We are a leading independent global provider of customized, integrated electronics
manufacturing services, or EMS. We provide these comprehensive services primarily
to original equipment manufacturers, or OEMs, in the communications, computing,
multimedia, industrial and semiconductor capital equipment, defense and aerospace,
medical, and automotive industries. The combination of our advanced technologies,
extensive manufacturing expertise and economies of scale enables us to meet the
specialized needs of our customers in these markets in a cost- effective manner.
Our end-to-end services in combination with our global expertise in supply
chain management enable us to manage our customers’ products throughout their
life cycles. These services include:
• product design and engineering, including initial development, detailed design
and preproduction services;
• volume manufacturing of complete systems, components and subassemblies;
• final system assembly and test;
• direct order fulfillment and logistics services; and
• after-market product service and support.
Our volume manufacturing services are vertically integrated, allowing us to
manufacture key system components and subassemblies for our customers. By manufacturing
key system components and subassemblies ourselves, we enhance continuity of
supply and reduce costs for our customers. In addition, we are able to have
greater control over the production of our customers’ products and retain incremental
profit opportunities for the company. System components and subassemblies that
we manufacture include volume and high-end printed circuit boards, printed circuit
board assemblies, backplanes and backplane assemblies, enclosures, cable assemblies,
optical modules and memory modules.
We manufacture products in over 20 countries on five continents. We seek to
locate our facilities near our customers and our customers end markets in major
centers for the electronics industry or in lower cost locations. Many of our
plants located near customers and their end markets are focused primarily on
final system assembly and test, while our plants located in lower cost areas
engage primarily in less complex component and subsystem manufacturing and assembly.
EMS companies are the principal beneficiaries of the increased use of outsourced
manufacturing services by the electronics and other industries. Outsourced manufacturing
refers to OEMs’ use of EMS companies, rather than internal manufacturing capabilities,
to manufacture their products. Historically, EMS companies generally manufactured
only components or partial assemblies. As the EMS industry has evolved, OEMs
have increased their reliance on EMS companies for additional, more complex
manufacturing services, including design services. Some EMS companies now often
manufacture and test complete systems and manage the entire supply chains of
their customers. Industry leading EMS companies offer end-to-end services, including
product design and engineering, volume manufacturing, final system assembly
and test, direct order fulfillment, after-market product service and support
and global supply chain management.
We have become one of the largest global EMS providers by capitalizing on our
competitive strengths, including our:
• end-to-end services;
• product design and engineering resources;
• vertically integrated volume manufacturing services;
• advanced technologies;
• global capabilities;
• high quality manufacturing, assembly and test services;
• customer focused organization;
• expertise in serving diverse end markets; and
• experienced management team.
This business strategy enables us to win large outsourcing programs from leading
multinational OEMs. Our customers consist of OEMs that operate in a range of
industries, and include Alcatel, Cisco, Dell, EchoStar, Ericsson, HP, IBM, McData,
Nokia, Nortel and Roche.
We have targeted markets that offer significant growth opportunities and for
which OEMs sell complex products that are subject to rapid technological change,
as the manufacturing of these products requires higher value added services.
We believe that markets involving complex, rapidly changing products offer us
opportunities to produce products with higher margins because these products
require higher value added manufacturing services and may also include our advanced
vertically integrated components. Our approach to our target markets is two-fold
— we intend to strengthen our significant presence in the communications and
computing markets, while also focusing on other under-penetrated target markets,
including the medical, automotive, industrial and semiconductor capital equipment
and defense and aerospace industries, many of which have not extensively relied
upon EMS companies in the past. Our diversification across market segments and
customers reduces our dependence on any particular market.
Communications: Wireless, Optical and Wireline Transmission and Enterprise.
In the communications sector, we focus on wireless transmission systems, optical
networking and wireline transmission systems and enterprise networking systems.
Our product design and engineering staff has extensive experience designing
advanced communications products for these markets. Products we manufacture
include optical switches, wireless base stations, wireline switches, routers,
transceivers, satellite receivers, radio frequency and point-to-point microwave
systems, and Bluetooth appliances among others. Selected customers in communications
equipment include Alcatel, Cisco, Ericsson, Lucent, Nokia, Nortel, and Tellabs.
Computing: Personal and Business (Enterprise) Computing and Storage Systems.
We provide services for OEMs of personal computer, or PC, systems, enterprise
computing, and storage systems.
We provide services to multiple major PC manufacturers. These services include
primarily BTO and CTO manufacturing of desktop PC systems serving primarily
the enterprise markets. Our PC manufacturing plants can build and configure
systems and have them ready for shipment within 48 to 72 hours of receipt of
a customer order. These plants are typically located in the geographic region
to which the finished system will be shipped to rapidly deliver finished products.
We manufacture a wide variety of desktop and laptop PCs and other PC components
for our customers, including Dell, HP and IBM.
We also provide services to the storage and server markets. Our expertise in
manufacturing products for the storage and server markets stems from our technological
capabilities and vertical integration. We are also the leading vertically integrated
supplier of complex, multilayer printed circuit boards and backplanes, and many
high-end computer designs incorporate these components. We have developed a
proprietary enclosure design for high density servers used in data center applications.
High-end computing products we manufacture include complex, fault tolerant servers
and enterprise storage. Our customers in the storage and server markets include
EMC, HP, IBM and Sun.
Multimedia. We manufacture digital satellite set-top boxes, personal video
recorders, digital home gateways and internet protocol entertainment devices.
