The EMS industry is consolidating, and the largest providers grow ever larger. MMI Top 50^TM providers now control about 86% of the market. Has the door closed on opportunities to cross the $100-million line? Not so, according to data obtained in MMI’s annual Top 50 survey. The survey identified seven emerging providers with sales greater than $100 million but less than the $154 million it took to make the Top 50.

How have these emerging providers managed to push their revenues into nine figures? There is no single answer because these providers represent a cross section of the EMS industry. Some companies employ vertical integration, and some do not. Four out of the seven have all or a majority of their capacity in low-cost regions, but the remaining three do not. While Asia is home to four of these providers, two come from Europe, and one operates in North America. A majority have made acquisitions, but others have not. Design services include ODM work in at least two cases.

These emerging providers also followed different approaches to market segmentation. But four out of seven listed industrial electronics as contributing the largest percentage of 2004 sales. This reliance on one of the nontraditional EMS segments reflects increasing diversification within the industry.

Who are these emerging providers? See the table on page 3 for a list of them along with some data on each company. In addition, a short profile of each follows in alphabetical order.

Creation Technologies. This Canadian provider operates six manufacturing plants in North America – four in Canada and two in the US. The company does not have plants outside the region, but offers offshore manufacturing
through partners in Asia.

Creation gained its two US facilities by acquiring a Wisconsin provider in 2003 and a Texas operation in 2004 (Sept. 2004, p. 4). The provider wants to continue to expand throughout North America and is interested in the East Coast where it lacks a production site. Last year, Creation received a C$10-million investment from CIBC Capital Partners to fund customer growth requirements as well as US acquisition plans.

Creation is an employee-owned company, which is unusual for the EMS industry. The provider focuses on highly complex, medium- to lowvolume product. Target markets consist of wireless telecom, medical, industrial controls, transportation and instrumentation. In 2004, the industrial and communications infrastructure segments amounted to 39% and 31% of sales respectively.

Founded in 1991, Creation achieved its 13th year of profitability in 2004.

Enics. A new company in 2004, Enics resulted from the sale of Elcoteq’s industrial electronics business. At present, Enics offers seven plant locations in Europe: four in Finland and one each in Switzerland, Sweden and Estonia. In addition, the company operates a 500-m2 production area in Beijing, China.

The European provider bills itself as one of the largest EMS companies in the industrial electronics field. Since Enics’ launch in April 2004, the company has grown quickly, with acquisitions playing a major role. When Enics started out last year, its annual sales were pegged at about 120 million euros. By Feb. 1, 2005, Enics had completed two deals: the addition of an ABB operation for PCB assembly and the acquisition of an EMS company
owned by Ahlstrom Capital, principal shareholder in Enics (Feb., p. 6-7).

With the completion of these two deals, Enics had upped its projected annual sales to 175 million euros.

This month, Enics announced yet another deal. The company will acquire Flextronics manufacturing operations in Malmo and Vasteras, Sweden (see News, p. 6). With this acquisition, Enics’ annual sales will increase to about 250 million euros, or more than twice the annual rate that the company started with last year. Total employment will expand to some 1600 people.

ESCATEC. This vertically integrated design and manufacturing services provider offers medium- to high-volume manufacturing in Asia and prototyping, NPI and smaller series manufacturing services in Europe.

The ESCATEC Group has three facilities in Malaysia, one in Singapore, one in Indonesia, and one in witzerland. In addition, the company opened a new plastic injection molding and mold-making facility this month in Shanghai, China.

The provider’s vertical integration model not only includes plastics capabilities, but also coil and transformer assembly, metal stamping and mechatronic assembly. On the front end, the company has expanded its design services in Switzerland and Malaysia.

Asia-based ESCATEC is led by two Swiss executives – Markus Walther, COO, and Christophe Albin, executive
chairman. Albin, one of the founders of ESCATEC, is its owner. ESCATEC serves customers in the industrial electronics, high-end consumer electronics, audio/video, power tool, medical and automotive markets. In 2004, 39% of its sales came from the industrial segment, while consumer and handheld devices represented 36%.

