW Rest of Asia Korea Taiwan/China Japan Europe N America US $ Billions Calendar Year
  180. 180. World PCB Shipments (with forecast) Converted @ Fluctuating Exchange Rates 20140222 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Actual Forecast +1.3% -1.1% $ Billions Source: Custer Consulting Group - 2010 base year expanded by monthly growth of N. American, European, Japanese & Taiwan/China monthly PCB shipments Calendar Year Growth calculations: Europe = Eurostat “Wiring Device” Japan & N. America from JPCA & IPC data Taiwan/China:46 rigid & flex company composite Rest of Asia growth = Taiwan/China 44 company composite Includes S Korea data for 2011-2013 +4.9 %
  181. 181. 2012 World PCB Production by Region IPC 8/13 5.0% 4.5% 14.7% 42.8% 12.6% 13.4% 6.6% 0.4% N America Europe Japan China/HK Taiwan S Korea Rest of Asia ROW 20130831 Total: $60.0 Billion (US$ M @ Average 2012 Exchange)
  182. 182. 2012 World PCB Production by End Market IPC 9/13 20.1% 34.2% 17.8% 3.9% 9.3% 2.5% 4.5% 7.7% PC/Office Communication Consumer Defense/Space Industrial Medical Others Automotive 20131111 Total: $60 Billion
  183. 183. Rank Maker Country US$M 1 Nippon Mektron Japan 2,888 2 Unmicron Taiwan 2,383 3 SEMCO Korea 2,002 4 Young Poong Group Korea 2,000 5 Ibiden Japan 1,924 6 Zhen Ding Taiwan 1,512 7 Tripod Taiwan 1,396 8 TTM Technologies USA 1,310 9 Sumitomo Denko PC Japan 1,219 10 Daeduck Group Korea 1,147 11 HannStar Board (GBM) Taiwan 1,112 12 Viasystems Group Inc USA 1,080 13 Nanya PCB Taiwan 1,007 14 Kingboard PCB Group HK/China 935 15 CMK Corp Japan 908 16 Shinko Electric Japan 869 17 Mflex USA 819 18 Kinsus (+Plotek) Taiwan 788 19 Compeq Taiwan 783 20 Meiko Electronics Japan 759 21 TPT (Taiwan Techvest) Taiwan 722 22 AT&S Austria 698 23 Multek USA 650 24 WUS Group Taiwan 644 25 LG Innotek Korea 600 World’s Top PCB Companies - 2012 20131111 Dr Hayao Nakahara, N.T. Information Ltd 9/2013
  184. 184. N American Rigid & Flexible PCB Shipments & Orders 20140204 0 50 100 150 200 250 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 2008 2009 2010 2011 2012 2013 Shipments Orders 2013/2012 Rigid & Flex PCB Shipment Growth: -1.9% Note: IPC survey captures "market" not domestic production. About 15% of the above represents imported boards resold by N American PCB producers in survey. $M (statistical sample of about 50% of producers) IPC
  185. 185. U.S. Electronic Equipment vs. Rigid & Flex PCBs $ Order Growth 20140301 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 PCB Equipment Zero Growth 3/12 Rate of Change IPC & U.S. Dept of Census Inventory builds and excess orders Inventory/order corrections
  186. 186. 2012 Vertical Markets for PCBs in N America (US$) WECC 8/2013 26% 15% 11% 11% 32% 2% 11.0% Military/Aerospace Computers Industrial Instrument/Medical Communications Automotive Consumer 20130912 Total: $3.0 Billion
  187. 187. EMS & ODM Companies
  188. 188. EMS & ODM Estimated Global Revenue vs. Total Available Market 20131119 2009 2010 2011 2012 2013 2014 2015 ODM 227 308 299 270 272 299 320 EMS 75 86 96 116 105 110 115 TAM 1195 1284 1388 1394 1399 1485 1614 1195 1284 1388 1394 1399 1485 1614 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 $ Billions ODM EMS TAM Custer Consulting Group 11/13, TAM = 0.7* Electronic Equipment Production at Fluctuating Exchange
  189. 189. 2013/2012 2012 2013 Growth % Hon Hai (Foxconn) Taiwan 141,122 133,349 -6% Flextronics Singapore 24,670 24,197 -2% Jabil Circuit USA 17,462 18,200 +4% Sanmina-SCI USA 6,086 5,872 -4% Celestica Canada 6,507 5,809 -11% Benchmark Elec USA 2,468 2,450 -1% Plexus USA 2,308 2,232 -3% Venture Mfg Singapore 1,912 1,831 -4% Sypris USA 342 331 -3% Total 202,877 182,386 -10% Large Global EMS Providers 20131117 Sources: Company data, 4Q’13 estimated by Custer Local currency converted at fluctuating exchange 2012 vs. 2013 Sales ($M)
  190. 190. Large EMS Providers Composite of 9 Public Companies Revenue, Net Income & Inventory Benchmark+Pemstar, Celestica, Flextronics+Solectron, Foxconn, Jabil, Plexus, Sanmina-SCI, Sypris, Venture Mfg -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 US$ Billions @ fluctuating exchange Revenue Income Inventory +7% 20140208 -1% Q1'14/Q1'13 Guidance
