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Celebrating our 12th consecutive year!

The 12th annual Fleck Connection Congress was held November 6-8, 2000, at the Paradise Point Resort in San Diego, California. The event was sponsored by Fleck Research and Global Connections, divisions of Global Connector Research Group.

The conference, which included five interconnect industry workshops, was attended by over200 of the industry's senior executives.

This issue of the Fleck Report summarizes 16 of the pertinent issues and topics addressed by the senior executives who were speakers at FCC.

2000 FCC Speakers (Listed in Presentation sequence)

This year’s distinguished group of industry executives was composed of the following speakers, listed in order of presentation:

Summary of 16 Pertinent Issues & Topics

Only brief summaries of the 16 pertinent issues and topics presented by the industry executives at FCC 2000 are presented below. Speakers provided significant insight related to business, market, products, manufacturing processes and technology.

Since remarks made during the respective speeches were, in many cases, "off the record," only attendees at FCC were exposed to this expanded data.

The 16 pertinent issues and topics are summarized below in the same sequence as the speakers on the program.


Fleck Research — Industry Review & Forecast

Fleck Research noted that the industry made significant advances in nearly every sector of the world in 2000, with only Europe in decline, at 3.9%below its 1999 figures. North America gained 10.4%, Japan 14%, the Pacific Rim 15.5% and the rest of the world (ROW) 6%, contributing to a worldwide increase of 10.2% from $36 billion in sales to just under $40 billion.

Among industry segments, the greatest advances were made in the communication (16.9%), datacom (15.8%) and telecom (12.4%) industries, Fleck reported.

The industry's driving forces were backplane systems, which registered a 37.3% gain; fiber optic shelves and racks, at 31.1%, and backplanes, at 24.3%. Connectors were up 9.5% and cable assemblies at 8.7%.

Fleck outlined 10 high-growth sectors responsible for driving positive growth in the year 2000. These were fiber optics, optical backplanes, backplane systems, electromechanical subsystems, high-speed connectors, high-density connectors, CATV/broadband, wireless, telecom and datacom. These accounted for $19.7 billion, or 44% of the industry.

For the year 2001, Fleck forecast the industry moving from $39.7 billion worldwide in 2000 to upwards of $43 billion, a gain of 9.1%. Driving forces for 2001 include high-speed connectors, increasing 30.8% to $2.4 billion; fiber optics, up 25.4% to $5.5 billion, and wireless, gaining 22.1% to $3.8 billion.

Further in the future, Fleck predicted that 10 high-growth sectors will drive the connector industry to $88.9 billion by 2010. New business models will be required in the industry, he concluded.

Tyco Electronics — a Global Presence

Gregory C. Johnson, vice president for North America and Global Communications at Tyco Electronics, identified several market dynamics faced by the company, including "faster, cheaper and increasing performance and value."

Manufacturers "almost have to have factories on wheels and do as much as we can in one central location" to service the far corners of the world, Johnson declared. His performance goals included improving time to market, a "maniacally drive for lower costs," investment in new product development and maintaining of a nimble mode of operations.

"A global presence is a requisite for doing business today," Johnson pointed out. Succeeding in today's environment, he added, also involves strong talent, a broad product offering, focus on costs and financial strength.

Tyco Electronics can be divided into two sectors. The first is non-connector-related product lines, such as transceivers, multiplexers, relays, switches and sensors among others. The second sector is composed of connectors, cable assemblies and backplanes, which will reach $6.5 billion in 2000..


Flextronics — Aggressive Acquisitions Key to Success

The rapid success story of Flextronics — from a ranking of 22 among contract electronics manufacturers in 1993 to number two in 2000 — was detailed by Warren Teissier, vice president of strategic development for the $12 billion global EMS provider.

"We're not competing against other companies," Teissier declared. "We're competing against time. And in this business, it's not the big companies that eat the small, it's the fast companies that eat the slow ones." The company now ranks only behind Solectron among CEMs and is growing on the OEM-driven outsourcing trend as well as aggressive acquisitions.

