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THE EMS SOLUTION 2.0:HOW & WHY THE BUSINESS MODEL IS
CHANGING
Eric Miscoll(817) [email protected]
IPC EMS MANAGEMENTCOUNCIL MEETING 2014
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
“It is not the strongest of the species that survives, nor the most
intelligent that survives. It is the one that is the most
adaptable to change.”
- Charles Darwin
2
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
TRENDS IMPACTING INDUSTRY
3
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
TRENDS IMPACTING EMS INDUSTRY
1. Demand Cycle has Shortened2. Risk in the Supply-Chain at Unprecedented Levels3. EMS/ODM Prices Are Converging4. Costs in China Are Rising Far Faster Than Predicted5. Regionalization Is Gaining Momentum6. Global Capacity Utilization Is Increasing7. Margin deterioration across sectors8. Slower Rate of Growth of Electronics Outsourcing9. Insourcing by OEMs10. OEMs are reclaiming the supply chain11. EMS Are Trying to Diversify Their Revenue Stream
4
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
ODM SHIFT
• Acer & ASUSTeK: – Computer OEM
• HTC: – Smartphone OEM
• Inventec & Quanta: – Servers
• Pegatron: – Consumer electronics (e.g., tablets)
• Wistron: – Cloud computing, after-sales service, medical equipment, and
recycling
“For the sake of increasing margins, people are eyeing diversification and vertical integration and looking for new cornerstones in this competitive landscape.”
- Elton Yang, CFO, Quanta
5
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
Manufacturing costs in China continue to rise with the potential for much larger increases should labor pressures continue to escalate or should the Yuan be allowed to float against global currencies.
ESCALATING COSTS IN CHINA
6
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
HISTORICAL LABOR RATES
PCBA CY2009 CY2010 CY2011 CY2012 CY2013
Australia $46.50 $42.70 $42.40 $43.20 $43.32 Brazil $26.45 $30.23 $31.00 $31.45 $32.32 Canada $49.12 $41.78 $42.15 $44.17 $43.67 China $10.15 $11.31 $12.45 $13.38 $17.26 E. Europe € $47.30 $50.10 $51.00 $53.76 $55.57 E. Europe non € $26.13 $30.02 $30.40 $32.23 $33.75 India $9.21 $9.91 $9.95 $10.37 $10.79 Israel $35.97 $34.81 $34.89 $34.83 $37.43 Malaysia * * $16.29 $16.88 $17.26 Mexico - Border * * $16.80 $17.51 $18.28 Mexico - Central * * $11.32 $11.99 $12.50 Philippines * * * * $8.98 Singapore $25.15 $26.10 $28.15 $29.20 $29.96 Thailand * * * $19.39 $20.08 Turkey * * * * $16.13 United Kingdom $93.63 $93.11 $92.75 $95.49 $95.49 USA $37.96 $39.30 $39.40 $39.61 $39.78 Vietnam $8.75 $8.80 $8.95 $9.36 $10.11 W. Europe $89.37 $92.16 $90.10 $92.99 $95.81
Historical Cost of Labor/PCBA (EMS only)
7
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
With the exception of large low-mix/high volume projects it is now cheaper, on a landed-cost basis, to utilize low-cost regional versus cross-hemispheric solutions.
RETURN TO REGIONALIZATION(Build in the region for the region)
8
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
EXAMPLES OF REGIONALIZATION
9
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
MARGIN DETERIORATION
Sector <1$ $1 $5 $10 $25 $50 $100 $250 $500 $750 $1KMil/Aero -7.0% -5.0% -3.0% -3.0% -2.0% -1.0% -1.5% -1.5% -1.0% -1.0% -1.0%Ind/Med/Auto -4.0% -3.0% -2.0% -2.0% -1.0% -1.0% -0.5% -0.5% 0.0% 0.0% 0.0%Com/Comp/Cons -5.0% -3.0% -1.0% -1.0% -0.5% -0.5% -0.5% 0.0% 0.0% 0.0% -0.2%
10
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
INSOURCING BY OEMS
11
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
BEYOND OUTSOURCING ROADMAP
12
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
IMPACT OF TRENDS
13
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
WHAT DOES THIS MEAN FOR EMS?
• Change is already happening• Margins will not return to what they were• If you are not already seeing this or
planning for the future, then you better GET BUSY!
• Innovative thinking is required
14
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
QUESTION FOR EMS
• What percentage of your revenue stream have you converted from commodity services?– E.g., PCBA & Box Build
15
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
EMS THAT ARE CHANGING
• Lightspeed MFG: Repair services• CTS Corporation: Components & Sensors• Tepcomp: LED modules• Stadium Group: Displays OEM • Circuitronics Inc.: Prototyping• Foxconn: Components, retail outlets, etc.• Celestica: Supply Chain as a Service• Nam Tai: Property development and mgmt
16
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
OEM-EMS RELATIONSHIP
• Change by one party in a relationship impacts the other party, whether desired or not. (e.g., child, partner, supplier)
• So as EMS diversify their revenue stream, OEMs will be impacted. – Fewer external options– Higher prices– Lower leverage
17
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
CBA’S ADVICE
18
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
WHAT TO DO?
1. Improve your bottom line2. Fire or renegotiate unprofitable
customers3. Make “lean” part of your fabric4. If small (<$100M) stay small5. Innovate6. Diversify revenue stream
19
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
MANAGEMENT METRICS
• Revenue per Employee– $300K-$350K
• Customer Base– Top 5 more than 50%of Revenue– Bottom 5 not less than 5% of Revenue– No customer over 25% of Revenue (>2 years)– No customer under .25% of Revenue
20
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
CLOSING THOUGHT
“It is not necessary to change. Survival is not mandatory.”
- W. Edwards Deming
21
© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing
Thank You.
Questions?
22
Achieving Operational Excellence for Electronics ManufacturersSpeaker:Matthew LittlefieldPresident and Principal Analyst, LNS Research
Agenda
• About LNS Research• Industry Drivers and Challenges• Operational Excellence Journeys• Operational Excellence Goals & Metrics• Accelerating Success – People• Accelerating Success – Process• Accelerating Success – Technology• Summary / Recommendations• Q&A
©LNS Research 2014
©LNS Research 2014
Manufacturing industry research firm that helps clients innovate and achieve Operational Excellence…
People, Processes & Technology
Research & Consulting Areas: Enterprise Quality
Sustainability / Energy Management
Manufacturing Operations Management
Differentiators: Experienced analysts
Primary research – large data sets
Interactive analysis & data visualizations
Deep industry executive contacts
Social media activity
About LNS Research - www.lnsresearch.com
Global Executive Council
Starbucks – VP of Global Quality and Regulatory Affairs
Onyx Pharmaceutical – VP of Global Quality
Whirlpool – Director of Quality
Lindt Chocolate – VP R&D and Quality
Oriflame – Corporate Quality Lead
Champion Technology – VP Quality and EH&S
Gurwitch Products – VP Research and Quality
Newell Rubbermaid – Director of Quality
Hygia Health Service – VP of Operations
Discount Tire – VP of Quality
Daikin McQuay – Director, Corporate Quality
Bio-Rad Laboratories – Director of Quality Assurance
Owens-Illinois – VP of Global Quality
Harley-Davidson – Director Corporate Quality
Alcoa – Director Corporate Quality
Bridgelux – VP Corporate Quality
Plexus – VP Corporate Quality
Fresenius – VP Corporate Quality
Alent – VP Corporate Quality
Corbian – VP Quality
Kellogs – VP Quality
Research Model
©LNS Research 2014
Industry Drivers and Challenges
©LNS Research 2013
Electronics Industry Overview
•Area of Focus•Component Manufacturing, Printed Circuit Boards, and Final Assembly
•Competitive Landscape•Global
•All sizes: multi-billion dollar companies to small job shops
•Market leaders include: Flextronics, Celestica, Sanmina-SCL, Jabil, and Plexus
•Customers•Generally large, powerful, and demanding
•Regulated and unregulated industries
•Medical Device, Aerospace and Defense, Industrial Equipment, etc.
©LNS Research 2012
Major Industry Challenges
•Shrinking Operating Margins•High competition/market concentration
•Pressures for large and small players in U.S., Europe, Mexico, and Asia
•Balancing Cost and quality
•Complex Supply Chains•Keeping operating margins low
•Issues with traceability and quality
•Disparate compliance standards
•Service and Warranty Management•Quality and traceability issues surface as higher warranty reserves and increased use of service
©LNS Research 2012
Major Industry Challenges
•Short Product Lifecycles•Rapidly changing consumer demands
•Collaboration and integration across the value chain: MOM, CRM, SCM, PLM, and EH&S
•Uncertain Demand•Cyclical and economic volatility
•Changing consumer tastes/preferences
•Sustainability/Regulatory Requirements•Tightening laws/regulations in electronics
• Companies are beginning to consider the product lifecycle beyond disposal
• Example: EU passed REACH and RoHS to protect environment
©LNS Research 2012
Research Demographics300+ Respondents to LNS Research Manufacturing Survey, 500+ Respondents to Quality Survey
©LNS Research 2014
Top Objectives & Challenges
©LNS Research 2014
• The top objectives are customer focused• The top challenges are people & systems related
Operational Excellence Journeys
©LNS Research 2014
Operational Excellence Journeys
Operational Excellence Goals & Metrics
©LNS Research 2013
Goals & Metrics - Alignment & Deployment
Goals & Metrics - Alignment & Deployment Process
1.) Understand and Articulate Strategy: have a clear and universally understood manufacturing strategy that is in support of the corporate business strategy2.) Translate Strategy into Specific Goals: turn that strategy into specific goals for business groups and associated supply chains, as well as plants, units, and production lines3.) Map Goals and Specific Measures for Success: use a cross-functional team to map each detailed translation across the enterprise4.) Determine Key Performance Indicators: develop a set of manufacturing KPIs to measure progress toward your goals5.) Establish Communication Procedures for KPIs: make sure the right information is getting to the right people in a timely manner6.) Set Processes for How to Act on KPI Information: determine best practices for individuals from the shop to top floor to interact with KPIs7.) Match Performance Incentives to Aligned Goals: reinforce the effectiveness of measuring KPIs by incentivizing progress
Categories/Sets of Operational Excellence Metrics
Top 28 Manufacturing KPIs within Categories/Sets
Improving Customer Experience & Responsiveness:1. On-Time Delivery to Commit2. Manufacturing Cycle Time3. Time to Make Changeovers
Improving Quality:4. Yield5. Customer Rejects/Return Material Authorizations/Returns6. Supplier’s Quality Incoming
Improving Efficiency:7. Throughput8. Capacity Utilization9. Overall Equipment Effectiveness (OEE)10. Schedule or Production Attainment
Reducing Inventory:11. WIP Inventory/Turns
Ensuring Compliance:12. Reportable Health and Safety Incidents13. Reportable Environmental Incidents14. Number of Non-Compliance Events / Year
Reducing Maintenance:15. Percentage Planned vs. Emergency Maintenance Work Orders16. Downtime in Proportion to Operating Time
Increasing Flexibility & Innovation:17. Rate of New Product Introduction18. Engineering Change Order Cycle Time
Improve Financial Performance:19. Total Manufacturing Cost per Unit Excluding Materials20. Manufacturing Cost as a Percentage of Revenue21. Net Operating Profit22. Productivity in Revenue per Employee23. Average Unit Contribution Margin24. Return on Assets/Return on Net Assets25. Energy Cost per Unit26. Cash-to-Cash Cycle Time27. EBITDA28. Customer Fill Rate/On-Time delivery/Perfect Order Percentage
Selecting and Implementing the Right Operational Excellence Metrics
• Benchmark• Decide / Commit• Choose metrics that directly
relate to SMART goals• Ensure that the metrics can
be reliably and efficiently produced
• Create team-based and role-based metrics
• Most people can only optimize their own time/activities around 5-6 metrics
• Plan, Do, Check, Act• Reward
Accelerating Success - People
©LNS Research 2014
Accelerating Success – People: Building Organizational Capabilities
Knowledge Management Issues & Opportunities: People, Process & Technology
People:• Aging Workforce (10,000 retiring per
day in US – Pew Research Center)• Knowledge Capture• Knowledge Transfer• Training & Certification• JIT Information Access• Leveraging SMEs• Team, Partner and Customer
Collaboration
Process & Technology:
Accelerating Success - Process
©LNS Research 2013
Accelerating Success - Process
Building Manufacturing Process Capabilities• Most companies are using combinations of 2 to 4 programs• Choose the most important programs by industry and issues• Training, certification, widespread engagement, collaboration
Accelerating Success - Technology
Architectural Approach to Quality Software
©LNS Research 2013
Accelerating Success – Technology
Accelerating Success – MOM Software
Accelerating Success – Real-Time Performance
Role-Based OI / EMI Capabilities
OI / EMI – Dashboards & Analytics
• Functional expectations & opportunities are growing
Big Data Analytics
• Big Data Analytics is about harnessing a collection of massive amounts of structured and unstructured data from across the enterprise• Exponential explosion of manufacturing data coming from connected devices / IoT – estimated 13.5 Billion manufacturing devices connected by 2022 (Cisco) • Previously unknown interrelationships between data will come to light with new analytics technologies like Hadoop
Big Data – Manufacturing Application Examples
• Enabling better product/production forecasts that tie to consumer trends• Improving interactions with suppliers based on dynamic sourcing needs• Providing faster customer service and support - harnessing knowledge• Better understanding customer requirements for new products• Better correlations of performance across multiple plants• Better understanding plant performance across multiple metrics• Performing predictive modeling of manufacturing data• Enabling real-time alerts based on analyzing manufacturing data• Correlating manufacturing and business performance information together• Mining combinations of manufacturing and other enterprise data to uncover new improvement and business opportunities
Mobile Technologies
• Mobile devices and applications have removed the restrictions of required on-site access, enabling workers to access the performance and decision support information applicable to their respective role, including:• Executives• Plant Managers/Supervisors• Plant Operators• Technical/Quality Personnel
• Can create an entirely paperless manufacturing environment• Allows information to be shared between suppliers and customers via similar mobile capabilities• 18% currently have Mobile Operations Visualization &Management capabilities• 14% have Mobile Operations Visualization & Management capabilities planned within 1 Year
Cloud Adoption for MOM Applications
• Cloud / SAAS Adoption Rates More Than Doubling in Manufacturer’s Future Plans
• 90% of MOM Vendors Either Have or Are Developing Cloud-based Solutions
Cloud Benefits for Manufacturers
• Benefits of Cloud versus On-Premise Solutions• Proven in IT applications
• Requires less internal IT resources
• Automatic software updates
• Unlimited capacity upgrades
• Built-in disaster recovery
• Universal remote access
• Easier to aggregate information across plants
• Little to no capital expenditures
• Lower lifecycle / maintenance costs
Top Selection Criteria for MOM Software
• Having Sufficient Functionality is Paramount• Cost & Ease of Integration with Existing Applications Come Next
Case Studies
©LNS Research 2013
• Before Software Supporting Operational Excellence• Heavy documentation requirements = management of
(literally) tons of data and paper.