IMI (Integrated Microelectronics, Inc.) Until recently, IMI’s manufacturing operations were confined to the Philippines, where the company had become one of the two largest providers based in that country. In ebruary, IMI announced a deal that extended IMI’s footprint to the US West Coast. The company acquired two operations of Saturn Electronics & Engineering; one of them is located in Tustin, CA, and includes both EMS and ODM assets (Feb., p. 7-8). IMI also bought from Saturn a high-volume SMT operation in the Philippines.

Despite competition from China, IMI has maintained its position as a major EMS player in the manufacture of optical and hard disk drives (March 2004, p. 4-5). IT-related products accounted for 56% of IMI’s sales in 2004. IMI’s customers include Japanese OEMs who are leaders in the storage device market. Among other markets served by IMI are consumer and handheld devices at 18% of 2004sales and industrial electronics at 17%. IMI reported that Japanese customers account for 70% of annual sales.

An IMI subsidiary, EAZIX, offers design services such as hardware and software design as well as ODM roducts.

Founded in 1980, IMI is a member of the Ayala Group.

Kong Yue Electronics & Information Industry Ltd. This Chinese EMS provider operates in an industrial park located in Jiangmen City within the Southern China province of Guangdong. Kong Yue is vertically integrated with facilities for plastic injection molding, rubber parts manufacturing and metal stamping. Services encompass manufacturing, sales distribution, post-sales services, logistics and reverse logistics. The company promotes its strength in the design and manufacture of opto-electromechanical parts and products. Kong Yue also emphasizes the international experience of its management team, made up of individuals from Canada, Hong Kong, Japan, Malaysia and Singapore.

Founded as a printer distributor in 1986, Kong Yue began contract manufacturing for Epson and Citizen rinters in 1996. Although Kong Yue has ahistory of serving Japanese customers, the company wants to be known for more than that now. The provider also manufactures for Chinese brands such as Jolimark and Lenovo and for companies such as ABB and Neopost, both based outside Asia.

Kong Yue still relies on the IT industry for the bulk of its sales. Office equipment represented 75% of the company’s 2004 sales. The second largest portion of sales came from the automotive side. Besides printers, products manufactured by Kong Yue include electronic cash registers, car audio units and projectors.

NOTE AB. In recent years, this European provider acquired a number of electronics operations in Sweden and now operates five production facilities in the country, according the company’s website. In addition, NOTE has factories in Estonia, Finland and Lithuania and utilizes a network of subcontractors in Poland. The company has shifted its focus in Sweden from volume manufacturing to development, industrialization, and lower-volume, higher-complexity production. For global manufacturing needs, NOTE led the formation of the ems-ALLIANCE, a network of prosviders in Brazil, China, India, Sweden and the US.

Also, NOTE offers industrialization services close to key client areas through small units called Gateways. They are located in two areas of Sweden as well as in the UK and France. Like NPI centers, Gateways can act as a portal for connecting customers with other NOTE operations.

At 32% of 2004 sales, industrial electronics was the largest segment of NOTE’s business last year. The second largest was telecom accounting for 24%, followed by security systems at 18%.

NOTE made two acquisitions recently: an Ericsson operation in Sweden (Feb., p. 6) and a Finnish contract manufacturer (Jan., p. 6). Publicly traded in Sweden, NOTE was founded in 1999 under the name EuroSupply.

VTech Communications Ltd. VTech offers circuit design, PCB layout, full mechanical design, board assembly
and system build from its Southern China factory in Dongguan. The provider can also do its own plastic injection molding and tooling fabrication. When it comes to lead-free assembly, VTech was an early adopter, having implemented lead-free processing in 2002.

Products manufactured by VTech include switching power supplies, professional audio equipment, home ppliances, RF modules and telecom products, mobile phones, medical products, and automotive products. Consumer and handheld devices made up 57% of VTech’s sales in 2004. The industrial segment contributed the second largest portion of sales with 25% of the total. Next was communications infrastructure at 12%.

On the design side, VTech specializes in industrial, electrical and mechanical design for RF/wireless products and audio electronics, among others. For systems assembly, design capabilities include structural layout,enclosures, cable harnesses and assemblies, and intelligent power supplies. VTech Communications was founded in 1993 as a subsidiary of the VTech Group of Companies. The parent company is known as a manufacturer
of cordless phones and electronic learning products.