  191. 191. Large EMS Providers Composite of 8 Public Companies Quarterly Revenue Growth Benchmark+Pemstar, Celestica, Flextronics+Solectron, Jabil, Plexus, Sanmina-SCI, Sypris,Venture Mfg 20140208 -40 -30 -20 -10 0 10 20 30 40 50 60 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Excludes Foxconn
  192. 192. Foxconn Electronics (Hon Hai), Taiwan Revenue, Net Income & Inventory CY 20140115 0 200 400 600 800 1000 1200 1400 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 NT$ (Billions) Revenue Income Inventory 2317 +17%
  193. 193. Flextronics Revenue, Net Income & Inventory CY 20140201 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 19992000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 $ Billions Revenue Income Inventory + 17% 5.9-6.3 1/29/14 FLEXFY ends March 31
  194. 194. Plexus Corp Revenue, Net Income & Inventory CY 20140126 -100 0 100 200 300 400 500 600 700 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 19992000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 $ Millions Revenue Income Inventory + 1% 535-565 1/15/14 PLXSFY ends September
  195. 195. Medium Size EMS Providers Composite of 10 Public Companies Revenue, Net Income & Inventory CTS, Keytronic, LaBarge, NamTai, Nortec, Raven, Sigmatron, Sparton, Sypris, Winland 20131127 -200 0 200 400 600 800 1000 1200 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Millions Revenue Income Inventory -6%
  196. 196. Nortech Systems Inc Revenue, Net Income & Inventory CY 20131119 -5 0 5 10 15 20 25 30 35 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Millions Thousands Revenue Income Inventory NSYS + 7%
  197. 197. Raven Industries Inc Revenue, Net Income & Inventory CY 20131127 0 20 40 60 80 100 120 140 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Millions Thousands Revenue Income Inventory RAVN + 8%
  198. 198. Sypris Solutions Revenue, Net Income & Inventory CY 20131119 -150 -100 -50 0 50 100 150 200 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Millions Revenue Income Inventory SYPR - 3%
  199. 199. SigmaTron International, Inc Revenue, Net Income & Inventory CY -20 -10 0 10 20 30 40 50 60 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 US$ (Millions) Thousands Revenue Income Inventory 20140126 SGMA + 7%
  200. 200. SMTC Revenue, Net Income & Inventory CY 20131119 -100 -50 0 50 100 150 200 250 300 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 US$ (Millions) Revenue Income Inventory - 4% TSE.SMX
  201. 201. Sparton Corporation Revenue, Net Income & Inventory CY 20140207 -20 0 20 40 60 80 100 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 19992000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Millions Revenue Income Inventory SPA + 28%
  202. 202. EMS Inventories/Sales 9 Large & 12 Medium Sized Companies Large: Benchmark+Pemstar, Celestica, Flextronics+Solectron, Foxconn, Jabil, Plexus, Sanmina-SCI, Sypris, Venture Mfg 20140208 0.15 0.25 0.35 0.45 0.55 0.65 0.75 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Large Medium Medium: CTS, Keytronic, LaBarge, NamTai, Nortec, Raven, Sigmatron, Sparton, Sypris, Winland Ratio: Inventories/Sales
  203. 203. 2013/2012 2012 2013 Growth % Foxconn (Hon Hai) 136,515 133,238 -2% Pegatron 30,800 32,029 +4% Quanta Computer 33,400 29,666 -11% Compal Electronics 23,567 23,341 -1% Wistron 22,869 21,793 -5% Inventec 15,406 15,537 +8% Asustek Computer 15,237 15,616 +2% Chimei Innolux 16,241 14,244 -12% Lite On Technology 7,266 7,171 -1% Total 301,301 292.635 -3% Large Taiwan ODM Providers 20140110 Source: Company data, NT$ converted at constant avg 2013 exchange (29.672 NT$ = 1US$) Consolidated company sales (to be updated soon to consolidated sales) 2012 vs. 2013 Sales ($M)
  204. 204. Taiwan ODM Companies Composite Sales of 11 Large Manufacturers 20140114 0 100 200 300 400 500 600 700 800 900 1,000 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Jan 2014 was 3.8% below Jan 2013 and 25% sequentially below Dec 2013 NT$ (Billions) Asustek Computer, Chei Mei, Compal Electronics, Foxconn, Chimei Innolux , Inventec, Inventec Appliance, Lite On Technology, Mitac International, Pegatron, Quanta Computer, Wistron, Chei Mei Display replacing Chei Mei & Innolux Display 3/10 & later Calendar YearCompany Financial Releases