• Cumbersome and time-consuming work flows to ensure tracking
• Reactionary approach to quality issues, struggles to meet ISO-9001 and AS-9100 requirements
• Reliance on nearly 40 stand-along spreadsheets to track all company data but each was a silo of information, lots of redundancies
Real-Life Example
• After Software Supporting Operational Excellence• Automated electronic workflows and electronic data
management.
• Efficient, non-redundant process flows
• Improved productivity• Exceeding standards for traceability, document
management and process controls• 25% cycle time reduction for audits• Eliminated manual processes and duplication of effort
• Leaner operations
• 32.5% reduction in scrap/waste
Case Study: Real-Life Example
Market Leaders Create a Holistic SQM Strategy
©LNS Research 2013
Summary / Recommendations
©LNS Research 2013
Summary / Recommendations
• Start or refine your Operational Excellence journey• Ensure alignment with strategy, goals, actions and metrics• Empower people with both team-based and role-based, real-time
performance information• Build organizational capabilities for sustainable success• Implement the most important process / programs to accelerate
progress• Over time, build a continuous improvement culture• Support process improvements and knowledge management with
technology – in particular, MOM software integrated with information in Enterprise and Automation Systems
• Investigate and experiment with new technologies – Cloud, Mobile, Big Data Analytics
• The appropriate scope of your journey may be at the plant, line of business or enterprise level
Summary / Recommendations
Thank You!!For More Information -Contact:
Matthew LittlefieldPrincipal Analyst – LNS [email protected]
• Leading OEMs, Distributors, Suppliers & EMSs use SiliconExpert Daily
• Our Electronic Component Database of over 250 million components powers our:
o Comprehensive software toolso Integrated solutionso Professional services
About Us
Reactive vs. Proactive Approaches to Obsolescence Management
250 Million+ Orderable Part Numbers
Up to 42 Parametric values/product line
Risk Analysis & Obsolescence Forecasting Algorithms developed with CALCE
Environmental Data tracked: EU & China RoHS, REACH, WEEE compliance & Material Declarations
Parametrically-derived cross-references for millions of parts
Our Database
Identifying the Impacts of SEC Regulations in the Electronics
Industry
Conflict Minerals
• Defined by Dodd-Frank Act Section 1502(e)(4)
• Tantalum, Tin, Tungsten, and Gold
• A mineral is conflict free if it did not originate in the DRC or surrounding countries
Definition of Conflict Minerals
Environmental Team
Access to this information is quickly becoming imperative as the first report is due on May 31, 2014
for the 2013 calendar year and then annually.
Conflict Minerals- Products
Top 10 Products with 3TG Parts
SiliconExpert Research and Analysis
Conflict Minerals Process
• Determine the requirements for each supplier within the regulations
• Determine due diligence responsibilities of each supplier/OEM
• Establish communication with supplier
• Determine documentation available and data collection procedures
Reactive vs. Proactive Approaches to Obsolescence ManagementSiliconExpert & Conflict Minerals
Data Collection
Most Up to Date Conflict Mineral Statuses-Over 1,000 suppliers
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Search by Supplier or Smelter- Access to smelter & mining information
* EICC stands for: Electronic Industry Citizenship Coalition* COC stands for : certificate of compliance (company statement)
Conflict Mineral Module
New Module: Conflict Minerals
Market OutlookSmall & Medium EMS Companies
Custer Consulting Groupwww.custerconsulting.comMarch 2014
20140303
Challenges
Financial data on individual, small EMS companies typically not publicly available
Markets can be very localized
Topics
Global & U.S. EconomyElectronic Equipment- World overview- Target Domestic MarketsActive & Passive ComponentsEMS/ODM Markets- Global- N AmericaSummary & Forecasts
Business ConditionsAfter a weak 1H’13 global business conditions improved in the second half of the year
2013 finished strong
U.S. economy is currently expanding but there are signs of slower global growth
Weaker domestic military market offset by continued growth in instrument & control sectors
Encouraging Signs:- Electronic equipment shipments growing in all regions- Leading indicators are generally positive except for China.- Some re-shoring to N America
20140303
Global & U.S.Economies
Industrial Production – World% Change vs. One Year Earlier
Britain + 1.8 DecCzech Republic + 9.3 DecFrance + 0.5 DecGermany + 2.9 DecItaly - 0.7 DecNetherlands + 1.8 DecRussia - 0.2 JanSpain + 3.5 DecEuro Area + 0.5 Dec
Canada + 2.6 NovUSA + 2.9 JanChina + 9.7 DecIndia - 0.6 DecMalaysia + 4.8 DecSingapore + 3.9 JanS Korea + 2.6 DecTaiwan - 1.8 JanThailand - 6.1 DecJapan + 7.1 Dec
www.economist.com + Eurostat
20140301
U.S. Industrial ProductionIndex (2007=100)
www.federalreserve.gov/releases/g17/table1_2.htm
6065707580859095
100105110
1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014
IP
20140214
U.S. GDP Growth% Change vs. Prior Quarter (2005 $)
-10
-8
-6
-4
-2
0
2
4
6
8
10
1/95
3/95
1/96
3/96
1/97
3/97
1/98
3/98
1/99
3/99
1/00
3/00
1/01
3/01
1/02
3/02
1/03
3/03
1/04
3/04
1/05
3/05
1/06
3/06
1/07
3/07
1/08
3/08
1/09
3/09
1/10
3/10
1/11
3/11
1/12
3/12
1/13
3/13
www.bea.gov/national/
20131221
Purchasing Managers
Indices(Leading Indicators)
Global "Purchasing Managers" IndexDiffusion Index, >50 = Growth
Markit Economics
30
35
40
45
50
55
60Ja
nM
aySe
pJa
nM
aySe
pJa
nM
aySe
pJa
nM
aySe
pJa
nM
aySe
pJa
nM
aySe
pJa
nM
aySe
pJa
nM
aySe
pJa
nM
aySe
pJa
nM
aySe
pJa
nM
aySe
pJa
n
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
PMI
20140303
China "Purchasing Managers" IndexDiffusion Index, >50 = Growth
Markit Economics
20140303
40
45
50
55
60
Jan
Apr Ju
lO
ctJa
nA
pr Jul
Oct
Jan
Apr Ju
lO
ctJa
nA
pr Jul
Oct
Jan
Apr Ju
lO
ctJa
nA
pr Jul
Oct
Jan
Apr Ju
lO
ctJa
nA
pr Jul
Oct
Jan
Apr Ju
lO
ctJa
nA
pr Jul
Oct
Jan
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
PMI
U.S "Purchasing Managers" IndexISM
Diffusion Index, >50 = Growth
ISM
30
35
40
45
50
55
60
65
70Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
n
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014
PMI
ISMGrowth >50
20140303
PMI Leading Indicator as
EMS Forecasting Tool
U.S PMI Leading Index vsN American EMS Shipments
ISM & IPC
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
2007 2008 2009 2010 2011 2012 2013 2014
PMI Leading Indicator
EMS Shipments
Zero Growth
20140303
3/12 Growth
1 yearLead
BusinessCycles
Industry Dynamics
BUSINESS CYCLE Electronic Equipment, EMS/ODM Companies, Components, Materials & Capital Equipment
-6
-4
-2
0
2
4
6
0 30 60 90 120 150 180 210 240 270 300 330 360
Electronic Equipment
EMS/ODM
Components
Raw Materials
Capital Equip
Expansion ContractionTime ->
20130915
% Growth
+
-
0
U.S. Electronic Equipment, N. American PCBs, Small/Med EMS & PCB Process Equipment
$ Shipment Growth20140222
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
PCBElec EquipPCB Process EquipmentZero GrowthSmall/Med EMS
3/12 Rate of Change
IPC, U.S. Dept of Census & Process Equipment Financial Reports
WorldElectronic Equipment
Production
World Electronic Equipment Shipmentsby Region 2013 @ 2012 Exchange Rates
Electronic Outlook 10/13
20%
15%
6%52%
7%
N AmericaW EuropeJapanRest of AsiaROW
Total Production: $2,002 Billion
FinalAssembly
World Electronic Equipment Production by Type@2012 Exchange Rates
Electronic Outlook 10/2013
2012 TOTAL: $1,991 Billion
2.3%
22.0%
13.1%
7.5%26.4%
9.0%
10.1%
9.7%BusinessCommunicationConsumerAutoComputerGov/MilitaryIndustrialInstrument
20130101
World Electronic Equipment ProductionBy Type20140221
0
100
200
300
400
500
600
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Mill
ions
industr+instrugov/milComputer & PeripheralsautomotiveconsumerTelecom/DatacomBusiness
based upon some historical estimates
+5.6%
Electronic Equipment SuppliersComposite of 141 Public Companies
Revenue, Net Income & Inventory
Computer 13, Internet 9, Storage 10, Communication 20, SEMI 20, Medical 23, Instruments 11, Military 6, Business & Office 3, Consumer 13, Automotive 11
20140221
-100
0
100
200
300
400
500
600
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ Billions
Revenue
Income
Inventory
+5.6%
Electronic Equipment SuppliersComposite of 141 Public Companies
Quarterly Revenue Growth
Computer 13, Internet 9, Storage 10, Communication 20, SEMI 20, Medical 23, Instruments 11, Military 6, Business & Office 3+ Media tablets from all vendors, Consumer 13, Automotive 11
20140221
-20
-15
-10
-5
0
5
10
15
20
25
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
% G
row
th
Global Electronic Equipment Shipment Growth 12/12 & 3/12 Rate of Change
141 OEM company sales composite
20140221
0.800.850.900.951.001.051.101.151.201.251.30
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Rat
e of
Cha
nge
12/12 3/12 0 Growth
Inventory/Sales Ratios Large Component Distributors, Semiconductor, EMS & OEM Companies
Custer Consulting Group based upon company financials
20140222
0.15
0.25
0.35
0.45
0.55
0.65
0.75
0.85
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Semiconductor
EMS
OEM
Component Distrib
Ratio: Inventories/Sales
