Scott Alyn is a rare breed of businessman. Instead of succumbing to foreign competition, he fought back and seems to be winning. Faced with a drop in revenues and laying off workers at his printed circuit board assembly company, Alyn had to come up with a game plan beginning in 2001 when competition heated up. So theVan Nuys businessman began to make changes to how the company operated diversifying its customer base, buying new equipment, providing new training so that it could better face the challenges coming from overseas companies. Today, Electronic Source Co. employees 65 people and is looking at nearly $900,000 in revenues for the first quarter of 2006. “We don’t compete on price,” said Alyn, who founded the company in 1994. “We compete on quick turn around and with quality produced in conformance to specifications.” Where five years ago ESC did 80 percent of its work for only two telecommunication clients, it now has expanded to 18 clients from the telecommunications, defense and aerospace, automotive and medical fields of which none has more than 25 percent of the company’s business. When the company was struggling five years ago, market diversification became its mantra to get back on its feet, Alyn said. “The hope was for a comeback and the same customers would come back,” Alyn said. “But in 2001 there was recognition there was a shift and it wasn’t coming back.” To compete in the global economy, companies need to go after niche and specialized markets that don’t tend to ship their work overseas, such as defense and medical fields, said Tony Hilvers, vice president for industry programs for IPC, an international trade association for the printed circuit board and electronics assembly industries. “In looking at other markets, ESC was being prudent and it was a good step,” Hilvers said. China competition The competition that the electronic manufacturing service industry faces comes primarily from China, whose second largest exporting item is electronic components, according to a study by the Organization for Economic Cooperation and Development. China had relied on the United States and European countries for its electronic components but in recent years now uses other Asian countries, including Japan, Chinese Taipei, Korea and Malaysia, the study said. In 2004, China overtook the U.S. as the world’s leading exporter of products such as laptop computers, digital cameras and mobile phones, the study said. Another move that makes the company more competitive was Alyn’s investing $400,000 in a “chip shooter,” a machine that places up to 53,000 components per hour onto the circuit boards, “What this does for us is if a board is laid out in a way so it’s automatically built we can approach off-shore level pricing,” Alyn said. Alyn said he has spoken with sales people who represent foreign companies, and was told those companies look for work that can be done “Their competitive advantage diminishes close to nothing when it’s all automated built,” Alyn said. “I had one off-shore rep tell me ‘We’re not looking to drag race with the chip shooters.'” The third approach used by Alyn was to have his employees certified to create circuit boards that meet the rigid standards set by the International Aerospace Quality Group in order to qualify for use in the aerospace industry. The company has an in-house instructor who provides the certification training, Alyn said. Spending the time and the money on the certification is a signal to customers that the ESC wants to have a well-trained workforce, Hilvers said. A study done by IPC found that a key to the profitability of electronic manufacturing service companies was the quality of their products, Hilvers said. “ESC by having the certified program and certified instructors for training are key steps to that quality,” Hilvers said.
