APEX 2006 – Jure Sola's keynote set an upbeat scene for 2006

This morning in Anaheim, several hundred industry executives sat down to hear how Jure Sola, Sanmina-SCI's president sees the future of the PCB and EMS sectors.

Following the usual introduction and one or two awards, IPC introduced this year's keynote speaker to a substantial audience at the Anaheim Convention Center. 

Jure's presentation began with a short personal history, telling of his rise from drill operator in a PCB shop in 1972, to 1980 when he and a colleague founded Sanmina Circuits.  Following a leverage buy out in 1989, Sanmina went to the market in 1993, where it spent the next seven years being one of the Nasdaq's top ten performers.  In 2001 Sanmina acquired SCI and, following some turbulent times, spent most of 2002 to 2005 restructuring its business.

Jure explained that "in the 1990s we thought that the good times would never end, our customers were saying build factories and we'll fill them".  Then suddenly everything changed and business went away, and Sanmina was left wondering what to do next.  For a business that had not made any substantial layoffs in more than 22 years this was going to be a tough time.

As Jure says, "2001 was a real wake up call, the world changed".  Sanmina needed a new strategy and it was clear that it had to compete globally.  Asian competitors were getting better and beating it, and the question the board had to face was how do we compete?

How do we compete?
Jure explained the Sanmina strategy to compete.  "Deliver complete end to end manufacturing services to our existing and new customers anywhere in the world" - to do this it needed to merge with SCI.

In 2002, Sanmina-SCI employed 68,000 staff.  80% of those staff were in higher cost geographies, predominantly North America and Europe, with just 20% in Asia, Mexico and Eastern Europe.  The market was changing daily and the business had to change too.  Jure said that the most important thing to do at this point was to listen to its clients to find out what they needed and expected from their manufacturing partners.  Jure stressed at this point that they had to take things one step at a time and build on the company's strength.  The strengths that Jure was keen to emphasise were the total customer focus, the value of the people that it has, and the importance of technology.

Roll that whole thing forward to 2006 and Sanmina now employs 47,000 people, with just 30% in higher cost geographies and the remaining 70% in Asia, Mexico and Eastern Europe.  Another major change is the time to market and visibility issue.  "Our customers have less and less visibility and need suppliers that are flexible and can adapt" Jure explained, adding "it was tough because we were too emotionally attached to some of our factories, particularly the earlier PCB facilities, but we needed US and European quality and technology in a low cost environment."

So, to compete globally...
According to Jure to compete globally you need to deliver the best local solution, whilst providing a global footprint.  He explained the importance of developing a lean business that could accelerate its customer's time to market, and how this could be done.  A major fundamental of this as far as Jure is concerned is getting the whole IT thing working in an integrated and efficient way to create an agile and advanced supply chain.

EMS + ODM = EMS today
This was the heading of Jure's next slide and served as an introduction to how Jure sees the whole EMS/ODM discussion.  Clearly Jure sees design as a key part of Sanmina-SCI's position in the supply chain, and clearly Jure believes that the entire industry is developing into a more design based model, but there are some major differences between ODM and EMS models in relation to their clients and in particular to the clients IP.

IP is how Jure makes the distinction between CDM (Custom Design and Manufacture), JDM (Joint Design and Manufacture) and ODM (Original Design and Manufacture).  Whilst he feels that the company needs to offer all three services, he does not see it developing products to offer the market, as in the Asian ODM model.  And clearly any thought of any Sanmina-SCI branded products is not in his sights.

The positioning of IP purely goes to serve as an indicator to the proprietary nature of the development work.  That is to say, if the client has no interest in keeping the IP and is happy for Sanmina to use it elsewhere, Sanmina can keep the IP and reduce design cost as a result...

Jure is very positive about the future of his industry.  He sees further growth opportunities and with an extension of the supply chain and a more appropriate business model, his view of the coming year is bright.

But as a warning he feels, as many do, that the relationship with the OEM has to change.  The OEM has to look at the supply chain as a source of value added services, and not merely work continuously to reduce the cost of the supply chain.  If they continue to do so, the supply will lose its ability to develop and innovate.

Jure held the audience well for over one hour and followed his speech with a lively Q&A session.  I spent the whole day with executives on the show floor who largely shared his optimism for 2006 and had been pleasantly surprised at how the year had begun.

It seems that both 2006 and APEX are meeting with the approval of the industry.  It also seems that this show, poised as it is at the start of the year, provides a good test for sentiment for the coming year.

Tomorrow more news from the show floor and from those exhibiting and visiting...