RegionalElectronic Equipment
Production
European Computer, Electronic & Optical Products Production
Eurostat, C26 category, EU 27 countries
20140212
80
85
90
95
100
105
110
115
120
1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Index (2010=100), Seasonally Adjusted
Japan Electronic Equipment Production by Month 2000 to Present
0200400600800
100012001400160018002000
1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Elec Application EquipElectronic Measuring InstrumentationCommunications EquipmentComputers & Related EquipmentElectronic Business MachinesConsumer Electronic Equipment
JEITA www.jeita.or.jp/
20140221
Yen Billion
Taiwan/China Electronic Equipment ProducersComposite of 101 Manufacturers
Consolidated Revenue
Taiwan listed companies, often with significant manufacturing in China
20140212
0
100
200
300
400
500
600
700
800
900
1000
1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Dec 2013 up 10.3% compared toDec 2012 and up 1.1% compared to Nov 2013
NT$ Billions
U.S. Electronic Equipment Orders & ShipmentsComputer, Communications, Measurement & Control and Military
www.census.gov/indicator/www/m3/
20140301
14
16
18
20
22
24
26
28
30
32
34
Jan
Jun
Nov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014
Thou
sand
s
Orders
Shipments
$ Billions (monthly, seasonally adjusted)
Regional Electronic Equipment Shipment Growth
20140301
0.60.70.80.91.01.11.21.31.41.51.61.71.81.92.0
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Taiwan/China
Japan
USA
Europe (EU27)
Zero Growth
3/12 Rate of Growth (in local currency)
Sources: IPC, JPCA, Taiwan/China composite; Eurostat "wiring devices" for Europe
Calendar Year
World Electronic Equipment Monthly Shipments
Converted @ Constant 2012 Exchange Rates
Source: Custer Consulting Group & Electronic Outlook Corp
20140221
0102030405060708090
100
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
USA
W Europe
Japan
Taiwan+China
ROA
ROW
US$ B
World Electronic Equipment Monthly Shipments
Converted @ Constant 2012 Exchange Rates
Source: Custer Consulting Group & Electronic Outlook Corp
20140221
0%10%20%30%40%50%60%70%80%90%
100%
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
ROWROATaiwan+ChinaJapanW EuropeUSA
% of US$ Total
World Electronic Equipment Monthly Shipments
Converted @ Fluctuating Exchange Rates
Source: Custer Consulting Group & Electronic Outlook Corp
20140301
80
100
120
140
160
180
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
January 2014 up 8.4% vs January 2013
US$ M
U.S. Electronic Equipment -Orders, Shipments &
Inventories
U.S. Electronic Equipment Order & Shipment GrowthComputer, Communications, Measurement & Control and Military
www.census.gov/indicator/www/m3/
20140301
0.70
0.80
0.90
1.00
1.10
1.20
1.30
Jan
Jun
Nov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014
ShipmentsOrdersZero Growth
3/12 Rate of Change
U.S. Electronic Equipment Orders & ShipmentsComputer, Communications, Measurement & Control and Military
www.census.gov/indicator/www/m3/
20140301
14
16
18
20
22
24
26
28
30
32
34
Jan
Jun
Nov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014
Thou
sand
s
Orders
Shipments
$ Billions (monthly, seasonally adjusted)
U.S. Electronic Equipment OrdersMonthly Data
www.census.gov/indicator/www/m3/
20140301
0
2
4
6
8
10
12
14
16
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014
Search & NavigationElectromedical, Instr & ControlCommunicationComputerDefense
$ Billions (monthly, seasonally adjusted)
U.S. Electronic Equipment OrdersMonthly Data
www.census.gov/indicator/www/m3/
20140204
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jan
Jun
Nov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Medical, Measuring & Control
Search & Navigation - non Military
Communication- non Military
Computer & Related
Military-Search & Navigation
Military-Communications
$ Billions (monthly, seasonally adjusted)
U.S. Electronic Equipment InventoriesMonthly Data
www.census.gov/indicator/www/m3/
20140301
0
2
4
6
8
10
12
14
16
18
20
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014
Thou
sand
s Search & NavigationElectromedical, Instr & ControlCommunicationComputerDefense
$ Billions (monthly, seasonally adjusted)
U.S. Electronic Equipment Inventories vs. Orders
www.census.gov/indicator/www/m3/
20140301
1.00
1.20
1.40
1.60
1.80
2.00
2.20
2.40
Jan
May Se
pJa
nM
ay Sep
Jan
May Se
pJa
nM
ay Sep
Jan
May Se
pJa
nM
ay Sep
Jan
May Se
pJa
nM
ay Sep
Jan
May Se
pJa
nM
ay Sep
Jan
May Se
pJa
nM
ay Sep
Jan
May Se
pJa
nM
ay Sep
Jan
May Se
pJa
nM
ay Sep
Jan
May Se
pJa
nM
ay Sep
Jan
May Se
pJa
nM
ay Sep
Jan
May Se
pJa
nM
ay Sep
Jan
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014
Ratio Inventories/Orders
Market Segments
Volume (Shift to Low Cost Areas)Personal ComputersMobile PhonesOther Consumer ElectronicsDatacom/TelecomAutomotive
"Protected"MilitaryMedicalInstruments & ControlsHigh IP Content
Prototype, Quick Response, Short Run, Need for Local Support
Global Electronic Supply Chain Growth 4Q'13 vs. 4Q'12 (Preliminary)
6-4
-83
017
-57
59
-432
53
612
88
136
4
-10 0 10 20 30 40Electronic Equipment
MilitaryBusiness & Office
Instruments & ControlsMedical
CommunicationInternet
ComputerData Storage
AutomotiveConsumer
SEMI EquipSemiconductors (SIA)Passive Components
PCBsComponent Distributors
Large EMS (excl Foxconn)ODM
PCB Process EquipmentMaterials
PCB Laminate
% Change
20140302
US$ equivalent at fluctuating exchange; based upon industry composites including acquisitions
European Electronic Supply Chain Growth 4Q’13 vs. 4Q’12
00
3-6
-210
8
76
-25
-8 -6 -4 -2 0 2 4 6 8 10 12
Electronic EquipmentOffice equipment
Instruments & ControlsMedical electronics
Domestic Electric AppliancesMotor Vehcles
Airplane/Aerospace
Semiconductors (SIA in euros)Electronic components & boards
Loaded electronic boardsWiring devices
% Change
20140212
Euro denominated growth rates; Eurostat, SIA & Custer Consulting Group
U.S Electronic Supply Chain Shipment Growth 4Q’13 vs. 4Q’12
04
-4-3
-2-6
146
1
170
31
3
-10 -5 0 5 10 15 20
Electronic EquipmentElectromedical, Measurement & Control
Search & NavigationComputer Related
CommunicationDefense
AutomotiveAirplane/Aerospace - non Defense
Airplane/Aerospace - Defense
Semiconductors to N AmericaSmall EMS
PCBsPassive componentsIndustrial Production
% Change
20140304
Custer Consulting Group
Electronic Equipment
Markets of Interest
ChangingElectronicEquipment
Markets
Smart Connected Device Shipments by Type
Gartner 1/14
20140114
2012 2013 2014 2015Oth Ultramobile (Hybrid &
Clamshell) 9 17 40 64
Mobile Phone 1,746 1,804 1,893 1,965Tablet (ultramobile) 120 180 263 325PC (Desktop & Notebook) 341 299 278 268
0
500
1,000
1,500
2,000
2,500
3,000Units (millions)
AutomotiveElectronics
World Motor Vehicle Production by Geography 2013
Autos, Trucks & Busses
Electronic Outlook 10/13
TOTAL: 86.7 Million Units
18.8%
14.3%
10.6%24.8%
17.3%
14.3%
Vehicles
N AmericaW EuropeJapanChina (PRC)Rest of AsiaROW
Automotive Equipment SuppliersComposite of 11 Public Companies
Revenue, Net Income & Inventory
Autoliv, Borg Warner, Continental AG, Delphi, Federal Mogul, Gentex, Johnson Controls, Lear, TRW Automotive, Valeo, Visteon
20140225
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ BillionsRevenueIncomeInventory
+9.4%
U.S. Vehicle Shipments
0
5
10
15
20
25
30
1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Lt Trucks & Utility Vehicles Heavy Duty Trucks Automobiles
www.census.gov/indicator/www/m3
20140204
US$ Billion
Aviation, Government &
Military Electronics
U.S. Aircraft & Parts Shipments
02468
101214161820
1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Non-Defense Defense
www.census.gov/indicator/www/m3
US$ Billion
20140301
Military EquipmentComposite of 6 Public Companies
Revenue, Net Income & Inventory
General Dynamics, Harris, Lockheed, Northrop Grumman, Raytheon, Rockwell Collins
20140209
-5.00.05.0
10.015.020.025.030.035.040.045.0
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ Billions
Revenue
Income
Inventory
- 4.1%
Global Military Equipment Shipment Growth 12/12 & 3/12 Rate of Change
Industry sector sales composite
20140209
0.85
0.95
1.05
1.15
1.25
1.35
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014
Rat
e of
Cha
nge
12/12 3/12 0 Growth
U.S. Defense Capital GoodsOrders & Shipments
www.census.gov/indicator/www/m3/
20140301
0
5
10
15
20
25
30
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014
Thou
sand
s
Orders
Shipments
$ Billions (monthly, seasonally adjusted)
U.S. Military Electronics Orders & ShipmentsDefense Communication & Search & Navigation Equipment
www.census.gov/indicator/www/m3/
20140204
0
1
2
3
4
5
6
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Thou
sand
s Orders
Shipments
$ Billions (monthly, seasonally adjusted)
U.S. Government & Military Electronics Production by Type
2013
Electronic Outlook
TOTAL: $83.5 Billion
7.0%7.7%
27.5%
25.7%
0.7%
10.6%
14.4%
0.8% 5.6%
Vehicles
RADAR
GUIDANCE/CONTROL
COMM & NAVIGATION
ELECTRONICWARFARESIMULATION & TRAIN
COMPUTER
ELECTRO-OPTICAL
More DetailsAvailablefor eachCategory
U.S. Government & Military ElectronicsCommunication & Navigation
2013
Electronic Outlook
TOTAL: $23.2 Billion
9%
22%
22%9%
14%
15%
2%5%
2%
Vehicles Telecommunication
Radio Communication
Microwave communication
Comm Checkout & Support
Other Communication
Airborn Navigation
Surface/marine/ground nav.