Flextronics, which has over 70,000 employees worldwide, operates over 100 manufacturing sites in 27 countries with operations in the Americas, Europe and Asia/Pacific. Its industrial park strategy enables the lowest-cost manufacturing, Teissier noted.

"Our world-class capabilities have been proven to positively impact time-to-market, reliability and cost," he continued, pointing out that 40% of the company's revenue comes from products impacted by Flextronics design. The company has over two million square feet of manufacturing capacity and is expanding production rapidly. .


3M — a Century of Diversification

Examining the role of innovation in the connector industry, 3M's John Woodworth, general manager of the company's Interconnect Solutions Division, pointed out that the company established as Minnesota Mining and Manufacturing now is nearly a century old. The multibusiness company is "knitted together by common platforms that provide fundamental competitive advantage," he noted.

These platforms, Woodworth said, include shared world-class technology, shared customers, channels and brands, shared global infrastructure and a culture of innovation. 3M, he pointed out, possesses the unique ability to create businesses with premium positions in a variety of industries.

A major change at 3M this year, he observed, was the March split of 3M's Electronic Products Division into two separate divisions, EPD and ISD (Interconnect Solutions Division). The latter unit includes such product segments as board mount interconnect, wire mount interconnect, cable, fiber optics, low-frequency interconnect assemblies and transmission line assemblies.

"3M's Interconnect Solutions Division" is committed to developing a trusting and long-term relationship with our customers that will be value and benefit-based," Woodworth stated, "delivering point of access to multiple technology platforms and material solutions, experienced global resources for solution design-in to maximize customer productivity and market advantage, new and innovative product platforms, highest reliability products and superior, industry-leading customer service."

3M has a major focus on advanced research, tracing back to the development of TAB (tape automated bonding). Their innovation spans Level 1 interconnections, high-speed connectors, fiber optics, burn-in and test sockets, to name but a few..

eConnections — Demand Mandates Innovation

"The challenge for everyone," declared Robert Rodin, chairman and CEO of eConnections, "is to get the right product to the right place in the right time in the most efficient way." Rodin, who spoke on the future of supply chain management, identified six forces at work in the industry—the network explosion, globalization, the war for talent, product life cycles being super-compressed, build to order and supply chain management.

"Acquisition are out of control," he said, "and are being driven by the voice of the marketplace. The bar of the customer's insatiable demand is being raised every minute." The breakthrough idea, he stated, is designing for the supply chain. Two products may look alike, but the supply chains that deliver it are so different that the economic models are almost unrecognizable.

It is the supply chains, not the companies, which now are competing, he noted. Rodin's eConnections optimizes by "moving, reducing and eliminating steps for the industry," he declared. "These are direct, authorized connections. eConnections doesn't touch parts and never will," he said.

"Time is the currency of the future. When you minimize work, you maximize time. You can measure the amount of time saved in the amount of market share gained," Rodin stressed. "We all must change; the market will demand we find ways to do it. Solutions may not be easy, but as John Wooden (the UCLA basketball coaching legend) said, failing to prepare is preparing to fail."

The connector industry is increasingly carrying out transactions through the Internet. Rodin believes that 80% of all transactions by the connector industry (engineering specifications, locating specific products, selecting suppliers and placing orders) will occur within three to five years..


Volex — The World's Largest Independent CEM

Volex, according to its president, Thomas Hagan, is the largest independent producer of electrical and electronic cable assemblies in the world. The company provides global support to the world's leading producers of data and telecommunication systems and builds products for consumer electronics and appliances for transportation and for defense, aerospace and industrial applications.

The company, headquartered in England, operates 30 manufacturing plants and 30 sales offices in 19 countries around the world with a total of 13,100 employees. In the United States, Volex is represented in Massachusetts, Indiana, North Carolina, Arkansas and California.

