David Wall, managing director of UK-based EMI-protection firm Kemtron, is among those who think that too many companies have ended up following the trend blindly, and not looked to see if it really made sense for the customers they supply. As he states, "In our part of the industry, just like other sectors of the electronics market, we have seen a great deal of consolidation, with the larger global players buying up the smaller localised vendors. But," he continues, "although these companies are able to provide for customers whose commercial interests span across various geographical regions and deal with large volume projects, there is a whole other part of the market that they have isolated themselves from. The SME firms who have specific needs, and require close cooperation on the designs, aren't adequately serviced by these companies. Firstly they can't offer them a good level of local technical support; secondly they are clearly not going to give these firms priority attention," Wall feels. "As a result, a lot of SME business is going to fall through the net, as the companies that they rely on to meet their demands have focussed their efforts elsewhere." In his opinion, there needs to be a revaluation of this situation, as a sizable chunk of not just his sector, but of the electronics market as a whole, is under risk of being neglected. He notes: "You just have to look at the banking/finance arena to see how a similar situation arose. A year or two ago the major banks all moved their call centres out to places like India to save on manpower costs. On paper this all made sense, but they soon realised that the client base was not happy about it, as the quality of service they received plummeted. When it became apparent that the banks that had kept their customer-service operations over here were actually gaining a competitive advantage, then the rest of them decided to do a u-turn and bring this side of their business back home." As Wall sees it, this analogy apppplies very well to a broad number of electronics sectors; he testifies that "We are now finding that companies are coming to us, as they simply aren't happy with the treatment they are getting from our larger competitors." Thus, it is Wall's judgment that there is a lot of good business that is simply slipping below the radar of the global players, and this can only be good news for companies such as his. Though most would have assumed that times would have only got harder for them, in fact it could be argued there are actually rich pickings that are becoming available to the local vendors. "We can target the firms that need strong engineering support and design flexibility, and give them a level of service they wouldn't be able to get elsewhere," he explains. "The quick time-to-market pressures and likelihood of last-minute changes to designs mean that many customers need to partner with companies that can turn on a pinhead and adapt to new situations rapidly. You can't really do that when you are collaborating with a large multinational, as the lines of communication are more complex."Electronics distributor Anglia Components is another firm that has identified the problem. It has focused on being technically adept, and quick to respond, rather than simply going after low-margin, high-volume business. Its 360,000 product lines are stocked in great depth for same-day despatch. CEO Steve Rawlins has been with the company since the mid-70s, and in that time he has seen many changes to the business environment. As he makes clear, "The days when a distributor could just send out a datasheet and then ask what quantity of product was required are long gone. Customers are now much more sophisticated, and the pace at which they are working at has risen dramatically." He explains: "In the distribution sector we are seeing the big players chasing the globalisation dream, but in doing so they are letting people down at the grass-roots level. Most have chosen to have one centralised warehousing site for Europe, with local offices in each key country, but although this gives the impression of an efficient system, it has several faults. Firstly, the turnaround times are not as good as they would like to imply, so getting stocked items shipped reliably is not always easy, especially in initial stages. Secondly, staff at these provincial sites don't normally have the level of training that a company like ours would expect. As SME design teams are generally small, they need to be able to rely on high-level support. Plus, often they will use specialist designers that are sub-contracted to look at certain aspects such as the power supply or RF design, so the distributor has to be willing to work closely with them too." According to Rawlins, "These are things that the broadliners are not really suited to do. With such massive linecards, it is more difficult to know each product inside out, and identify real opportunities. We have looked to have a balanced, complementary - rather than a competing - linecard that means we can pass on our expertise to the client." The often highly demanding projects that smaller firms have, and the fact that they are usually one-shot affairs where there is no room for error make the stakes even higher. This means that having regular consultation with their distribution partners is all the more important. To deal with this, Anglia has looked to put more technical staff out in the field: "We have ensured that a large proportion of our workforce are fully qualified engineers, something that is still a rarity amongst our larger competitors. We have invested in making sure that we have a strong complement of FAEs that can advise our clients," Rawlins elucidates. "It is a model that needs more investment, as finding good engineers and providing ongoing training clearly requires a lot of effort and financial outlay, but this is what we need to do to add value, and our customers clearly appreciate this," he adds. The firm serves a great selection of market sectors, including automotive, add-on automotive, LED signage, intelligent lighting, medical, defence, high-end security, and intelligent building management. "Basically anywhere that SMEs can differentiate themselves and keep ahead of the run-of-the-mill vendors there is going to be a need for a distributor like us. Some of them may choose to use a broadliner for the commoditised components, but for the crucial digital or analogue parts, which can make or break the design, they will work with us," states Rawlins. Anglia looks to carry more depth of inventory per ratio of sales than its broadline competitors, so that it can fulfil requirements within the shortest period. "It is vital that we be proactive when it comes to getting samples out quickly, and make sure that customers know the supply situation with the products they are looking to use, so communication is everything," Rawlins states. "To make this run efficiently you have to build a working relationship as quickly as possible. If this is not done, there is always a risk that customers will be kept in the dark, and not be able to make informed decisions. How well you can engage with the client is the deciding factor. These SME firms need to be reactive and innovative to survive, and so the pressures to get their products out on schedule are obviously huge. They simply can't afford to be let down by suppliers, and so they only want to deal with ones that make their needs a priority," he adds. To this end the firm is seeing strong sales: "We've out-performed the market and seen substantial growth that is above that of the industry as a whole. So customers are clearly voting with their feet," he concludes.