Underwater navigation
Nav checkout & support
Instruments & Control Equipment
U.S. Electromedical, Measurement & Control EquipmentOrders & Shipments
www.census.gov/indicator/www/m3/
20140204
4
5
5
6
6
7
7
8
8
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Orders
Shipments
$ Billions (monthly, seasonally adjusted)
U.S. Industrial Electronics Production2013
Electronic Outlook
TOTAL: $69.8 Billion
26.6%
25.1%
9.7%
15.0%
0.6%11.7%
11.2%
Vehicles
ControlsProduction EquipmentProduction Support/ServEnvironmental SystemsAppliance ControlsOther Ind ElecAll Other
Note: Similar data available for other electronic equipment sectors
U.S. Instrumentation Equipment Production2013
Electronic Outlook 11/2012
TOTAL: $63.8 Billion
8.0% 4.1%
53.2%
20.7%
1.3%1.4%
8.2%
3.3%
$
Test & MeasurementAutomatic TesterMedicalAnalyticalNuclear InstrumentOptical & UltrasonicAvionicOther
Note: Similar data available for other electronic equipment sectors
Instruments & Control EquipmentComposite of 12 Public Companies
Revenue, Net Income & Inventory
Agilent, Ametek, Emerson, Itron, Keithly, LeCroy, PerkinElmer, Rockwell Automation, Teledyne, ThermoFisher, Varian, Woodward Govenor
20140222
-2.00.02.04.06.08.0
10.012.014.016.018.0
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ Billions
Revenue
Income
Inventory
3.4%
Rank Company 2011 Sales $M 2011/2010 Growth1 Danaher (T&M div) 3,391 19.7%2 Agilent Technologies (EMG div) 3,316 19.1%3 Teradyne 1,429 -8.8%4 Rohde & Schwarz 1,300 private5 Advantest (semiconductor test div) 1,272 52.6%6 National Instruments 1,024 17.3%7 Anritsu (T&M div) 882 31.9%8 Yokogawa (T&M div) 436 -0.7%9 Aeroflex (ATS div) 348 -1.6%10 Electro Rent 220 43.1%11 LeCroy 194 25.7%12 LTX-Credence 179 -30.3%13 McRath RentCorp (TRS RenTelco div) 125 16.2%
Test & Measurement Equipment SuppliersPublic Companies
Frost & Sullivan 6/12
Danaher Corp.Revenue, Net Income & Inventory
CY
20140201
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Q1Q2Q3 Q4Q1Q2Q3Q4Q1 Q2Q3Q4Q1Q2Q3 Q4Q1Q2Q3Q4Q1 Q2Q3Q4Q1Q2Q3Q4 Q1Q2Q3Q4Q1Q2 Q3Q4
2005 2006 2007 2008 2009 2010 2011 2012 2013
$ Billions
Revenue
Income
Inventory
DHR
+ 6%
Medical EquipmentComposite of 23 Public Companies
Revenue, Net Income & Inventory
Analogic, Bio-Rad Laboratories, Boston Scientific, Bruker, CareFusion, Covidien, Draeger, Guidant, Hill-Rom, Intuitive Surgical, Invacare, Kinetic Concepts, Medtronic, ResMed, St Jude Medical, Smith & Nephew, STERIS, Stryker, Varian Medical, Waters, Zimmer, Zoll
20140222
-5
0
5
10
15
20
25
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ Billions
Mill
ions Revenue
Income
Inventory
+0.1%
U.S. Medical Instrument Production2013
Electronic Outlook 11/2012
TOTAL: $33.9 Billion
15.2%
4.1%
33.4%
22.5%
1.3%
Vehicles
DiagnosticTherapeuticOther Medica InstrRadiologicNuclear Medicine
Note: Similar data available for other electronic equipment sectors
Medtronic IncRevenue, Net Income & Inventory
CY
20140221
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
19992000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ Billions
Revenue
Income
Inventory
MDT
+ 3%
Medical Semiconductor Market Forecast
IC Insights 12/13
3.23.6
4.0 4.1 4.44.9
5.66.5 6.8
-5%
14%10%
5%7%
12%15% 16%
4%
-0.1
-0.05
0
0.05
0.1
0.15
0.2
0.25
0.3
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2009 2010 2011 2012 2013 2014 2015 2016 2017
US$ billions
20131222
% Change
CommunicationEquipment
Communication Equipment SuppliersComposite of 20 Companies
10 mobile phone makers, 10 other telecom equipment makers plus estimate of other mobile makers
Revenue, Net Income & Inventory
3COM, ADC Telecom, Alcatel+Lucent, Ciena, Ericsson, Motorola Solutions,, Nokia, Polycom, TellLabs, Palm ; Apple iPhone, HTC, Huawei Device, LG, Motorola Mobility, Nokia, RIM, Samsung, Sony Mobility, ZTE; Euros & Krona converted at fluctuating exchange; mobile phone volumes from company reports & Gartner Dataquest quarterly unit shipment estimates; historical data included for acquired companies
20140209
-40-20
020406080
100120140160
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ Billions
Mill
ions Revenue
Income
Inventory
+ 16.8%Preliminary 4Q’13 results; smartphones driving growth
U.S. Communication Equipment Orders & Shipments
www.census.gov/indicator/www/m3/
20140301
0
2
4
6
8
10
12
14
16
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014
Thou
sand
s Orders
Shipments
$ Billions (monthly, seasonally adjusted)
InternetInfrastructure
"Internet" Equipment SuppliersComposite of 9 Public Companies
Revenue, Net Income & Inventory
ADTRAN, Cisco Systems, Extreme Networks, Juniper Networks, Mattson Technology, Netgear, Sierra Wireless, Sonus Networks, Sycamore
20140222
-4.0-2.00.02.04.06.08.0
10.012.014.016.0
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ Billions
Revenue
Income
Inventory
-4.9%
LargeCiscoDecline
Layer 2/3 Ethernet Switch Vendors 3Q’13
www.idc.com 3Q'13 World Total US$ 5.36 Billion
62.6%9.4%
3.6%2.7%2.0%
19.8%
$
CiscoHPAlcatel-LucentJuniperDellOthers
Cisco SystemsRevenue, Net Income & Inventory
CY
20140214
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ Billions
Revenue
Income
Inventory
CSCO
- 8%
$639 M due to Scientific Atlanta acquisition
Computers &Related Products
U.S. Computers & Related ProductsOrders & Shipments
www.census.gov/indicator/www/m3/
20140301
0
2
4
6
8
10
12
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014
Thou
sand
s Orders
Shipments
$ Billions (monthly, seasonally adjusted)
Makeup of Personal Computer Market
IC Insights 5/12
20121027
2009 2010 2011 2012 2013 2014 2015Tablets 1 17 63 110 160 249 341Netbooks 26 27 15 8 6 5 4Notebooks 137 167 184 205 225 253 279Desktops 146 155 154 155 153 156 159
0100200300400500600700800900
1,000
2010-2015 CAGRTablets + 82.9%Netbooks - 31.7%Notebooks + 10.8%Desktops + 0.5%
Units (millions)
World Server Shipment Revenue
Gartner Dataquest 2/14 & prior reports
0
2
4
68
10
12
14
1618
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2005 2006 2007 2008 2009 2010 2011 2012 2013
RevenueUS$ Billions
20140226
-6.6%
World Server Shipments4Q’13
Gartner Dataquest 2/2014
TOTAL: $13.7 Billion
28.1%
26.5%15.2%
4.7%
4.2%
21.3%HPIBMDellCiscoOracleOthers
Industrial Robots: Share by Market
IFR 1/14
39.7%
20.5%
8.6%
7.2%
3.1%21.0%
Automotive
Electronics/Electrical
Metals/Machinery
Chemical, Rubber &PlasticsFood & Beverage
Other
159.3 Million Units in 2012
Industrial Robots: Sales by Region
IFR World Robotics 2013
20140505
2006 2007 2008 2009 2010 2011 2012Total 111.1 114.4 113.0 60.0 120.6 166.0 159.3India 0.8 0.9 0.9 0.4 0.8 1.5 1.5ROW 2.6 2.8 1.7 1.0 3.7 9.2 7.2Asia Pacific 5.9 4.3 6.8 3.6 8.7 11.1 12.0China 5.8 6.6 7.9 5.5 15.0 22.6 23.0S Korea 10.8 10.1 11.6 7.8 23.5 25.5 19.4N America 17.4 18.7 16.2 8.4 16.4 24.3 26.3Japan 37.4 36.1 33.1 12.8 21.9 27.9 28.7Europe 30.4 34.9 34.7 20.5 30.7 43.8 41.2
111.1 114.4 113.0
60.0
120.6
166.0 159.3
020406080
100120140160180200
Units (000)
Robots: Accelerating Demise of Factory Jobs?
ElectronicComponents
Semiconductors
World Semiconductor ShipmentsMonthly US$
SIA
20140303
0
5
10
15
20
25
30
Jan
Aug Mar
Oct
May
Dec Ju
lFe
bSe
pA
prN
ov Jun
Jan
Aug Mar
Oct
May
Dec Ju
lFe
bSe
pA
prN
ov Jun
Jan
Aug Mar
Oct
May
Dec Ju
lFe
bSe
pA
prN
ov Jun
Jan
Aug Mar
Oct
May
Dec Ju
lFe
bSe
pA
prN
ov Jun
Jan
Aug Mar
Oct
May
Dec
83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Thou
sand
s
3-Month AvgUS$ Billions (3-month average)
2009 recession much sharper but shorter than 2001
Total Semiconductor Shipments to an AreaMonthly Shipments - Reporting Firms
SIA website: www.sia-online.org/
20140303
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Jan
Jun
Nov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Japan
N America
Europe
Asia-Pac
$B (3-month average) SE Asia
N American Semiconductor ShipmentsMonthly & 3-Month Average Shipments
SIA website: www.sia-online.org/
20140303
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Jan
Jun
Nov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Thou
sand
s
Month
3-Month Avg
$ Billions
Semiconductor Shipments to N. Americavs. U.S Electronic Equipment Production
Total $ Semiconductor Shipments from All Countries to N. America www.sia-online.org/U.S. Electronic Equipment Shipments www.census.gov/indicator/www/m3/
20140303
0.3
0.5
0.7
0.9
1.1
1.3
1.5
1.7
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Semiconductors
El Equip
3/12 Rate of Change(US$)
Semiconductor Fab, Assembly, Packaging,Test & Measurement
Equipment
Semiconductor Capital Equipment Shipments by Area
www.semi.org, www.seaj.or.jp/ 9/13
20130914
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
ROW
China
Taiwan
S Korea
N America
Japan
Europe
$ Billions
Semiconductor Fab, Test & Measurement Composite of 20 Public Companies
Revenue, Net Income & Inventory
Applied Materials, ASM Intl, ASML, Advantest, KLA Tencor, Novellus, Hitachi Hi Tech, Lam Research, BTU, LTX-Credence, FEI, FSI, Intervac, Kulicke & Soffa, MKS Instruments, Rudolph, Teradyne, Ultratech Stepper, Varian semiconductor, Veeco
20140222
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
US$ Billions @ fluctuating exchange
Chart TitleRevenue
Income
Inventory
+33%
Global Semiconductor & Semiconductor Capital Equipment3-Month Shipment Growth Rates on $ Basis
Sources: SIA; Semiconductor Equipment Association of Japan, www.semi.org, Custer Consulting Group SEMI equipment sector composite growth
20140303
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Jan
Aug Mar
Oct
May
Dec Ju
lFe
bSe
pA
prN
ov Jun
Jan
Aug Mar
Oct
May
Dec Ju
lFe
bSe
pA
prN
ov Jun
Jan
Aug Mar
Oct
May
Dec Ju
lFe
bSe
pA
prN
ov Jun
Jan
Aug Mar
Oct
May
Dec Ju
lFe
bSe
pA
prN
ov Jun
Jan
Aug Mar
Oct
84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
SemiconductorsSEMI Capital EquipZero Growth
3/12 Rate of Change
Passive Components
Passive ComponentsComposite of 11 Companies
Revenue, Net Income & Inventory
AVX, Bel Fuse, Diodes, International Rectifier, Littlefuse, Murata, RF Micro, Rohm, Vishay, TDK, Yageo;Euros, Yen & NT$ converted to US$ at fluctuating exchange rates
20140214
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ Billions
Revenue
Income
Inventory
+1.8%
U.S. Production: "Other" Electronic Components (excludes semiconductors)
Orders & Shipments
http://www.census.gov/indicator/www/m3/
20140208
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Thou
sand
s
Orders
Shipments
$B (Seasonally Adjusted)
Calendar Year
PCB Fabrication
World PCB Monthly ShipmentsConverted @ Fluctuating Exchange Rates
Source: Custer Consulting Group
20140221
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Thou
sand
s ROWRest of AsiaKoreaTaiwan/ChinaJapanEuropeN America
US $ Billions
Calendar Year
World PCB Shipments (with forecast)Converted @ Fluctuating Exchange Rates
20140222
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
ActualForecast
+1.3%
-1.1%
$ Billions
Source: Custer Consulting Group - 2010 base year expanded by monthly growth of N. American, European, Japanese & Taiwan/China monthly PCB shipments
Calendar Year
Growth calculations:Europe = Eurostat “Wiring Device”Japan & N. America from JPCA & IPC dataTaiwan/China:46 rigid & flex company compositeRest of Asia growth = Taiwan/China 44 company compositeIncludes S Korea data for 2011-2013
+4.9%
2012 World PCB Production by Region
IPC 8/13
5.0%
4.5%
14.7%
42.8%
12.6%
13.4%6.6% 0.4%
N AmericaEuropeJapanChina/HKTaiwanS KoreaRest of AsiaROW
20130831
Total: $60.0 Billion
(US$ M @ Average 2012 Exchange)
2012 World PCB Production by End Market
IPC 9/13
20.1%
34.2%
17.8%
3.9%
9.3%
2.5%
4.5%7.7%
PC/OfficeCommunicationConsumerDefense/SpaceIndustrialMedicalOthersAutomotive
20131111
Total: $60 Billion
Rank Maker Country US$M1 Nippon Mektron Japan 2,8882 Unmicron Taiwan 2,3833 SEMCO Korea 2,0024 Young Poong Group Korea 2,0005 Ibiden Japan 1,9246 Zhen Ding Taiwan 1,5127 Tripod Taiwan 1,3968 TTM Technologies USA 1,3109 Sumitomo Denko PC Japan 1,21910 Daeduck Group Korea 1,14711 HannStar Board (GBM) Taiwan 1,11212 Viasystems Group Inc USA 1,08013 Nanya PCB Taiwan 1,00714 Kingboard PCB Group HK/China 93515 CMK Corp Japan 90816 Shinko Electric Japan 86917 Mflex USA 81918 Kinsus (+Plotek) Taiwan 78819 Compeq Taiwan 78320 Meiko Electronics Japan 75921 TPT (Taiwan Techvest) Taiwan 72222 AT&S Austria 69823 Multek USA 65024 WUS Group Taiwan 64425 LG Innotek Korea 600
World’s Top PCB Companies - 201220131111
Dr Hayao Nakahara, N.T. Information Ltd 9/2013
N American Rigid & Flexible PCB Shipments & Orders
20140204
0
50
100
150
200
250
1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11
2008 2009 2010 2011 2012 2013
Shipments
Orders
2013/2012 Rigid & Flex PCB Shipment Growth:
-1.9%
Note: IPC survey captures "market" not domestic production. About 15% of the above represents imported boards resold by N American PCB producers in survey.
