Tag Archives: Flextronics

The Rush to Russia

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Timing is everything, isn’t it?

On the same day IPC named an official representative for Russia, calling it “a market with enormous growth potential,” a leading research firm basically threw in the towel on Putinland.

“Russia now is facing a cessation of new investment, along with shutdowns in existing facilities and delays in new ones,” iSuppli said in a press release today. The firm pointed to aborted attempts by Foxconn, Flextronics and others in trying to get operations there up and running, and noted that while Elcoteq has been building in the country for years, its investment there has been so unprofitable, the telecom EMS tried in vain to find someone to dump it on and finally decided to shut it down.

In its announcement of Yury Kovalevsky as its official representative to Russia and Russian-speaking countries, IPC said the appointment is part of a “long-term plan to expand services and standards globally.” Kovalevsky, IPC said, will make IPC services “widely available to companies in Russia, a market with enormous growth potential for both electronics manufacturing services and printed board production.”

That comes as news to iSuppli.

I’m not saying one side is right and the other is wrong. By outsourcing translations and distribution of its standards, IPC can position itself to make money even if the market doesn’t materialize any time soon.

But it’s hard to escape iSuppli prinicipal analyst Adam Pick’s damning statement: “With the ongoing recession and financial crisis, however, it appears that most of the interest in penetrating the Russian market has disappeared. Furthermore, the historical record for electronics manufacturers operating in Russia has been plagued by multiple problems.”

Pick ticks off a series of reasons: the Russian economy; social and political issues; tariffs and value-added taxes; shifting policies and laws; slow material supply chains and a lack of electronics supply chain infrastructure; inefficient distribution; Russian mobs; counterfeiting rates so high it would make the Chinese blush.

On the other hand, in market terms, IPC is probably buying low. Like I said, timing is everything, right?

Plexus Delivers, Again

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Plexus this week reported December quarter revenues were flat with last year’s, which for this market counts as a huge win, as most top tier EMS firms saw revenues drop 3% or more. The world’s 10th largest EMS company also turned a net profit, making it a rarity among its large publicly traded competitors.

It’s a testament to the company’s wisdom years ago when it decided to forego chasing revenues in favor of concentrating on the higher margin medical, military and aerospace markets. That foresight, coupled with solid execution, has put Plexus at the forefront of its peer group.

All of which justifies Circuits Assembly’s selection of Plexus as its 2008 EMS Company of the Year.

As markets turn down, EMS companies historically reach for any piece of business they can get to keep factories full. This means new competition. This week, for example, Flextronics chief executive Mike McNamara said the company is “very bullish” on the medical end-market, adding “more and more outsourcing opportunities are coming out of this environment. And it is an industry that is very reasonably new in terms of outsourcing. We think that is a big upside.”

Things aren’t going to get easier in Neenah. But we think the company remains the best-positioned to survive this cold winter.