  205. 205. Large ODM Companies Composite of 10 Public Manufacturers Quarterly Revenue Growth Asustek Computer, Compal Electronics, Foxconn, Chimei Innolux, Inventec, Inventec Appliance, Lite On Technology, Mitac International, Pegatron, Quanta Computer, Wistron 20140114 -40 -20 0 20 40 60 80 100 120 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
  206. 206. Structure of European EMS Industry 2012 Reed Electronics Research 12/12 13.27 3.39 3.75 5.55 Group 1 Group 2 Group 3 Group 4 20140118 Group 1 Group 2 Group 3 Group 4 Number of Companies Turnover of Each Segment Eur billion 850+ 52 6 19
  207. 207. European EMS by Region Reed Electronics Research 1/14 2201401180131020 14.6 14.4 14.7 14.9 15.3 15.8 11.0 11.1 11.3 11.4 11.7 12.0 0 2 4 6 8 10 12 14 16 18 2012A 2013E 2014F 2015F 2016F 2017F CEE, N Africa & Oth W Europe Euro (Billions)
  208. 208. Forecasting EMS Sales using Leading Indicators
  209. 209. Global EMS & ODM Companies Composite of 53 Public Companies Revenue 0 20 40 60 80 100 120 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 US$ Sales @ fluctuating exchange Millions +3.4% 20140208 US $ Billions
  210. 210. IPC Small & Medium N American EMS Company Revenue Index 0 20 40 60 80 100 120 140 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 2007 2008 2009 2010 2011 2012 2013 20140208 Index 2010 avg month = 100
  211. 211. IPC Small/Medium EMS vs Composite of 53 Public EMS/ODM Companies Revenue 0 5000 10000 15000 20000 0 20 40 60 80 100 120 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 53 Company IPC Small/Medium 20140208 US $ Billions
  212. 212. IPC EMS Small & Medium Company N. American Shipments & Bookings Markit Economics & ISM 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 1.70 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar 2007 2008 2009 2010 2011 2012 2013 2014 PMI Ship Book Zero Growth 20140303
  213. 213. IPC Small & Medium Company EMS vs N. American PCB Shipments Markit Economics & ISM 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar 2007 2008 2009 2010 2011 2012 2013 2014 PMI Small/Med EMS PCB Zero Growth 20140303
  214. 214. IPC N American Small/Medium EMS vs Composite Sales of 53 Global EMS/ODM Companies Markit Economics & ISM 0.60 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 PMI IPC N American Small/Medium 53 Company EMS/ODM Zero Growth 20140303
  215. 215. U.S Purchasing Managers Leading Index vs IPC EMS shipments & bookings Markit Economics & ISM 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 1.70 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar 2007 2008 2009 2010 2011 2012 2013 2014 PMI PMI Leading Indicator EMS Ship EMS book Zero Growth 20140303
  216. 216. Global PMI Leading Index vs Composite Sales of 53 Global EMS/ODM Companies Markit Economics & ISM 0.60 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 PMI PMI Leading Indicator EMS/ODM Shipments Zero Growth 20140303
  217. 217. U.S PMI Leading Index vs N American EMS Shipments ISM & IPC 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 1.70 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar 2007 2008 2009 2010 2011 2012 2013 2014 PMI Leading Indicator EMS Shipments Zero Growth 20140303 3/12 Growth 1 year Lead
  218. 218. U.S PMI Leading Index vs N American EMS, PCB & Semiconductor Shipments Markit Economics & ISM 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 1.70 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar 2007 2008 2009 2010 2011 2012 2013 2014 PMI PMI Leading Indicator EMS Ship PCB Ship Zero Growth Semiconductors 20140303
  219. 219. Using This Information to Forecast Your Company’s Sales
  220. 220. Data Sources • Trade Organizations • IPC, ZVEI, SIA, SEMI • Government Statistics • US Department of Commerce, Eurostat • Published Market Research Studies • Company Financial Reports & Consolidated Sector Data • Leading Indicators • Purchasing Managers Indices, Conference Board CLI • Your Own Company’s Sales
  221. 221. Forecasting Your Company Sales • Organize monthly or quarterly sales in spreadsheet • Obtain related industry time series for same time period • Compare industry data and/or leading indicators to your sales using 3/12 growth rates • Determine lead times vs. your data • Forecast your sales based upon lead times • Estimate your market share gains/losses by comparing your company growth to a related industry sector •Custer Consulting Group can assist by providing: • Historical industry data • Help with analysis