$M (statistical sample of about 50% of producers)
IPC
U.S. Electronic Equipment vs. Rigid & Flex PCBs$ Order Growth
20140301
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
Jan
Jun
Nov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
Aug Ja
nJu
nN
ov Apr
Sep
Feb
Jul
Dec
May Oct
Mar
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
PCB
Equipment
Zero Growth
3/12 Rate of Change
IPC & U.S. Dept of Census
Inventory builds and excess orders
Inventory/order corrections
2012 Vertical Markets for PCBs in N America(US$)
WECC 8/2013
26%
15%11%
11%
32%
2%11.0%
Military/AerospaceComputersIndustrialInstrument/MedicalCommunicationsAutomotiveConsumer
20130912
Total: $3.0 Billion
EMS & ODM Companies
EMS & ODM Estimated Global Revenue vs. Total Available Market
20131119
2009 2010 2011 2012 2013 2014 2015ODM 227 308 299 270 272 299 320EMS 75 86 96 116 105 110 115TAM 1195 1284 1388 1394 1399 1485 1614
11951284
1388 1394 13991485
1614
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800$ Billions
ODMEMSTAM
Custer Consulting Group 11/13, TAM = 0.7* Electronic Equipment Production at Fluctuating Exchange
2013/20122012 2013 Growth %
Hon Hai (Foxconn) Taiwan 141,122 133,349 -6%Flextronics Singapore 24,670 24,197 -2%Jabil Circuit USA 17,462 18,200 +4%Sanmina-SCI USA 6,086 5,872 -4%Celestica Canada 6,507 5,809 -11%Benchmark Elec USA 2,468 2,450 -1%Plexus USA 2,308 2,232 -3%Venture Mfg Singapore 1,912 1,831 -4%Sypris USA 342 331 -3%
Total 202,877 182,386 -10%
Large Global EMS Providers20131117
Sources: Company data, 4Q’13 estimated by Custer Local currency converted at fluctuating exchange
2012 vs. 2013 Sales ($M)
Large EMS Providers Composite of 9 Public Companies
Revenue, Net Income & Inventory
Benchmark+Pemstar, Celestica, Flextronics+Solectron, Foxconn, Jabil, Plexus, Sanmina-SCI, Sypris, Venture Mfg
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
US$ Billions @ fluctuating exchange
Revenue
Income
Inventory
+7%
20140208
-1%Q1'14/Q1'13
Guidance
Large EMS Providers Composite of 8 Public Companies
Quarterly Revenue Growth
Benchmark+Pemstar, Celestica, Flextronics+Solectron, Jabil, Plexus, Sanmina-SCI, Sypris,Venture Mfg
20140208
-40
-30
-20
-10
0
10
20
30
40
50
60
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Excludes Foxconn
Foxconn Electronics (Hon Hai), TaiwanRevenue, Net Income & Inventory
CY
20140115
0
200
400
600
800
1000
1200
1400
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
NT$ (Billions)
Revenue
Income
Inventory
2317
+17%
FlextronicsRevenue, Net Income & Inventory
CY
20140201
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
19992000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014
$ Billions
Revenue
Income
Inventory
+ 17%
5.9-6.31/29/14
FLEXFY ends March 31
Plexus CorpRevenue, Net Income & Inventory
CY
20140126
-100
0
100
200
300
400
500
600
700
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
19992000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014
$ Millions
Revenue
Income
Inventory
+ 1%
535-5651/15/14
PLXSFY ends September
Medium Size EMS Providers Composite of 10 Public Companies
Revenue, Net Income & Inventory
CTS, Keytronic, LaBarge, NamTai, Nortec, Raven, Sigmatron, Sparton, Sypris, Winland
20131127
-200
0
200
400
600
800
1000
1200
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ Millions
Revenue
Income
Inventory
-6%
Nortech Systems IncRevenue, Net Income & Inventory
CY
20131119
-5
0
5
10
15
20
25
30
35
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ Millions
Thou
sand
s
Revenue
Income
Inventory
NSYS
+ 7%
Raven Industries IncRevenue, Net Income & Inventory
CY
20131127
0
20
40
60
80
100
120
140
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ Millions
Thou
sand
s
Revenue
Income
Inventory
RAVN
+ 8%
Sypris SolutionsRevenue, Net Income & Inventory
CY
20131119
-150
-100
-50
0
50
100
150
200
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ Millions
Revenue
Income
Inventory
SYPR
- 3%
SigmaTron International, IncRevenue, Net Income & Inventory
CY
-20
-10
0
10
20
30
40
50
60
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
US$ (Millions)
Thou
sand
s
Revenue
Income
Inventory
20140126
SGMA
+ 7%
SMTCRevenue, Net Income & Inventory
CY
20131119
-100
-50
0
50
100
150
200
250
300
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
US$ (Millions)
Revenue
Income
Inventory
- 4%
TSE.SMX
Sparton CorporationRevenue, Net Income & Inventory
CY
20140207
-20
0
20
40
60
80
100
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
19992000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ Millions
Revenue
Income
Inventory
SPA
+ 28%
EMS Inventories/Sales 9 Large & 12 Medium Sized Companies
Large: Benchmark+Pemstar, Celestica, Flextronics+Solectron, Foxconn, Jabil, Plexus, Sanmina-SCI, Sypris, Venture Mfg
20140208
0.15
0.25
0.35
0.45
0.55
0.65
0.75
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Large Medium
Medium: CTS, Keytronic, LaBarge, NamTai, Nortec, Raven, Sigmatron, Sparton, Sypris, Winland
Ratio: Inventories/Sales
2013/20122012 2013 Growth %
Foxconn (Hon Hai) 136,515 133,238 -2%Pegatron 30,800 32,029 +4%Quanta Computer 33,400 29,666 -11%Compal Electronics 23,567 23,341 -1%Wistron 22,869 21,793 -5%Inventec 15,406 15,537 +8%Asustek Computer 15,237 15,616 +2%Chimei Innolux 16,241 14,244 -12%Lite On Technology 7,266 7,171 -1%Total 301,301 292.635 -3%
Large Taiwan ODM Providers20140110
Source: Company data, NT$ converted at constant avg 2013 exchange (29.672 NT$ = 1US$)Consolidated company sales (to be updated soon to consolidated sales)
2012 vs. 2013 Sales ($M)
Taiwan ODM CompaniesComposite Sales of 11 Large Manufacturers
20140114
0100200300400500600700800900
1,000
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Jan 2014 was 3.8% below Jan 2013 and 25% sequentially below Dec 2013
NT$ (Billions)
Asustek Computer, Chei Mei, Compal Electronics, Foxconn, Chimei Innolux , Inventec, Inventec Appliance, Lite On Technology, Mitac International, Pegatron, Quanta Computer, Wistron, Chei Mei Display replacing Chei Mei & Innolux Display 3/10 & later
Calendar YearCompany Financial Releases
Large ODM Companies Composite of 10 Public Manufacturers
Quarterly Revenue Growth
Asustek Computer, Compal Electronics, Foxconn, Chimei Innolux, Inventec, Inventec Appliance, Lite On Technology, Mitac International, Pegatron, Quanta Computer, Wistron
20140114
-40
-20
0
20
40
60
80
100
120
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Structure of European EMS Industry2012
Reed Electronics Research 12/12
13.27
3.39
3.75
5.55
Group 1 Group 2
Group 3 Group 4
20140118
Group 1 Group 2
Group 3 Group 4
Number of CompaniesTurnover of Each Segment
Eur billion
850+
52
6 19
European EMS by Region
Reed Electronics Research 1/14
2201401180131020
14.6 14.4 14.7 14.9 15.3 15.8
11.0 11.1 11.3 11.4 11.7 12.0
0
2
4
6
8
10
12
14
16
18
2012A 2013E 2014F 2015F 2016F 2017F
CEE, N Africa & OthW Europe
Euro (Billions)
Forecasting EMS Salesusing
Leading Indicators
Global EMS & ODM Companies Composite of 53 Public Companies
Revenue
0
20
40
60
80
100
120
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
US$ Sales @ fluctuating exchangeM
illio
ns +3.4%
20140208
US $ Billions
IPC Small & Medium N American EMS Company Revenue Index
0
20
40
60
80
100
120
140
1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11
2007 2008 2009 2010 2011 2012 2013
20140208
Index 2010 avg month = 100
IPC Small/Medium EMS vs Composite of 53 Public EMS/ODM Companies
Revenue
0
5000
10000
15000
20000
0
20
40
60
80
100
120
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
53 CompanyIPC Small/Medium
20140208
US $ Billions
IPC EMS Small & Medium CompanyN. American Shipments & Bookings
Markit Economics & ISM
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
2007 2008 2009 2010 2011 2012 2013 2014
PMI
Ship
Book
Zero Growth
20140303
IPC Small & Medium Company EMS vs N. American PCB Shipments
Markit Economics & ISM
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1.50
Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
2007 2008 2009 2010 2011 2012 2013 2014
PMI
Small/Med EMS
PCB
Zero Growth
20140303
IPC N American Small/Medium EMS vsComposite Sales of 53 Global EMS/ODM Companies
Markit Economics & ISM
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
PMI
IPC N AmericanSmall/Medium
53 Company EMS/ODM
Zero Growth
20140303
U.S Purchasing Managers Leading Index vs IPC EMS shipments & bookings
Markit Economics & ISM
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
2007 2008 2009 2010 2011 2012 2013 2014
PMI
PMI Leading IndicatorEMS ShipEMS bookZero Growth
20140303
Global PMI Leading Index vsComposite Sales of 53 Global EMS/ODM Companies
Markit Economics & ISM
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
PMI
PMI Leading Indicator
EMS/ODM Shipments
Zero Growth
20140303
U.S PMI Leading Index vsN American EMS Shipments
ISM & IPC
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
2007 2008 2009 2010 2011 2012 2013 2014
PMI Leading Indicator
EMS Shipments
Zero Growth
20140303
3/12 Growth
1 yearLead
U.S PMI Leading Index vsN American EMS, PCB & Semiconductor Shipments
Markit Economics & ISM
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
May Ju
lSe
pN
ov Jan
Mar
2007 2008 2009 2010 2011 2012 2013 2014
PMI
PMI Leading IndicatorEMS ShipPCB ShipZero GrowthSemiconductors
20140303
Using This Information to Forecast Your
Company’s Sales
Data Sources
• Trade Organizations• IPC, ZVEI, SIA, SEMI
• Government Statistics• US Department of Commerce, Eurostat
• Published Market Research Studies• Company Financial Reports & Consolidated Sector Data• Leading Indicators
• Purchasing Managers Indices, Conference Board CLI• Your Own Company’s Sales
Forecasting Your Company Sales
• Organize monthly or quarterly sales in spreadsheet• Obtain related industry time series for same time period• Compare industry data and/or leading indicators to yoursales using 3/12 growth rates• Determine lead times vs. your data• Forecast your sales based upon lead times• Estimate your market share gains/losses by comparingyour company growth to a related industry sector
•Custer Consulting Group can assist by providing: • Historical industry data• Help with analysis
Forecasts
Walt
World 2.5 2.5 3.2 3.9 3.7
USA 2.8 1.9 2.7 3.4 3.3
EU -0.4 0.0 1.2 1.5 1.9
Japan 1.4 1.8 1.9 1.6 1.2
Four Tigers 1.9 2.5 3.6 3.9 3.7
China 7.7 7.7 7.9 8.2 7.7
Henderson Ventures 2/2014www.hendersonventures.com
2012 2013 2014 2015 2016
GDP GrowthConstant $ Growth Rates Converted @ Constant Exchange Rates
20140209
World 1.0 -2.9 4.7 5.9 5.7
USA -0.9 -3.3 2.7 4.9 5.1
W. Europe -3.4 -4.6 1.6 3.2 3.4
Japan -2.6 -10.3 4.3 4.1 3.2
Four Tigers -1.2 1.8 4.4 5.7 5.4
China 2.6 -2.9 6.2 7.0 6.6
Henderson Ventures 2/2014www.hendersonventures.com
2012 2013 2014 2015 2016
Electronic Equipment Production Growth
Constant $ Growth Rates Converted @ Constant Exchange Rates
20140209
World Rigid & Flex PCB ProductionConverted @ 2012 Exchange Rates except Japan @ 100Y/US$
H Nakahara 2/14
20131111
59.9 59.8 59.862.7 64.9 66.6 67.7
0
10
20
30
40
50
60
70
80
2011 2012 2013 2014 2015 2016 2017
TotalOther AsiaThailandS KoreaTaiwanJapanChinaOther EuropeGermanyAmericas
$ Billion (@2012 exchange rates)
N. American Supply Chain Forecast2014 vs. 2013
0 2 4 6 8
Small/MediumEMS
Semiconductors
PCBs
ElectronicEquipment
Combined GDP
Custer Consulting Group
Custer Consulting Group
Henderson Ventures
HV
Henderson Ventures
% Change
20140222
Key PointsAbility to target each end market sector by key companies, size and growth rate
Size & growth of each sector of world & U.S. electronic supply chain
Leading indicators to forecast domestic and global EMS growth
Tools & methodology to forecast your companies growth
Likely N American Small/Medium EMS Growth about 3% in 2014
Future Presentations
Financial data on small EMS companies not publicly available
Markets can be very localized
Leading indicators appear very promising as forecasting tool
Cooperative efforts with individual companies would be welcome
More work needs to be done
Custer Consulting Group Products
Daily News Services (6 days/week)- Global electronics supply chain- Solar/Photovoltaic supply chain
Business Outlook- Market charts & data
Global marketOEMsComponents, EMS, ODM, materials & process equipSolar/Photovoltaic
- Weekly Market Comments with latest charts
20111007
Strictly private & confidential
Lincoln International’s Presentation Regarding:
The Dynamic EMS Industry
March 24, 2013
Lincoln International Snapshot
Paris
Frankfurt
ChicagoNew YorkLos Angeles
London
Vienna
Madrid
Mumbai
Tokyo
AmsterdamMoscow
São Paulo
Beijing
Americas▪ Offices in Chicago, Los Angeles
and New York▪ Office in São Paulo
Europe▪ Offices in Amsterdam, Frankfurt,
London, Madrid, Milan, Moscow, Paris and Vienna
Asia▪ China – Office in Beijing▪ India – Office in Mumbai▪ Japan – Office in Tokyo
International Industry-focused Leader 15 offices with nearly 300 bankers in
key global economies – half outside the U.S.
