The establishment of Flextronics International Ltd’s laptop design center last month in Banciao (板橋), Taipei County, creates advantages for both the company and its customers, Sean Burke, president of Flextronics’ computing segment, said in a recent telephone interview.
The Singapore-based company decided to settle in Banciao because it is a prime location for the firm’s current and future employees in terms of proximity to MRT stations, retail stores and restaurants, Burke said. Also, with the new building, there would be room for expansion if needed, he said.
Most importantly, “this particular location is of the right cost structure. It’s close to the majority of experienced notebook engineers we intend to hire, as well as to many notebook component suppliers and partners we currently work with,” Burke told the Taipei Times.
PHOTO: LI YI-JU, TAIPEI TIMES
Flextronics, one of the world’s leading electronics manufacturing services (EMS) providers, plans to hire up to 1,500 engineers over the next couple of years at the Banciao facility, which is aimed at providing design, research and support services for its clients.
The company, however, has no plans to “steal talents from other contract makers,” such as Quanta Computer Inc (廣達電腦), Compal Electronics Inc (仁寶電腦) or Hon Hai Precision Industry Co (鴻海精密), Burke said.
Already, the Singapore-based company has operations in Wugu (五股), Taipei County, and Jhongli (中壢), Taoyuan County. The new Banciao facilities expand Flextronics’ presence in Taiwan by adding an emphasis on the notebook computer sector.
“Flextronics has long recognized the importance of establishing a strong computing presence in Taiwan because it is the hub of many of the leading PC original equipment manufacturers [OEMs],” Burke said.
Flextronics, Hon Hai’s biggest rival in the EMS business, has made three acquisitions in the past three-and-a-half years, including the purchase of the PC and server manufacturing business of Arima Computer Corp (華宇電腦) for more than US$192 million in 2007 to strengthen its research and development (R&D) capabilities.
That acquisition alone bought Flextronics more than 600 Taipei-based R&D employees, Burke said, adding that the company’s strategy for completing its manufacturing chain was well thought out.
“We are strengthening and growing in what we’ve acquired. Similar to Hon Hai’s vertical integration, we are providing laptop components directly from inside the company, such as motherboards, printed circuit boards, touch pads, camera modules, power supply adapters, plastics and even metal,” Burke said.
Thus, Flextronics will be able to lower overall costs to its customers as well as provide products faster to market, he said.
Despite the decrease in information technology (IT) spending over the past nine months, Burke foresees a bright future for notebooks and netbooks as global consumers opt for mobility away from their desktops.
“We see stable demand in the second half due to seasonality in both commercial and consumer spending,” he said.
Moreover, as Intel Corp rolls out new processors that save energy and increase processing power, new demand will emerge because more companies will retire old equipment and data centers to embrace newer technology, he said.
Lately, Flextronics has heard a lot of discussion on alternative architecture, such as Linux or Google Inc’s Android operating system (OS).
However, Burke said he had seen no increase in orders catering for these platforms.
“Maybe [we will see more orders] one year down the road, but currently they are ... not ready for the mainstream consumers,” he said.
The current focus remains Intel-type processors with Windows OS, or non-Intel CPUs with Windows, he said.
Global research firm IDC said last month that the PC market was rebounding as consumers took advantage of lower prices and bought more laptops. Burke said, however, that the laptop segment of the PC market was pretty complex, and the increase in netbook sales was lowering that of regular notebooks.
“In this economy, we do see people being more value conscious. We have also seen our netbook business growing at 16 to 20 percent quarter-on-quarter, as netbooks currently comprise 8 percent to 10 percent of revenue share for the computing segment,” he said.
Burke said the most promising segment was the low-priced notebooks that sell for between US$500 and US$900.
On the other hand, the high-end, gaming-supported laptops with price tags of between US$1,500 and US$6,000 per unit are also very popular, he said.
However, as margins shrink, Flextronics actually saw its profit margin turn red in the three months ending on July 3, when it posted a loss of US$154 million. However, Burke remains optimistic about the company’s future. He said Flextronics was no stranger to this type of thin-margin competition and the company would squeeze out a profit through volume production and from the vertical integration process.
Without giving any sales guidance in the notebook segment, Burke said his department’s revenue would come from high volume shipments, adding that he saw a future unit growth rate double that of the market average.
During the interview, Burke did not confirm market speculation that Flextronics was aiming for double-digit annual growth rates on notebook shipment and revenue by next year.
He said that in order to achieve these milestones, “Flextronics intends to increase its scale, improve upon current cost structure, and leverage integration of existing complimentary processes.”
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