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Leading IMI to a billion by 2011

Posted: 06 May 2008 ?? ?Print Version ?Bookmark and Share

Keywords:IMI CEO? EMS? Philippine electronics?

Arthur Tan, IMI President and CEO

In 2006, Arthur Tan, president and CEO of Integrated Microelectronics Inc., announced that IMI would be a $1-billion company by 2011.

Two years since that announcement, while in the middle of worldwide pessimism in the chip industry and the economy as a whole, Tan is asked if this remains his goal, and he smiles and replies, "I still have time."

IMI is a global vertically-integrated electronics manufacturing services provider that touts itself as the "Flexible Experts." Based in the Philippines, IMI has five production facilities in the country, plus five in China, one in Singapore, and a prototyping and new product introduction (NPI) facility in the United States. Also, IMI has engineering and design centers in these countries and Japan, and strategic alliances with other global EMS companies.

Vertical integration
Tan explains that vertical integration for IMI means that the company can engage with an OEM and say that "After you've decided what you want on your product, we can actually take care of the process to the point that we'll even take care of your warranty services."

One strategy used by IMI in order to offer complete vertical integration is the development of platforms. Tan clarifies that the effort of developing a platform is almost the same as developing a product. If they develop a product, however, the customers might think that they are taking on the Taiwan ODM model and will "eventually become their competition." This is not something they want customers to think. The development of a platform is very important because, Tan explains, if IMI waits "until a customer develops a product before achieving the capability for manufacturing the product, there would be a lag." So from the beginning they do R&D to develop a platform and Tan says "by the time their product is ready, our manufacturing capacity is already there."

One important aspect of the relationship between IMI and its customers that enables them to develop platforms in line with the customers' needs is that IMI "spends time studying our customers' markets and their business," says Tan. "We exchange road maps. We tell them what our goals are in terms of business, technology and manufacturing capabilities and they give me roadmaps of their product families and where their business is going."

By the time a customer approaches IMI with a new product, IMI can show that it has done similar work and the customer can say "I know you can build it because you've shown that you already understood what the requirements are." And these are what the platforms are, explains Tan, not the product, but the capability to manufacture a product. "You can't buy it in a store."

IMI offers its platforms to all its customers: IMI will customize a platform to suit a customer's product, and then the customer will own the product. There is no conflict of interest.

And the strategy is working to keep relationships strong. "The average tenure of IMI customers is seven to eight years. We have customers that have been with us for 25 years, and these are tier one customers," reveals Tan.

These customers have provided IMI with a CAGR of 39 percent from 2002 to 2007, way over the industry CAGR of 13.5 percent. By nationality, revenues come from Japan, 48 percent; the United States, 21 percent; Europe, 18 percent; and the rest of Asia, 13 percent. "It's actually a unique position, because we are probably the only non-Japanese EMS company that has this level of a customer base," notes Tan.

Industry recognition
These customers have also boosted IMI to grow from 7,000 employees in the Philippines in 2001 to over 15,000 employees in the country in 2007 and about 10,000 more globally.

Customer satisfaction is also reflected in the recognition of IMI by the industry. The company is ranked number 27 in Manufacturing Market Insider's list of top 50 EMS companies, and it is the recipient of the 2007 Service Excellence Award for highest overall customer rating from Circuit Assembly. Beyond the industry, IMI has been dubbed as one of ASEAN's 12 most admired companies.

The company's success has been achieved by its value proposition: Delivering flexible, customer-focused, integrated electronics solutions of the highest quality and effectivity in a cost-effective manner. "We won't be able to do this for everybody," Tan qualifies. "We are very selective [of the] partner of choice we do it with, but when we do it, we do it wholeheartedly."

So much so that, according to Tan, customers "feel that IMI is a competitive advantage to them."

IMI sees opportunities in emerging applications for electronics in the automotive, industrial and medical industries. Tan points out that although the growth in those markets is only in the single digit, "but if you look at the growth of the electronic content that goes into those markets, it's in the double digit in the next five years."

The company is also focusing on green technologies, particularly on renewable energy. Tan explains that "more and more we will find that in order to capture efficiently and effectively the different types of renewable energy, inevitably you need electronics to run it. That's where we come in." Tan further clarifies that IMI has the capability of taking the design and increasing its efficiency and reliability.

A third area of growth for IMI is its original customer: the Japanese OEMs that are still highly integrated.

Strategic initiatives
IMI has four strategic initiatives. IMI is targeting market leaders and more complex products so cost structure is, according to Tan, "not dictated primarily by the low cost of the labor component but really the brain power that goes into a particular product." IMI is also enhancing design and engineering, and supply chain management. It is "capitalizing on its Japanese and European partners," says Tan, and continuing geographic expansion to answer the "need for a global footprint in order to serve all the different submarkets."

Geographic expansion, not just of IMI but of the Asian industry as a whole, is providing IMI with a key advantage over other EMS providers. China companies, for example, need to expand their markets and ship products to the United States and Europe. However, the mentality in China is that when products are already in the customers' hands, the manufacturers have nothing whatsoever to do with it anymore. This doesn't work in the United States where customers expect, and demand, after-sales service, if not product replacement or return. IMI operates under the premise that even when a product leaves their hands, it is still theirs until the customer is satisfied. This is where manufacturers in China and the rest of Asia have to make a transition. This is something that IMI understands. Tan shares the example of a leading China telecommunications network provider. "There are a thousand other subcontractors in the five-mile range where we operate that they can get cheaper. They decide to build with us." This is because IMI can help customers "cater their goods to world standards," according to Tan.

Understanding worldwide standards also comes in handy with the convergence that is happening in the industry. Different technologies are being used in different applications, oftentimes wirelessly. Tan describes the car environment as an example. "The last thing you want to do is you're on the cellphone and your brake doesn't work, or every time you send a text message your lights turn off." Other electronic applications also impact their environments, such as a washing machine in a hospital, and laptops in airplanes. "More and more companies are now figuring out that it's not just a matter of being able to build a screw, solder a horn." Tan emphatically states that it is vital to understand "where a product is going and what to build, and how to build it." He adds, "That's where we come in. We understand."

Going back to the question of the 2011 goal, Tan confidently answers: "Do we feel we can reach a billion by 2011? Maybe even before."

- EE Times-Asia





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