Experienced local bankers with deep strategic relationships within each region
14 global industry groups led by experienced senior bankers
Significant transactional experience and deep relationships within each sector
Ranked one of the top two middle market investment banks in the world(1)
Ranked as the #1 investment bank for the sale of private equity owned businesses for 2013
Since 2001 has completed more EMS transactions than any investment bank in the world
Milan
(1) According to MergerMarket for M&A transactions less than $300 million completed in 2013 (Rothschild was the other top ranked bank)
Contents
Section 1 General Middle Market M&A Environment 1
Section 2 EMS Industry Financial Metrics 3
Section 3 EMS Industry Merger and Acquisition Activity 8
Section 4 Overview and Traditional Drivers of Buyer Valuation 13
Section 5 Long-Term Strategic Outlook: Eliminating the “E” from EMS 16
Section 6 Conclusion 23
APPENDIX
A Officer Bio
2014 - IPC Presentation_v1.4.pptx
T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O RAMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA
General Middle Market M&A Environment
Section 1
9,035 7,250
10,448 11,836 11,455 10,812
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2008 2009 2010 2011 2012 2013
Num
ber o
f Dea
ls
M&A activity has solidly rebounded from great recession levels in 2009
The combination of low interest rates and slow growth creates an ideal environment for M&A
A more robust M&A market is expected in 2014 due toincreased M&A activity in the second half of 2013 carrying into 2014, as well as continued strength in M&A activity fundamentals
Middle market M&A ($10-$500M EV) is expected to continue driving the majority of deals in 2014
Middle-Market M&A OverviewM&A activity decreased in 2013, but is expected to increase in 2014Overview Activity
Sponsor Activity Financial sponsors have over $400 billion of equity funds to
invest and pressure to deploy this capital 4,000+ portfolio companies currently need to be exited or
recapitalized Continued low interest rates Leverage multiples have returned to pre-recession levels,
allowing sponsors to often out pay strategic buyers for assets
Strategic Activity $2.2+ trillion of cash on hand to fuel acquisitions, offset
slow organic growth to meet strategic initiatives Seeking growth through M&A to counteract the low organic
growth environment Increased cross-border activity due to globalization
Yearly M&A Volume (Transaction Size $10M – $500M)
Source: Capital IQ
Section 1: General Middle Market M&A Environment 2
T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O RAMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA
M&A as a Strategic Value Enhancing Tool
Section 2
Sparton Corporation (NYSE:SPA) Acquisition History
November 15th, 2012
June 6th, 2013
August 30thth, 2013
December 11thth, 2013 2014
Sparton acquired Onyx EMS, LLC, a leading EMS provider of complex applications to medical OEMs
Sparton acquired Aydin Displays, Inc. to add engineered product content of enhanced flat panel display and touch-screen solutions
Sparton acquired Creonix LLC, a leading EMS provider, in order to build out cable and wire harness engineering and manufacturing capabilities
Sparton acquired Beckwood Services, Inc. to provide electromechanical controls for the machine tool, analytical instruments and military markets
Section 2: M&A as a Strategic Value Enhancing Tool 4
** Lincoln International involved transaction
**
**
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14
Sparton Corporation (NYSE:SPA) Acquisition History (continued)
Announcement of Onyx acquisition
Announcement of Creonix acquisition
Announcement of AydinDisplays acquisition
Announcement of BeckwoodServices acquisition $31.6
$12.6
Source: Capital IQ, February 25th, 2014
Share price
Section 2: M&A as a Strategic Value Enhancing Tool 5
T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O RAMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA
EMS Industry Financial Metrics
Section 3
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Q1-03 Q1-04 Q1-05 Q1-06 Q1-07 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-13
Inde
x V
alue
A
s of
3/3
1/03
Large Mid Small
EMS Industry Stock Performance
EMS Stock Index
Small and Mid sized EMS public company stocks have greatly outperformed Large EMS company stocks over the last 10 years
Since 2002 Small and Mid sized EMS companies have traded at higher valuations than large EMS companies, prior to that the large companies dominated market valuations
Large EMS companies searching for opportunities to differentiate and increase margin and create shareholder value
Note: Large index: Celestica, Flextronics, Jabil and Sanmina Corp.; Mid index: Benchmark, CTS Corp, Key Tronic Corp., Nam Tai Electronics, Plexus Corp. and Sypris Solutions Inc.; Small index: IEC Electronics Corp., Nortech Systems, Sigma Tron International, SMTC Corp. and Sparton Corp.
740%
114%
(25%)
Section 3: EMS Industry Financial Metrics 7
(30.0%)
(20.0%)
(10.0%)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
Q1-03 Q4-03 Q3-04 Q2-05 Q1-06 Q4-06 Q3-07 Q2-08 Q1-09 Q4-09 Q3-10 Q2-11 Q1-12 Q4-12 Q3-13Large Mid Small
EMS Revenue Growth Rates
Small size EMS companies are exhibiting the highest YoY LTM revenue growth rates while Mid and Large (excluding Foxconn) EMS companies are exhibiting declining revenue growth
Small size EMS companies are exhibiting YoY LTM revenue growth rates above their respective historical averages
Year-over-Year (YoY) Last Twelve Months (LTM) revenue growth rates
Note: Data sourced from Capital IQ as of the last day of each quarter; Large index: Celestica, Flextronics, Jabil and Sanmina Corp.; Mid index: Benchmark, CTS Corp, Key Tronic Corp., Nam Tai Electronics, Plexus Corp. and Sypris Solutions Inc.; Small index: IEC Electronics Corp., Nortech Systems, Sigma Tron International, SMTC Corp. and Sparton Corp.
7.1%
9.2%
5.4%
Averages:
7.9%
(2.4%)
(13.8%)
Section 3: EMS Industry Financial Metrics 8
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Q1-03 Q4-03 Q3-04 Q2-05 Q1-06 Q4-06 Q3-07 Q2-08 Q1-09 Q4-09 Q3-10 Q2-11 Q1-12 Q4-12 Q3-13Large Mid Small
EMS EBITDA Margins Over Time
Large and Mid size EMS companies are operating above their historical EBITDA margin averages
Large EMS companies are exhibiting recent margin improvement
Note: Data sourced from Capital IQ as of the last day of each quarter; Large index: Celestica, Flextronics, Jabil and Sanmina Corp.; Mid index: Benchmark, CTS Corp, Key Tronic Corp., Nam Tai Electronics, Plexus Corp. and Sypris Solutions Inc.; Small index: IEC Electronics Corp., Nortech Systems, Sigma Tron International, SMTC Corp. and Sparton Corp.
EBITDA Margins
4.8%
6.2%
4.3%
Averages:
Section 3: EMS Industry Financial Metrics 9
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13
Mul
tiple
of E
BIT
DA
Large Mid Small
EMS Company Valuations
Enterprise Value / EBITDA
Note: Data sourced from Capital IQ as of the last day of each quarter; Enterprise Value is calculated as market cap plus debt, preferred equity and minority interest less cash; Large index: Celestica, Flextronics, Jabil and Sanmina Corp.; Mid index: Benchmark, CTS Corp, Key Tronic Corp., Nam Tai Electronics, Plexus Corp. and Sypris Solutions Inc.; Small index: IEC Electronics Corp., Nortech Systems, Sigma Tron International, SMTC Corp. and Sparton Corp.
EMS company valuations in general have improved over the last year
Small EMS companies are being valued at new historical averages
Large and small size EMS companies are trading above historical averages; Mid size companies are trading right at historic averages
6.7x
6.7x
4.9x
Averages:
Section 3: EMS Industry Financial Metrics 10
T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O RAMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA
EMS Industry Merger and Acquisition Activity
Section 4
5148
24
46
3229
24
0
10
20
30
40
50
60
2007 2008 2009 2010 2011 2012 2013
# of
Tra
nsac
tions
Total EMS Merger and Acquisition ActivityM&A activity in the EMS industry has decreased since 2010
Transaction volume
Transaction volume equal with historic lows of 2009
Activity is indicative of buyers becoming more selective
Industry unlikely to bounce back to 2007 levels
Section 4: EMS Industry Merger and Acquisition Activity 12
9 98
7
2 2
45
6
10
5
10
2012 2013
# of
Tra
nsac
tions
U.S./Canada Europe Asia Cross-Border (High/High) Cross-Border (High/Low) Other
EMS Merger and Acquisition Activity – by GeographyM&A activity decreased, or remained flat, in all but Cross-Border (High/Low) transactions
Transaction volume by geography
Cross-Border M&A activity between high-cost regions has exhibited the most growth with year-over-year transaction volume increasing 25%
Cross Border activity between high-cost and low-cost regions has exhibited the greatest percentage decrease in activity with transaction volume down from six to zero
Transactions between Asian countries have remained flat
Section 4: EMS Industry Merger and Acquisition Activity 13
13
1514
10
3 1 1
15
7
10
77
1 2 1
8 8
3
5
0
2
4
6
8
10
12
14
16
2010 2011 2012 2013
# of
Tra
nsac
tions
EMS Consolidations OEM Divestitures Vertical/Horizontal Convergences
EMS Divestitures Private Equity Investments
EMS Merger and Acquisition Activity – by TypeM&A activity in the EMS industry has primarily been concentrated within Consolidations and Convergences
Transaction volume by target company category
Consolidations continue to be the main source of M&A activity within the EMS industry
While investment into EMS by private equity is slightly below 2010 levels, Lincoln is currently seeing renewed interest by private equity in EMS
Section 4: EMS Industry Merger and Acquisition Activity 14
T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O RAMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA
Traditional Drivers of Valuation and Current Buyer Trends
Section 5
Traditional Drivers of Value
Drivers Commentary
Margin
Growth
Highest EMS valuations occurred when industry growth rates exceeded 20%
individual companies that can achieve double digit growth rates will attract higher valuations
Difficult to sell a business that is in decline Historically, EMS valuations were not driven by margin due to extraordinary growth rates
As the industry has matured margins have become more important than growth
Average EBITDA margins for high mix providers are 7% - 8%
Premium valuations are given to companies with double digit EBITDA margins
Customers and End Markets
Historically, telecommunications and computing were attractive end markets due to their inherent growth rates
Today, medical, military and industrial end markets are valued due to their customers’ higher margin profiles
Automotive, which was highly unflavored, has returned as a more promising end market due to a higher growth rate and a change in auto OEM behavior to allow their supply chain more profitability
Customer diversity is rewarded over customer concentration
Section 5: Traditional Drivers of Valuation and Current Buyer Directions 17
Capabilities
Historically automated SMT capability was valued
Today, overall complexity of work, level of integration and box build are what drives value
Any unique capabilities add value (e.g. ruggedization, special software integration, etc.)