  222. 222. Forecasts
  223. 223. Walt
  224. 224. World 2.5 2.5 3.2 3.9 3.7 USA 2.8 1.9 2.7 3.4 3.3 EU -0.4 0.0 1.2 1.5 1.9 Japan 1.4 1.8 1.9 1.6 1.2 Four Tigers 1.9 2.5 3.6 3.9 3.7 China 7.7 7.7 7.9 8.2 7.7 Henderson Ventures 2/2014 www.hendersonventures.com 2012 2013 2014 2015 2016 GDP Growth Constant $ Growth Rates Converted @ Constant Exchange Rates 20140209
  225. 225. World 1.0 -2.9 4.7 5.9 5.7 USA -0.9 -3.3 2.7 4.9 5.1 W. Europe -3.4 -4.6 1.6 3.2 3.4 Japan -2.6 -10.3 4.3 4.1 3.2 Four Tigers -1.2 1.8 4.4 5.7 5.4 China 2.6 -2.9 6.2 7.0 6.6 Henderson Ventures 2/2014 www.hendersonventures.com 2012 2013 2014 2015 2016 Electronic Equipment Production Growth Constant $ Growth Rates Converted @ Constant Exchange Rates 20140209
  226. 226. World Rigid & Flex PCB Production Converted @ 2012 Exchange Rates except Japan @ 100Y/US$ H Nakahara 2/14 20131111 59.9 59.8 59.8 62.7 64.9 66.6 67.7 0 10 20 30 40 50 60 70 80 2011 2012 2013 2014 2015 2016 2017 Total Other Asia Thailand S Korea Taiwan Japan China Other Europe Germany Americas $ Billion (@2012 exchange rates)
  227. 227. N. American Supply Chain Forecast 2014 vs. 2013 0 2 4 6 8 Small/Medium EMS Semiconductors PCBs Electronic Equipment Combined GDP Custer Consulting Group Custer Consulting Group Henderson Ventures HV Henderson Ventures % Change 20140222
  228. 228. Key Points Ability to target each end market sector by key companies, size and growth rate Size & growth of each sector of world & U.S. electronic supply chain Leading indicators to forecast domestic and global EMS growth Tools & methodology to forecast your companies growth Likely N American Small/Medium EMS Growth about 3% in 2014
  229. 229. Future Presentations Financial data on small EMS companies not publicly available Markets can be very localized Leading indicators appear very promising as forecasting tool Cooperative efforts with individual companies would be welcome More work needs to be done
  230. 230. Custer Consulting Group Products Daily News Services (6 days/week) - Global electronics supply chain - Solar/Photovoltaic supply chain Business Outlook - Market charts & data Global market OEMs Components, EMS, ODM, materials & process equip Solar/Photovoltaic - Weekly Market Comments with latest charts 20111007
  231. 231. Strictly private & confidential Lincoln International’s Presentation Regarding: The Dynamic EMS Industry March 24, 2013
  232. 232. Lincoln International Snapshot Paris Frankfurt Chicago New York Los Angeles London Vienna Madrid Mumbai Tokyo Amsterdam Moscow São Paulo Beijing Americas ▪ Offices in Chicago, Los Angeles and New York ▪ Office in São Paulo Europe ▪ Offices in Amsterdam, Frankfurt, London, Madrid, Milan, Moscow, Paris and Vienna Asia ▪ China – Office in Beijing ▪ India – Office in Mumbai ▪ Japan – Office in Tokyo International Industry-focused Leader  15 offices with nearly 300 bankers in key global economies – half outside the U.S.  Experienced local bankers with deep strategic relationships within each region  14 global industry groups led by experienced senior bankers  Significant transactional experience and deep relationships within each sector  Ranked one of the top two middle market investment banks in the world(1)  Ranked as the #1 investment bank for the sale of private equity owned businesses for 2013  Since 2001 has completed more EMS transactions than any investment bank in the world Milan (1) According to MergerMarket for M&A transactions less than $300 million completed in 2013 (Rothschild was the other top ranked bank)
  233. 233. Contents Section 1 General Middle Market M&A Environment 1 Section 2 EMS Industry Financial Metrics 3 Section 3 EMS Industry Merger and Acquisition Activity 8 Section 4 Overview and Traditional Drivers of Buyer Valuation 13 Section 5 Long-Term Strategic Outlook: Eliminating the “E” from EMS 16 Section 6 Conclusion 23 APPENDIX A Officer Bio 2014 - IPC Presentation_v1.4.pptx
  234. 234. T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O R AMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA General Middle Market M&A Environment Section 1