For our multimedia OEM customers, we manage the production process for multimedia
products, including product design and engineering, test development, supply
chain management, manufacturing of printed circuit boards and assemblies, final
system assembly and test, and direct order fulfillment, including our BTO and
CTO capabilities. Our major multimedia customers include EchoStar, Nokia, and
Royal Philips Electronics.
Industrial and Semiconductor Systems. Our expertise in manufacturing industrial
instrumentation products includes production of semiconductor capital equipment,
front-end environmental chambers, computer controllers, and test and inspection
equipment. We also have significant experience manufacturing scanning equipment
and devices, flat panel display test and repair equipment, optical inspection
and x-ray equipment for use in the printed circuit board assembly industry,
and deep ultraviolet photolithography equipment. Our industrial and semiconductor
systems customers include GE and Honeywell International Inc, or Honeywell.
Defense and Aerospace. In December 2001, we merged with SCI Systems, Inc.,
or SCI. SCI began operations as Space-Craft, Inc., in the early 1960’s and was
then principally a supplier to the defense and aerospace industries. We continue
to offer our end-to-end services to the defense and aerospace industry. We believe
that this industry currently represents a significant growth opportunity due
to increased defense spending, as well as the growing desire of defense and
aerospace OEMs to outsource non-core manufacturing activities to reduce costs.
Our experience in serving the aerospace industry, as well as our product design
and engineering capabilities, represent key competitive strengths for us in
the defense and aerospace market. Defense and aerospace products that we manufacture
include avionics systems, weapons guidance systems, cockpit communications systems,
spread spectrum communications systems, and space systems. Key defense and aerospace
customers include The Boeing Company, Honeywell, Lockheed Martin Corporation
and Raytheon Company.
Medical. We provide comprehensive manufacturing and related services to the
medical industry, including design and regulatory approval support. The manufacturing
of products for the medical industry requires compliance with domestic and foreign
regulations, including the Food and Drug Administration’s, or FDA’s, quality
system regulations and the European Union’s medical device directive. In addition
to complying with these standards, our medical manufacturing facilities comply
with ISO 13485 (formerly EN 46002) and ISO 9001:2000. Medical products that
we manufacture include magnetic resonance imaging equipment, blood glucose meters,
computer tomography scanners, respiration monitors, ventilators, anesthesia
workstations, infusion pumps, thermo-regulation devices, and cardio-resuscitation
systems. Our medical customers include GE Medical Systems, Philips Medical Systems,
Siemens Medical Health Services Corporation and Roche Pharmaceuticals.
Automotive. In recent years, the electronics content in automobiles has increased
substantially as new entertainment, wireless communication and navigation systems
are being offered as standard features or factory options. We believe that this
increased usage of electronic devices in automobiles will continue, and that
there will be significant opportunities for EMS companies to manufacture automotive
electronics. Accordingly, we have formed an automotive products group to focus
on these opportunities.
Customers
Our ten largest customers (listed in alphabetical order) are Alcatel, Dell,
EchoStar, Ericsson, Hitachi, HP, IBM, Nokia, Nortel and Roche.
We typically enter into supply agreements with our major OEM customers with
terms ranging from three to five years. Many of these supply agreements were
entered into in connection with divestiture transactions, which are transactions
in which we also acquire plants, equipment and inventory from the OEM. In these
divestiture-related supply agreements, the customer typically agrees to purchase
its requirements for particular products in particular geographic areas from
us. Our OEM customer supply agreements that were not entered into in connection
with divestitures typically do not require the customer to purchase their product
requirements from us, and in these cases customers may have alternate sources
of supply available to them.
Our supply agreements with our OEM customers generally do not obligate the
customer to purchase minimum quantities of products. However, the customer typically
remains liable for the cost of the materials and components that we have ordered
to meet the customer’s production forecast but which are not used, provided
that the material was ordered in accordance with an agreed-upon procurement
plan. In some cases, the procurement plan contains provisions regarding the
types of materials for which our customers will assume responsibility. Our supply
agreements typically contain provisions permitting cancellation and rescheduling
of orders upon notice and subject, in some cases, to cancellation and rescheduling
charges. Order cancellation charges typically vary by product type and depend
upon how far in advance of shipment a customer notifies us of the cancellation
of an order. In some circumstances, our supply agreements with customers provide
for cost reduction objectives during the term of the agreement.
Competition
We face competition from other major global EMS companies such as Celestica,
Inc., Flextronics International Ltd., Jabil Circuit, Inc. and Solectron Corporation,
as well as other EMS companies that often have a regional or product, service
or industry specific focus. In addition, our potential customers may also compare
the benefits of outsourcing their manufacturing to us with the merits of manufacturing
products themselves.
We compete with different companies depending on the type of service or geographic
area. We believe that the primary basis of competition in our target markets
is manufacturing technology, quality, responsiveness, the provision of value-added
services and price. To remain competitive, we must continue to provide technologically
advanced manufacturing services, maintain quality levels, offer flexible delivery
schedules, deliver finished products on a reliable basis and compete favorably
on the basis of price. We believe that our primary competitive strengths include
our ability to provide global end-to-end services, our product design and engineering
resources, advanced technologies, high quality manufacturing assembly and test
services, customer focus, expertise in serving diverse end markets and an experienced
management team.
In addition to EMS companies, we also compete, with respect to certain of the
EMS services we provide, with ODMs. These companies, typically based in Asia,
design products and product platforms that are then sold to OEMs, system integrators
and others who configure and resell them to end users. To date, ODM penetration
has been greatest in the personal computer, including both desktop and notebook
computers, and server markets.