Engineering capability is also more valued today
Location Historically, globalization was the main driver of value
Today location is important, but value drivers are more varied (e.g. low cost, proximity to customers, logistics considerations, etc.)
Current Buyer Interest Trends
Trend Commentary
Outside Acquirers Looking in the EMS
Industry
Tier I Providers Looking Outside Typical EMS
Industry for Acquisitions
Tier I providers are reluctant to acquire mid-size and small EMS companies due to industry maturity Customers who do business with mid-size and small EMS companies typically do not want to do
business with Tier Is
The need to increase margins to create shareholder value and meet Wall Street expectations is paramount for Tier Is Looking outside EMS for higher margin businesses Looking internally for cost saving opportunities Increasingly building up engineering and IP content
Manufacturers in contracting industries (e.g. defense) are looking for rapid diversification Natel Engineering (leading defense hybrid components manufacturer) acquiring EPIC Technologies
Mechanical products manufacturers within an end market looking to expand capabilities into electronics Duccomun (a mechanical DOD company) acquiring LaBarge A current maker of mechanical components for automobile applications actively seeking companies
with electronics expertise
Companies who dominate a specific niche needing to use acquisitions to achieve external growth Leading manufacturer of micro-electronics for communication applications seeking acquisitions
outside their niche including potential EMS companies
Private Equity Investment Trends
Leverage multiples have returned to pre-recession levels, which combined with low interest rates and unvested capital, make private equity more active and competitive buyers
Fragmentation and relatively low multiples make EMS an attractive industry for the PE model
Mid-tier Consolidations Consolidations were the leading type of transaction in 2013 and are expected to repeat in 2014
Need for scale, geographic expansion and market penetration are driving Mid-tier consolidations
Section 5: Traditional Drivers of Valuation and Current Buyer Directions 18
T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O RAMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA
Long-Term Strategic Outlook: Eliminating the “E” from EMS
Section 6
Valuation of Large Industrial Conglomerates
Section 6: Long-Term Strategic Outlook: Eliminating the “E” from EMS 20
EV / EBITDA Multiples
12.4x
15.2x
12.9x
10.1x
12.7x
9.9x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
Actuant Ametek Danaher EmersonElectric
Teledyne Tech. TE ConnectivityEBITDA Margins
18.2%
26.0%
21.8%19.6%
14.2%
19.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
ActuantCorporation
Ametek Danaher Corp. EmersonElectric Co.
TeledyneTechnologies
Inc.
TE ConnectivityLtd.
EMS Average 5.2%
EMS Average 7.5x
Long Term Trend: “DMS”
Section 6: Long-Term Strategic Outlook: Eliminating the “E” from EMS 21
The 3D vs. Virtual World
“There will always be 3D stuff to build”
EMS companies will convert into Diversified Manufacturing Services (DMS) companies
Jabil: an Emerging DMS Company
Section 6: Long-Term Strategic Outlook: Eliminating the “E” from EMS 21
Focusing the company on engineering and manufacturing “3D stuff”
Acquisition of Nypro, a leading plastics manufacturer
Non-electronics account for 30% - 35% of Jabil’s revenue
Divestiture of Jabil Global Services business to focus company on engineering and manufacturing excellence
T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O RAMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA
Conclusion
Section 7
Key Takeaways Heading Into 2014
Expect favorable EMS M&A environment in 2014
Consolidations will continue
Increased activity by private equity
Big EMS companies looking for diversification outside of core EMS business
Outside companies looking into the EMS market
Every EMS company should think about a DMS strategy
Section 7: Conclusion 25
Bios
Appendix A
T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O RAMSTERDAM BEIJING CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA
Jack CalderonAdvisory ExpertiseJack has extensive experience in advising companies on merger and acquisitions, restructuring, fairness opinions, and other strategic matters. In addition to completing multiple transactions for public company, private equity, and private owner clients, Jack also has experience in cross border advisory work encompassing both Europe and Asia. Jack has led numerous sell-side and buy-side transactions. Jack's advisory work is exclusively focused on the commercial and defense electronics industries.
Industry ExpertiseJack is an expert in the electronics industry. He spent 20 years in various operating management positions in the industry, beginning with Honeywell and culminating as CEO of publicly traded EFTC (now part of Benchmark). Jack is a frequent speaker at industry events and publishes the quarterly EMS DealReader which tracks all transactions in the electronic manufacturing services (EMS) industry globally, as well as the EMS Stock Index. Jack is a former member of the Board of Directors of the IPC which is the global standards-setting organization for the manufacture of electronic products. In addition to the EMS industry, he focuses on interconnects (circuit boards, flex circuits, and connectors), defense electronic products, specialty systems, and design and product repair service providers.
Managing Director
Past AffiliationsPrior to joining Lincoln International, Jack served as Chairman and Chief Executive Officer of EFTC, a publicly traded electronics manufacturing service provider, now part of Benchmark Electronics (NYSE:BHE). EFTC specialized in manufacturing complex electronics primarily for the aerospace industry.
Jack began his career in Honeywell's Aerospace and Defense Group in 1979. In his 20 year operating career, he held a variety of positions with several companies including Program Manager; Vice President of Marketing and Contracts; Vice President of Corporate Development; Vice President and General Manager of Latin American Operations and Chief Executive Officer.
Academic CredentialsJack earned a Juris Doctor degree from The American University, and a Bachelor of Arts degree in economics, cum laude, from Case Western Reserve University.
Role at Lincoln International
Jack leads Lincoln International's Electronics group which includes Electronic Manufacturing Services (EMS), Interconnects, and Defense Electronics. He has extensive operating and transaction experience in defense electronics and electronic manufacturing services. Jack leads deal teams, manages key client relationships and markets the firm's services.
Appendix A: Officer Bio 28
Chaim LubinAdvisory Expertise
Chaim has experience in advising companies on merger and acquisitions, restructuring, fairness opinions, and other strategic matters. His experience includes transactions and advisory services for private equity, Fortune 500, and private company clients. Chaimalso has cross-border transaction experience, providing advisory services for transactions involving German, Japanese, and Spanish companies.
Industry Expertise
Chaim specializes in the electronics and renewable energy industries, though he has also been actively involved with companies in the industrial technology, building products, chemicals, office products, and manufacturing & distribution industries. He has relationships with leaders and active acquirers in the electronics industry as well as with contacts throughout the private equity community. Chaim has a strong understanding of the dynamics in the electronics industry, and a keen sense of what makes companies attractive and how best to position these to potential partners.
Vice President
Past Affiliations
Prior to joining Lincoln International, Chaim worked in public accounting for Feeley and Driscoll, P.C. in Boston. Chaim advised and worked with companies in the technology, construction, healthcare, legal, and manufacturing & distribution industries. Chaim is a licensed CPA.
Academic Credentials
Chaim earned a Master of Business Administration degree from the Kellogg School of Management at Northwestern University, a Master of Engineering Management from the McCormick School of Engineering and Applied Science at Northwestern University, and a Bachelor of Science degree from Boston University with Honors.
Role at Lincoln International
Chaim leads or assists in leading deal teams and is active in marketing the services of Lincoln International. Chaimis a key member of the firm's Electronics and Renewable Energy groups and is heavily involved in executing transactions for these groups.
Appendix A: Bios 25
IPC Validation Services QPL/QML Program Overview
Randy Cherry – IPC Director of Validation Services
EMS Management Council, PCB Supply Chain Leadership, and BZ2
Don’t Let This Happen To You!
You Need a Network of Trusted Sources!
What is Validation Services?– Series of programs that provide auditing and
certification services to companies in the electronics manufacturing industry
– They provide a technical in-depth look at the products or processes in accordance with IPC standards and TM-650 test methods
– These programs provide verification of conformance to IPC standards through 3rd party testing
– Offered to both IPC members and nonmembers
What are the Programs?– Qualified Products List (QPL)
• Three programs based on J-STD-004, 005, and 006 standards
– Solder Flux, Solder Paste, and Solder Alloys
– Qualified Manufacturers List (QML)• Two programs based on J-STD-001/610 and the 6010
series of standards including 600– Acceptability of Soldered Electrical and Electronic Assemblies
and Qualification and Performance for Printed Boards (Rigid, Flex, and High Frequency Boards) including Acceptability of Printed Boards
These Programs Are Not!– Training Certificate
• Having individuals certified to an IPC standard does not mean the facility is certified.
• CIS, CIT, and MIT certificates are weighted heavily
– ISO audit– Nadcap audit– Paper-Based Audit Program
Why is IPC Creating These Programs?– Address members’ needs for verification that
companies can build products in accordance with IPC standards
– Market research (survey) was conducted with OEM’s, EMS providers, and industry suppliers
• 75% of the OEM Manager’s viewed a supplier qualification program as VAUABLE!
– IPC Members are looking for Trusted Sources of Supply!
– How do we offer Value and Fill the Gap that exists today with current IPC programs?
QPL & QML Value AddEMS OEM Products
QPL QML
Enterprise & Product Level Certification GAP
What are the Program Details?– Validation Services certifies the facility, qualifies the
products or processes, and provides a list for industry members to use
– Audits are conducted by trained personnel• Certified to IPC standards and have auditing experience
– Certification is valid for three (3) years– Validation services only uses IPC approved test
laboratories for 3rd party testing– All Proprietary Information is kept Confidential!– Once the program is completed, industry exposure is
provided by IPC through several marketing initiatives
What are the Program Benefits?– Provides source of competitive advantage among
peers– Reduces the customer audit timeline when conducting
external quality assurance audits– Certifying facilities to specific IPC standards– Immediate access to a list of Trusted Suppliers– Online access to conformance information by product
and facility– Exposure to global electronics supply chain via IPC
website– Easy identification of IPC Trusted Suppliers through
IPC branded logos and traceability
Who is Certified?– Indium Corporation of America
• Clinton, N.Y. facility• 1st IPC J-STD-004 QPL Certificate
– IEC Electronics Corporation• Newark, N.Y. and Albuquerque, N.M. facilities• 1st IPC J-STD-001/610 QML Certificate
Who Do I Contact for More Information?– Randy Cherry - CID CIT
• Director of Validation Services• [email protected]• +1 847-597-2806
– Tom Baggio• Director of Business Development• [email protected]• +1 847-597-2814
– www.ipc.org/validation
Thank You For Your Time
The Affordable Care Act—Summary of
Employer Requirements
Provisions—January 1, 2014 Individual mandate—mandates all Americans, with some
exceptions, to maintain a minimum level of health coverage or face a tax
Insurance Exchanges—creates health insurance Exchanges and provides premium tax credits to assist eligible individuals with the purchase of coverage
Medicaid expansion—allows states to expand Medicaid up to 133% of federal poverty level
Employer mandate—mandates employers with 50 or more full-time equivalents to offer coverage to full-time employees and their dependents or pay taxes if an employee obtains Exchange coverage and a premium tax credit (99+ employees delayed until 1/1/2015; 50-99 employees delayed until 1/1/2016)
Individual Mandate
The PPACA requires all American citizens and legal residents to purchase qualified health insurance coverage
In 2014, those without insurance will pay the greater of $95 or 1% of household income that exceeds personal exemption for that year
Starting in 2016, the penalties rise—the greater of $695or 2.5% of income; these penalties apply to EACH family member without coverage
The maximum family penalty is the greater of 2.5% of income or three times the per-adult penalty ($2,085 in 2016)
All penalties are capped at the cost of the lowest-priced conventional plan on the exchanges
Individual Mandate
Exemptions to individual mandate Financial hardship Religious objections (see for reference IRS Sec. 1402(g)(1)) American Indians Those without coverage for less than three months Undocumented immigrants, incarcerated individuals Those for whom the lowest cost plan options exceeds 8% of an
individual’s income, and those with incomes below the tax filing threshold
Exchanges & Individual Market
Coverage must be offered on a guarantee-issue basis in all markets and be guarantee renewable
Exclusions based on pre-existing conditions would be prohibited in all markets
Full prohibition on “essential benefit” annual and lifetime limits in all group (including self-funded plans) or individual plans
Premium rating rules are modified community rating with age-rated bands based on a 3 to 1 ratio
Exchanges & Individual Market
It creates sliding-scale tax credits for non-Medicaid eligible individuals with incomes up to 400% of FPL (can be up to $90,000 for a family of 4) to buy coverage through the exchange
The requirement that the subsidies are only available through the exchange is significant
It is a particular threat to employer plans due to other provisions that allow employees to opt out of employer sponsored coverage
Basic Employer Coverage Rules
Large employers may be subject to an excise tax if— At least one full-time employee whose household income is between
100% and 400% of the federal poverty level Receives a premium tax credit for Exchange coverage and an employer
either— Fails to offer coverage to full-time employees and their dependents Offers coverage to full-time employees that does not meet the law’s
affordability or minimum value standards
Who is a Large EmployerUnder the ACA?