  235. 235. 9,035 7,250 10,448 11,836 11,455 10,812 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 2008 2009 2010 2011 2012 2013 NumberofDeals  M&A activity has solidly rebounded from great recession levels in 2009  The combination of low interest rates and slow growth creates an ideal environment for M&A  A more robust M&A market is expected in 2014 due to increased M&A activity in the second half of 2013 carrying into 2014, as well as continued strength in M&A activity fundamentals  Middle market M&A ($10-$500M EV) is expected to continue driving the majority of deals in 2014 Middle-Market M&A Overview M&A activity decreased in 2013, but is expected to increase in 2014 Overview Activity Sponsor Activity  Financial sponsors have over $400 billion of equity funds to invest and pressure to deploy this capital  4,000+ portfolio companies currently need to be exited or recapitalized  Continued low interest rates  Leverage multiples have returned to pre-recession levels, allowing sponsors to often out pay strategic buyers for assets Strategic Activity  $2.2+ trillion of cash on hand to fuel acquisitions, offset slow organic growth to meet strategic initiatives  Seeking growth through M&A to counteract the low organic growth environment  Increased cross-border activity due to globalization Yearly M&A Volume (Transaction Size $10M – $500M) Source: Capital IQ Section 1: General Middle Market M&A Environment 2
  236. 236. T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O R AMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA M&A as a Strategic Value Enhancing Tool Section 2
  237. 237. Sparton Corporation (NYSE:SPA) Acquisition History November 15th, 2012 June 6th, 2013 August 30thth, 2013 December 11thth, 2013 2014 Sparton acquired Onyx EMS, LLC, a leading EMS provider of complex applications to medical OEMs Sparton acquired Aydin Displays, Inc. to add engineered product content of enhanced flat panel display and touch-screen solutions Sparton acquired Creonix LLC, a leading EMS provider, in order to build out cable and wire harness engineering and manufacturing capabilities Sparton acquired Beckwood Services, Inc. to provide electromechanical controls for the machine tool, analytical instruments and military markets Section 2: M&A as a Strategic Value Enhancing Tool 4 ** Lincoln International involved transaction ** **
  238. 238. $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Sparton Corporation (NYSE:SPA) Acquisition History (continued) Announcement of Onyx acquisition Announcement of Creonix acquisition Announcement of Aydin Displays acquisition Announcement of Beckwood Services acquisition $31.6 $12.6 Source: Capital IQ, February 25th, 2014 Share price Section 2: M&A as a Strategic Value Enhancing Tool 5
  239. 239. T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O R AMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA EMS Industry Financial Metrics Section 3
  240. 240. 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Q1-03 Q1-04 Q1-05 Q1-06 Q1-07 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-13 IndexValue Asof3/31/03 Large Mid Small EMS Industry Stock Performance EMS Stock Index  Small and Mid sized EMS public company stocks have greatly outperformed Large EMS company stocks over the last 10 years  Since 2002 Small and Mid sized EMS companies have traded at higher valuations than large EMS companies, prior to that the large companies dominated market valuations  Large EMS companies searching for opportunities to differentiate and increase margin and create shareholder value Note: Large index: Celestica, Flextronics, Jabil and Sanmina Corp.; Mid index: Benchmark, CTS Corp, Key Tronic Corp., Nam Tai Electronics, Plexus Corp. and Sypris Solutions Inc.; Small index: IEC Electronics Corp., Nortech Systems, Sigma Tron International, SMTC Corp. and Sparton Corp. 740% 114% (25%) Section 3: EMS Industry Financial Metrics 7
  241. 241. (30.0%) (20.0%) (10.0%) 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% Q1-03 Q4-03 Q3-04 Q2-05 Q1-06 Q4-06 Q3-07 Q2-08 Q1-09 Q4-09 Q3-10 Q2-11 Q1-12 Q4-12 Q3-13 Large Mid Small EMS Revenue Growth Rates  Small size EMS companies are exhibiting the highest YoY LTM revenue growth rates while Mid and Large (excluding Foxconn) EMS companies are exhibiting declining revenue growth  Small size EMS companies are exhibiting YoY LTM revenue growth rates above their respective historical averages Year-over-Year (YoY) Last Twelve Months (LTM) revenue growth rates Note: Data sourced from Capital IQ as of the last day of each quarter; Large index: Celestica, Flextronics, Jabil and Sanmina Corp.; Mid index: Benchmark, CTS Corp, Key Tronic Corp., Nam Tai Electronics, Plexus Corp. and Sypris Solutions Inc.; Small index: IEC Electronics Corp., Nortech Systems, Sigma Tron International, SMTC Corp. and Sparton Corp. 7.1% 9.2% 5.4% Averages: 7.9% (2.4%) (13.8%) Section 3: EMS Industry Financial Metrics 8
