Contract manufacturers position themselves for a rebound
7/17/2012 8:04 PM EDT
SAN JOSE, Calif. – Tucked away in industrial parks across the U.S. are small technology manufacturers that have survived in the shadow of China’s manufacturing juggernaut. Some are beginning to expand their operations.
Among them is SMTC Corp., a small but growing electronic manufacturing services company located in a “trade zone” here hard against this city’s East Foothills. SMTC is looking to expand in Silicon Valley through acquisitions and new hires. The company bills itself as a “manufacturing partner to innovators.”
Toronto-based SMTC’s variation on the standard EMS infrastructure is a strong presence in North America along with the usual assembly services offering in China. Along with a high-volume manufacturing operation in Dongguan, in China’s booming Guangdong province, SMTC also offers product assembly services in Chihuahau, Mexico. The company said that’s important as Chinese labor costs rise.
SMTC and other second-tier EMS providers also are attempting to move up the production volume ladder while continuing to shift high-volume assembly work to places like China, Malaysia and Mexico. It’s an acknowledgement that high-volume manufacturing and assembly jobs aren’t coming back, but more flexible medium-volume manufacturing along with value-added design and prototyping services may be making a comeback.
Joel Bustos, vice president and general manager of SMTC’s San Jose operation, said in an interview that the company is also looking to expand through acquisitions to raise its profile in Silicon Valley. Last September, SMTC acquired privately-held ZF Array Technology of San Jose for about $9.1 million. Bustos said SMTC is pursuing other acquisitions.
“We have made a conscious decision that we want to be a major player in Silicon Valley. In order to that, we need to [create] a center of excellence, as we call it, ready to assist our customers with engineering issues” and product designs, Bustos said. Being a smaller EMS provider also gives contract manufacturers like SMTC the ability to be more agile while still having the resources to resolve product design issues before ramping up production.
SMTC is focusing on markets such as industrial equipment and medical devices, market segments that are “not cut-throat businesses” like consumer electronics manufacturing, Bustos said. That’s an approach other middle-tier contract manufacturers have adopted in order to offer customers cost advantages and reducing infrastructure requirements.
While the drive to return product manufacturing to places like Silicon Valley remains more an aspiration than a reality, Google’s announcement last month that it will design and manufacture its Nexus Q wireless media player in the U.S. provides a glimmer of hope. “I think [the Google manufacturing initiative] can be scaled up,” Bustos predicted.
Companies like SMTC are positioning themselves to be ready if and when electronics manufacturing ramps up here.