Any employer with 50+ full-time equivalents is considered a large employer IRC §4980H applies to all common law employers, including
governmental entities, churches, tax-exempt organizations with at least 50 full-time equivalent employees
Foreign companies with at least 50 full-time equivalent employees performing work in the US with US-source compensation
Determining Large Employer Status For Smaller Employers
For each calendar month of the preceding calendar year, employers must— Count the number of full-time employees (including seasonal
employees) who work on average 30 hours per week per month Calculate the number of full-time equivalent employees by aggregating
the number of hours worked by non-full-time employees (including seasonal employees) and dividing by 120
Add the number of full-time employees and full-time equivalents calculated in the previous steps for each of the 12 months in the preceding calendar year
Add the monthly totals and divide by 12. If the average exceeds 50 full-time equivalents, determine whether the seasonal employee exception applies
Determining Large Employer Status for Smaller Employers
Seasonal employee exception—IRC §4980H does not apply to employers whose workforce exceeds 50 full-time employees for no more than 120 days or four calendar months during a calendar year if the employees in excess of 50 who were employed during that period were seasonal employees. The 120 days or four calendar months are not required to be consecutive
For purposes of determining large employer status until further guidance is issued, employers may apply a reasonable, good-faith interpretation of the statutory definition of seasonal worker, including a reasonable, good-faith interpretation of the standard set forth under the DOL regulations at 29 CFR 500.20(s)(1)
Determining Large Employer Status for Smaller Employers
DOL regulation 29 CF 500.20(s)(1)—Labor is performed on a seasonal basis where, ordinarily, the employment pertains to or is of the kind exclusively performed at certain seasons or periods of the year and which, from its nature, may not be continuous or carried on throughout the year. A worker who moves from one seasonal activity to another, while employed in agriculture or performing agricultural labor, is employed on a seasonal basis even though he may continue to be employed during a major portion of the year
Who is a Full-Time Employee Under the ACA?
Full-time employee—Defined as an employee who works on average 30 hours per week, per month or 130 hours of service per calendar month
Calculation for hourly and non-hourly employee Hourly employees—Count actual hours served Non-hourly employees—Select one of three methodologies that does
not understate hours Count actual hours Days worked equivalence—Count 8 hours for each day credited with at least
one hour of service Weeks worked equivalence—Count 40 hours of service for each week
credited with at least one hour of service
Who is a Full-Time Employee Under the ACA?
General rule—Employees who are classified or determined to be full time are eligible for the employer’s health plan after the applicable wait period not to exceed 90 days
Safe harbors—Available for part-time, seasonal, and variable hour employees to determine when they are treated as full-time employees
Employer Responsibilities
Employer mandate basics final rule Employers must offer medical coverage that meets new standards to
full-time employees and their dependent children up to age 26. New standards Coverage is “affordable” if employee contributions are less than 9.5% of— Employee’s W-2 wages Employee’s monthly wages (hourly rate x 130 hours per month), OR Federal Poverty Level for a single individual A plan must pay 60% of the
costs of covered health services to be considered as providing “minimum value.”
Employer Responsibilities
Effective for plans beginning in 2015—
50-99 full-time employees—Does not apply 100 or more full-time employees
Employer must offer coverage to 70% of full-time employees
Employer Responsibilities
Effective for plans beginning in 2016—
50 or more full-time employees Employer must offer coverage to 95% of full-time employees
Employer Responsibilities
Transition Rules—Employer Mandate Delay For employers with 0-99 full-time employees and equivalents These employers are not subject to penalties in 2015
Numerous requirements must be met
Transition Rules—Employer Mandate Delay For Employers With
50-99 Full-Time Employees Between 2/9/14 - 12/31/14—Employer cannot reduce size of
workforce or employees’ overall hours of service to get below the 99-count threshold Unless for bona fide business reasons
“Coverage Maintenance Period”—Employer cannot eliminate or materially reduce health coverage it offered as of 2/9/14
Employer will have to certify to IRS that it met these requirements
Transition Rules—Non-Calendar Year Plans
Basic Requirements for All Three Types of Transitional Relief Employer must have sponsored a non-calendar year plan as of
12/27/12 After 12/27/12, employer cannot have modified plan year to begin at
later date Employer must continue to sponsor non-calendar year plan in 2015 Plans beginning in 2015 must offer affordable, minimum value coverage
No Coverage
If an employer fails to provide its full-time employees (and their dependents) the opportunity to enroll in “minimum essential coverage”, and
One or more full-time employees enrolls for coverage in an exchange and qualifies for a premium tax credit or cost-sharing reduction, then
Employer penalty = $2,000 for each of its full-time employees in the workforce (not tax deductible)
Unaffordable Coverage
If the employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage, and
One or more full-time employees enroll for coverage in an exchange and qualifies for a premium tax credit or cost-sharing reduction because The employee’s share of the premium will not exceed 9.5%
of income, or The actuarial value of the coverage was less than 60%, then Employer penalty = $3,000 for each full-time employee who receives a
tax credit or cost-sharing reduction
Other Responsibilities
Notice to current employees and new hires about exchange and subsidies Existence of exchange, services and how to obtain assistance Availability of premium assistance Loss of employer contribution and tax exclusion
for contributions Notice must be provided in coordination with the annual open
enrollment period for the Exchange
More Employer Responsibilities
The value of employer provided health insurance must be reported on W-2’s
New ten-page summary of benefits MUST be provided to employees for open enrollment of group-sponsored plans
Completion of form 5500 will become more complex New requirements on claims and appeals are in place
Questions?
Program OverviewMarch 24, 2014
Supply Chain Risk Management
About NetApp
$6 billion (Fortune 500) Storage & data management 12,000 employees 150+ offices worldwide Fortune’s Best Companies to Work For
Vision
“Implement a Supply Chain Risk Management program that anticipates and mitigatesexposure across our products and supply network.”
3
Incident & Crisis Management
(FY13)
Business continuity planning
Crisis management & threat monitoring
Some level of mitigation
NetApp’s SCRM Evolution
Effectiveness and Impact
Org
aniz
atio
nal E
ngag
emen
t
Proactive Risk Management
(FY14) Further BCP assessment
BOM, supplier, & tooling assessment
Matured mitigation and enterprise metrics
Resiliency Management
(FY15+)
SC & HW design for resiliency
Resiliency embedded in processes (NPI & sustaining)
4
Elements of SC Risk Management
Key Elements of Supply Chain Risk Management
• Assess & mitigate risks through upfront sourcing strategies
• Anticipate supplier disruption through predictive tools
How Risk Enters Supply Chain
Iterate
• Real time monitoring for rapid response• Quickly assess potential impact• Playbook for decisive execution• “War games” to ensure organizational readiness
• Map potential impacts to:– Programs– Customers/bookings pipeline– Enterprise
Internal Decisions
Component SelectionSupplier Selection/Mgmt
Tooling Investment
External EventsNatural DisasterPolitical UnrestSupplier Failure
Supply Base Consolidation
Risk ImpactsContinuity of Supply
Cost Trends
5
Risk Monitoring & Resiliency
(real-time)
Supply Chain Mapping
(portal)
BOM SUPPLIER Tooling
“What is the $ impact, for x disruption, for n weeks?”
• Financial alerts• Natural disasters• Disruption at site
Site monitoring
Internal playbook
What-if scenario
(snapshot)
BOM SUPPLIER
ProductAssessment
(portal)
• Financial health• Quality• Delivery• Contracts• BCP
“How robust is the product and its supply chain?”
BOM risk assessment
BCP assessment
Financial health
TOOLING
6
Risk MonitoringIncident Management
7
9/11 Hurricane Katrina
Hurricane Ike
Global Recession
Egyptian/N. African Conflict
Thailand Floods
Dot Com Bubble
Indonesia Tsunami
Political Unrest
Chengdu Earthquake
EU Volcanic Eruption
Japan Crisis
01 130704 1002 03 05 06 08 09 11 12
The “Why”: Disruption Unpredictability
India Power Outage
14
Thailand Political Unrest
Incident Monitoring
Real-time incident & threat monitoring for NetApp supplier sites– Natural disasters– Geopolitical unrest– Health / pandemic– Man-made disasters– Terrorism, etc.
Redundant tools / team– 24/7 staffed monitoring team (Security group in SVL, RTP, Bangalore)– Automated alert notifications– Scalable, and customizable
Initial coverage: 95% global supplier sites
9
Case (Typhoon Usagi Sept-2013)Background: • 9/18/13 category 5 storm tracked by NetApp security group.• 9/19/13 Typhoon alters course and points toward Taiwan. • 9/19/13 NetApp SCM receives warning (2 days in advance).• 9/19/13 NetApp SCM coordinates with EMS to execute mitigation plans. • 9/20/13 EMS arrange for immediate logistics to avoid disruption.
NetApp security monitoring
NetApp SCM action
Result: • EMS was able to ship product prior to transportation lanes being affected, resulting
in zero impact to NetApp.
10
ResiliencyProduct Assessments
11
Product Resiliency Framework
• Align on Risks
• Prioritize
• Approve
• Execute
• Improve / Control
• Sourcing• Lifecycle• Environmentals• Availability
• BCP• Contracts• Financial health• Revenue impact• Performance
• Likelihood• Occurrence• Recovery time• Impact
12
Resiliency Assessment Philosophy
RESILIENCY INDEX
HIGH
LOW
1
3
5
7
10
CO
MP
ON
EN
T / B
OM
HIGH
LOW
1
3
5
7
10
SU
PP
LIE
R
HIGH
LOW
1
3
5
7
10
TOO
LIN
G /
EQ
UIP
ME
NT
13
Component / BOM Scoring
HIGH
LOW
1
3
5
7
10
CO
MP
ON
EN
T / B
OMLIFECYCLE
AVAILABILITY
SOURCING
ENVIRONMENTAL
DESIGN / QUALIFICATION
• Part lifecycle stage• Program end date
• Part lead time• Worldwide channel inventory (6 mos)
• Sole, single, multi-sourced• Supplier geo/site
• Part compliance (RoHS, REACH, Conflict Minerals)
• NetApp design status for part• NetApp qualification status for part example
14
Supplier Scoring
HIGH
LOW
1
3
5
7
10
SU
PP
LIE
RFINANCIAL
BUSINESS CONTINUITY
CONTRACTS
PERFORMANCE
• Debt, NI, current ratio, WC, equity, Frisk, payment• Monthly trending (2 yr history)
• Currently “on file & assessed, on file, not on file”• Assessment for robustness with scoring
• Currently “on file, not on file”• Assessment for protection with scoring
• Limited to QBR/BBR suppliers (TQRDC)• Expanding to EMS controlled suppliers *
*note: EMS controlled supplier performance data may be limited to quality & delivery data
example
15
Tooling / Equipment Scoring
HIGH
LOW
1
3
5
7
10
TOO
LIN
G /
EQ
UIP
ME
NT
RECOVERY TIME
LIKELIHOOD
OCCURENCE
IMPACT TO REVENUE
16
Case Background: • Initial assessment for program• Cadence: 3 phases
Pre-pilot• Pilot• RTS
• Components assessed: 914• Component risk: 17 high, 42 med
• Suppliers assessed: 65• Supplier risk: 1 high, 1 med
• Developed XX mitigation plans with SCM & Engineering
Results: • Engaged with 2 med-high risk suppliers and closely monitoring financial performance• Partnered with EMS to qualify additional sources for single & sole sourced components• Partnered with EMS to secure inventory on highest risk supplier and components
17
Backup
18
BOM / Component Assessment(example)
return
19
Supplier Assessment (example)
return
20
Financial Assessment
Current Process Manual Z-Score + DnB As-needed Reactive Point in time Not scalable
Future Process Automated Multiple elements Monthly Predictive Point in time + trend Scalable
Financial risk assessment team has developed an automated financial dashboard solution
21
Dashboard Output
22
Process Flow
Financial Dashboard Output (w risk
levels)
Quantitative Risk Level
Monitor on Monthly Cadence
WatchlistCredit Assessment
LOW RISK
REPEAT
Add to Watchlist YES
NO
MEDIUM / HIGH RISK
REMOVAL
23
Supplier Watch list (concept)
Financial Watch list
24