  242. 242. 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% Q1-03 Q4-03 Q3-04 Q2-05 Q1-06 Q4-06 Q3-07 Q2-08 Q1-09 Q4-09 Q3-10 Q2-11 Q1-12 Q4-12 Q3-13 Large Mid Small EMS EBITDA Margins Over Time  Large and Mid size EMS companies are operating above their historical EBITDA margin averages  Large EMS companies are exhibiting recent margin improvement Note: Data sourced from Capital IQ as of the last day of each quarter; Large index: Celestica, Flextronics, Jabil and Sanmina Corp.; Mid index: Benchmark, CTS Corp, Key Tronic Corp., Nam Tai Electronics, Plexus Corp. and Sypris Solutions Inc.; Small index: IEC Electronics Corp., Nortech Systems, Sigma Tron International, SMTC Corp. and Sparton Corp. EBITDA Margins 4.8% 6.2% 4.3% Averages: Section 3: EMS Industry Financial Metrics 9
  243. 243. 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 MultipleofEBITDA Large Mid Small EMS Company Valuations Enterprise Value / EBITDA Note: Data sourced from Capital IQ as of the last day of each quarter; Enterprise Value is calculated as market cap plus debt, preferred equity and minority interest less cash; Large index: Celestica, Flextronics, Jabil and Sanmina Corp.; Mid index: Benchmark, CTS Corp, Key Tronic Corp., Nam Tai Electronics, Plexus Corp. and Sypris Solutions Inc.; Small index: IEC Electronics Corp., Nortech Systems, Sigma Tron International, SMTC Corp. and Sparton Corp.  EMS company valuations in general have improved over the last year  Small EMS companies are being valued at new historical averages  Large and small size EMS companies are trading above historical averages; Mid size companies are trading right at historic averages 6.7x 6.7x 4.9x Averages: Section 3: EMS Industry Financial Metrics 10
  244. 244. T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O R AMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA EMS Industry Merger and Acquisition Activity Section 4
  245. 245. 51 48 24 46 32 29 24 0 10 20 30 40 50 60 2007 2008 2009 2010 2011 2012 2013 #ofTransactions Total EMS Merger and Acquisition Activity M&A activity in the EMS industry has decreased since 2010 Transaction volume  Transaction volume equal with historic lows of 2009  Activity is indicative of buyers becoming more selective  Industry unlikely to bounce back to 2007 levels Section 4: EMS Industry Merger and Acquisition Activity 12
  246. 246. 9 9 8 7 2 2 4 5 6 1 0 5 10 2012 2013 #ofTransactions U.S./Canada Europe Asia Cross-Border (High/High) Cross-Border (High/Low) Other EMS Merger and Acquisition Activity – by Geography M&A activity decreased, or remained flat, in all but Cross-Border (High/Low) transactions Transaction volume by geography  Cross-Border M&A activity between high-cost regions has exhibited the most growth with year-over-year transaction volume increasing 25%  Cross Border activity between high-cost and low-cost regions has exhibited the greatest percentage decrease in activity with transaction volume down from six to zero  Transactions between Asian countries have remained flat Section 4: EMS Industry Merger and Acquisition Activity 13
  247. 247. 13 15 14 10 3 1 1 15 7 10 77 1 2 1 8 8 3 5 0 2 4 6 8 10 12 14 16 2010 2011 2012 2013 #ofTransactions EMS Consolidations OEM Divestitures Vertical/Horizontal Convergences EMS Divestitures Private Equity Investments EMS Merger and Acquisition Activity – by Type M&A activity in the EMS industry has primarily been concentrated within Consolidations and Convergences Transaction volume by target company category  Consolidations continue to be the main source of M&A activity within the EMS industry  While investment into EMS by private equity is slightly below 2010 levels, Lincoln is currently seeing renewed interest by private equity in EMS Section 4: EMS Industry Merger and Acquisition Activity 14