The trend is very apparent, unsurprisingly, when looking at semiconductor manufacture. With European IDMs backing out of production here and looking to follow outsourcing strategies, it is refreshing to see that one firm is staying true to its fab principles. austriamicrosystems is managing to find some good business for its Graz-based facility in the US and Europe, as it targets more complicated, non-commodity analogue processes, such as HV or SiGe. Rene Kautschitsch, marketing manager for its foundry-services business, gives details of how "anyone who is looking for a fab to produce, say, 500 to 1000 analogue wafers is not going to get any real interest from the major Taiwanese players, and they certainly won't be able to expect any scheduling precedence or special attention. Firms need quick turnaround and high levels of support for their analogue designs, but the mega foundries will not be able to offer this. That's why they often come to us."Roband is a manufacturer of high-specification power-supply systems. The company mainly concentrates on defence/aerospace business, working with major players such as BAE Systems and Boeing on high-value/high-technology avionics and missile-system contracts. As its managing director, Andrew Gold, explains, "Our customers will have all sorts of demanding and potentially conflicting requirements - e.g. compressed size, high shock/vibration resistance, high temperature range (from -55 up to +115°C), and stringent EMC performance. This means that these designs are put under pressure from all sides at once. If these sorts of projects are to be fully optimised," he continues, "they must be undertaken by experienced engineers/production staff who have high skill levels and competence in multiple disciplines, as well as a good understanding of component characteristics. These aren't things you learn over night." He adds: "The bigger power-supply companies prefer to go for a 'one-size-fits-all' business strategy. Our sort of higigh-specification, lower volume projects are something that they don't really have the correct attributes to deal with." By way of an analogy he describes how "it's a bit like comparing McDonald's with the restaurant at the Savoy. Both can offer you a meal, and each has certain advantages over the other. If you've only got a few pounds in your pocket and just want a burger, then you are better to go with the first option, but if you want to have something cooked just the way you like it, then you have to consider the latter." However, he is quick to point out, "Of course that doesn't make what they do any less valid. We just see there being room for both styles of business."GTK is a UK-based cabling-solutions manufacturer. John Morath, its marketing director, has also noticed this counter-culture building up. 85% of its business still comes from within European borders. In his experience, "Too often the cabling in OEM designs is an afterthought, but we try to get ourselves involved as early as possible and engage in heavy consultation with the client, so that we can produce the best solution. The large cabling/connector suppliers only really deal at this level with their tier 1 customers; the tier 2s tend to get offloaded onto their distributors. But often the level of support that they need is even higher, since their engineering teams are stretched," he continues. "They need something way beyond the basic linecard." The firm focuses on key markets that offer the best match for its expertise, and looks to play to its strengths. Metering and gaming machines, among others, are proving to be very promising areas for it. He explains, "There is no point in just going at it from a sales-figure perspective; you need to look at business which makes the best use of your resources. In the past it was just filling up the order book; now we appreciate that it is better to follow a more market-aware strategy and take on projects where we can add value and be rewarded for it. We look to add something to the overall design by improving the ease of use and addressing the aesthetic aspect, as well as keeping space required to an absolute minimum. The end products then have a more professional feel. It is a shame when a good design is spoilt by ugly cabling." Simon Cruddace, managing director of contract EMS provider Brantham Engineering, is another individual who is not swayed by this widespread infatuation to go global, and feels there is an underserved percentage of the TAM even in this most cutthroat of sectors. He believes companies should consider the advantages of utilising domestic manufacturing firms before being lured into going offshore. The Essex-based firm that he runs has managed to carve out a profitable living for itself, employing nearly 200 people and producing an annual turnover of over £15 million. It has seen a year-on-year growth of 19% for the last two years, and predicts that it will reach similar figures for the next five years. "We pride ourselves on being able to offer a level of responsiveness that just wouldn't be possible with an EMS firm based in the Far East or Eastern Europe," he states. "Being successful in this sector is clearly difficult, and being competitive on price is certainly very important, but there are many other aspects to consider. Clients are now far more aware that there can be a lot of additional factors - as well as just the initial price tag - that will affect the total cost of the project and the revenue that can result from it. Cutting corners can be fatal, as this can lead to further problems down the line. We have continued to prove our worth through the service we provide: responding quickly to changes in schedules or fluctuations in volume, and dealing with problems before they have a chance to damage the project. A larger EMS firm is like a freight train, it runs very well when fully up to speed, but if you need to change its direction, then you have a difficult job on your hands." In his opinion, it is all about giving customers a complete package, and he clearly feels this is where companies like Brantham have the edge on their more substantial competitors. "We are at a stage with many companies where they are so used to the level of service we can provide that they wouldn't want to risk going elsewhere. We have targeted customers that need that little bit extra, and have had great uptake there." A high level of automation and the use of supply-chain management technology keep operation overheads to a minimum. The company can claim contract wins with leading firms in the medical, audio-recording, and aerospace sectors (with its PCB assemblies being integrated into the Airbus 380). "We don't want to limit ourselves to a particular niche, as you can never be certain what the future holds for any single market sector. It is much better to cast your net over a broad area. Companies tend to partner with us on projects to produce various forms of what could be classed as professional level equipment." The firm's largest customers are from the US, Germany, and surprisingly China and Romania (exactly where the low-cost EMS business is tending to be located), as well as the UK. As Cruddace sees it, "We certainly don't think of ourselves as some provincial firm just going for the remaining scraps. We can present an attractive option that appeals to companies in the global marketplace as well as here in the UK."There is no doubt globalisation is clearly here to stay, but it is not the only game in town. This is not some sort of misguided Euro-patriotism; it is simple commercial common sense. There is going to be a divergence between the big players and the smaller local firms, but if both define their business models well enough there is no reason why there can't be room for both. One will be able to go for the high-volume, less differentiated end products that require a strong transcontinental presence, the other - though admittedly a far smaller slice - will deal with the lower volume, more development-intensive, but potentially higher margin products.