  248. 248. T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O R AMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA Traditional Drivers of Valuation and Current Buyer Trends Section 5
  249. 249. Traditional Drivers of Value Drivers Commentary Margin Growth  Highest EMS valuations occurred when industry growth rates exceeded 20%  individual companies that can achieve double digit growth rates will attract higher valuations  Difficult to sell a business that is in decline  Historically, EMS valuations were not driven by margin due to extraordinary growth rates  As the industry has matured margins have become more important than growth  Average EBITDA margins for high mix providers are 7% - 8%  Premium valuations are given to companies with double digit EBITDA margins Customers and End Markets  Historically, telecommunications and computing were attractive end markets due to their inherent growth rates  Today, medical, military and industrial end markets are valued due to their customers’ higher margin profiles  Automotive, which was highly unflavored, has returned as a more promising end market due to a higher growth rate and a change in auto OEM behavior to allow their supply chain more profitability  Customer diversity is rewarded over customer concentration Section 5: Traditional Drivers of Valuation and Current Buyer Directions 17 Capabilities  Historically automated SMT capability was valued  Today, overall complexity of work, level of integration and box build are what drives value  Any unique capabilities add value (e.g. ruggedization, special software integration, etc.)  Engineering capability is also more valued today Location  Historically, globalization was the main driver of value  Today location is important, but value drivers are more varied (e.g. low cost, proximity to customers, logistics considerations, etc.)
  250. 250. Current Buyer Interest Trends Trend Commentary Outside Acquirers Looking in the EMS Industry Tier I Providers Looking Outside Typical EMS Industry for Acquisitions  Tier I providers are reluctant to acquire mid-size and small EMS companies due to industry maturity  Customers who do business with mid-size and small EMS companies typically do not want to do business with Tier Is  The need to increase margins to create shareholder value and meet Wall Street expectations is paramount for Tier Is  Looking outside EMS for higher margin businesses  Looking internally for cost saving opportunities  Increasingly building up engineering and IP content  Manufacturers in contracting industries (e.g. defense) are looking for rapid diversification  Natel Engineering (leading defense hybrid components manufacturer) acquiring EPIC Technologies  Mechanical products manufacturers within an end market looking to expand capabilities into electronics  Duccomun (a mechanical DOD company) acquiring LaBarge  A current maker of mechanical components for automobile applications actively seeking companies with electronics expertise  Companies who dominate a specific niche needing to use acquisitions to achieve external growth  Leading manufacturer of micro-electronics for communication applications seeking acquisitions outside their niche including potential EMS companies Private Equity Investment Trends  Leverage multiples have returned to pre-recession levels, which combined with low interest rates and unvested capital, make private equity more active and competitive buyers  Fragmentation and relatively low multiples make EMS an attractive industry for the PE model Mid-tier Consolidations  Consolidations were the leading type of transaction in 2013 and are expected to repeat in 2014  Need for scale, geographic expansion and market penetration are driving Mid-tier consolidations Section 5: Traditional Drivers of Valuation and Current Buyer Directions 18
  251. 251. T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O R AMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA Long-Term Strategic Outlook: Eliminating the “E” from EMS Section 6
  252. 252. Valuation of Large Industrial Conglomerates Section 6: Long-Term Strategic Outlook: Eliminating the “E” from EMS 20 EV / EBITDA Multiples 12.4x 15.2x 12.9x 10.1x 12.7x 9.9x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x Actuant Ametek Danaher Emerson Electric Teledyne Tech. TE Connectivity EBITDA Margins 18.2% 26.0% 21.8% 19.6% 14.2% 19.2% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Actuant Corporation Ametek Danaher Corp. Emerson Electric Co. Teledyne Technologies Inc. TE Connectivity Ltd. EMS Average 5.2% EMS Average 7.5x
  253. 253. Long Term Trend: “DMS” Section 6: Long-Term Strategic Outlook: Eliminating the “E” from EMS 21 The 3D vs. Virtual World “There will always be 3D stuff to build” EMS companies will convert into Diversified Manufacturing Services (DMS) companies
  254. 254. Jabil: an Emerging DMS Company Section 6: Long-Term Strategic Outlook: Eliminating the “E” from EMS 21  Focusing the company on engineering and manufacturing “3D stuff”  Acquisition of Nypro, a leading plastics manufacturer  Non-electronics account for 30% - 35% of Jabil’s revenue  Divestiture of Jabil Global Services business to focus company on engineering and manufacturing excellence
  255. 255. T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O R AMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA Conclusion Section 7
  256. 256. Key Takeaways Heading Into 2014  Expect favorable EMS M&A environment in 2014  Consolidations will continue  Increased activity by private equity  Big EMS companies looking for diversification outside of core EMS business  Outside companies looking into the EMS market Every EMS company should think about a DMS strategy Section 7: Conclusion 25
  257. 257. Bios Appendix A T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O R AMSTERDAM BEIJING CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA
  258. 258. Jack Calderon Advisory Expertise Jack has extensive experience in advising companies on merger and acquisitions, restructuring, fairness opinions, and other strategic matters. In addition to completing multiple transactions for public company, private equity, and private owner clients, Jack also has experience in cross border advisory work encompassing both Europe and Asia. Jack has led numerous sell-side and buy-side transactions. Jack's advisory work is exclusively focused on the commercial and defense electronics industries. Industry Expertise Jack is an expert in the electronics industry. He spent 20 years in various operating management positions in the industry, beginning with Honeywell and culminating as CEO of publicly traded EFTC (now part of Benchmark). Jack is a frequent speaker at industry events and publishes the quarterly EMS DealReader which tracks all transactions in the electronic manufacturing services (EMS) industry globally, as well as the EMS Stock Index. Jack is a former member of the Board of Directors of the IPC which is the global standards-setting organization for the manufacture of electronic products. In addition to the EMS industry, he focuses on interconnects (circuit boards, flex circuits, and connectors), defense electronic products, specialty systems, and design and product repair service providers. Managing Director Past Affiliations Prior to joining Lincoln International, Jack served as Chairman and Chief Executive Officer of EFTC, a publicly traded electronics manufacturing service provider, now part of Benchmark Electronics (NYSE:BHE). EFTC specialized in manufacturing complex electronics primarily for the aerospace industry. Jack began his career in Honeywell's Aerospace and Defense Group in 1979. In his 20 year operating career, he held a variety of positions with several companies including Program Manager; Vice President of Marketing and Contracts; Vice President of Corporate Development; Vice President and General Manager of Latin American Operations and Chief Executive Officer. Academic Credentials Jack earned a Juris Doctor degree from The American University, and a Bachelor of Arts degree in economics, cum laude, from Case Western Reserve University. Role at Lincoln International Jack leads Lincoln International's Electronics group which includes Electronic Manufacturing Services (EMS), Interconnects, and Defense Electronics. He has extensive operating and transaction experience in defense electronics and electronic manufacturing services. Jack leads deal teams, manages key client relationships and markets the firm's services. Appendix A: Officer Bio 28
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