"There are increased opportunities for global suppliers that can create value," Hagan stated, noting that the pace of technological change is increasing. "Products change early and often," he commented, and there is a large requirement for new product introduction and design support.

Volex is involved in myriad industry segments, including power products, wire harnesses, RF products, networking products and fiber optics. Hagan declared that Volex will "continue to invest in technologies and capacity, particularly RF and fiber optics, that have the largest potential for growth."

Volex will produce nearly $500 million of electronic cable assemblies in 2000, excluding power cords..

Cisco Systems — Riding the "Tornado Market"

"The Internet is changing every aspect of life, creating new opportunities for business, and it's happening at unprecedented speed," declared Bill Bender, Cisco Systems' strategic commodity manager. "There are now 300 million Internet users worldwide with over 3.2 billion Web addresses."

The e-commerce explosion, Bender noted, has just begun. The Internet revolution is leveling the playing field between companies and countries around the world. "It's not about the big beating the small," he emphasized. "It's about the fast beating the slow."

"At Cisco," he noted, "the Internet is at the center of everything we do. Cisco's history is tightly linked to the rapid growth of networking and the Internet." Bender pointed out that Cisco went public in 1990 and has been one of the best-performing stocks. "If you'd invested $1,000 in Cisco 10 years ago," he said, "you'd be a millionaire today."

Service providers have been the real "tornado markets" of the past few months, Bender declared. "Cisco is very bullish on its growth plans—we may become a $50 billion company in the next year or two." He noted that one of Cisco's highest priorities is 0optical networking, which "dramatically changes the economics of networking."

Cisco has become one of the top 10 OEM accounts for the connector industry in 2000. Their purchases will be about $350 million..


Delphi/PHI — A Presence in Every Region of the World

William S. Jensen, president of the Connection Systems division of Packard Hughes Interconnect, traced the evolution of Delphi from the creation of General Motors' Global Automotive Operations in 1988 to the company's eventual independence in 1999. The company, he noted, is the world's largest and most diversified automotive supplier which has its roots in the 1890 incorporating of the Packard Electric Company, which led to the Packard automobile.

"Delphi is growing business outside of GM at a rate of 10% per annum and has a presence in every region of the world with its vast product portfolio," Jensen commented. He pointed out that in 1999 Delphi booked $33 billion in new business—of which $9 billion, or 27%, was with customers other than GM.

The company employs over 16,000 engineers, scientists and technicians worldwide, with an engineering investment amounting to 6% of sales. Delphi holds 5,500 worldwide patents and has 149 major products under development for introduction this year and next. The total worldwide employment is well over 430,000.

Delphi's 1999 sales revenues were divided among dynamics and propulsion ($14 billion), safety, thermal and electrical architecture ($10.3 billion) and electronics and mobile communications ($4.9 billion). "Our connection systems are the linking technology to physically integrate wiring, flexible circuits, switches, electronic products and devices for complete power and signal distribution capabilities," Jensen stated.

Delphi, following the IPO last year, became a non-captive supplier, competing just like any other manufacturer for the General Motors car and truck divisions' business. As a result, Delphi, for the first time, was counted as a non-captive supplier. Delphi, coupled with PHI, became the number-four worldwide supplier in 2000, with approximately $1.2 billion in worldwide revenues.

Sun Microsystems — Rapidly Increasing Board Density

Keith Newman, a senior staff engineer at Sun Microsystems, outlined his company's focus on ASIC products. "Most companies appreciate our input because it's based on product needs, not marketing objectives," he said.

"The two main categories at Sun are density and performance," Newman stated. "Sun looks at products for density and performance across all its product lines. There is intense competition. Our largest competitors are Hewlett-Packard and IBM, which keep us on our toes at all times."

Newman acknowledged that Sun "has been really slow in introducing new products." The company lets its suppliers know as early as possible what it's doing, and the maximum lead count trend steadily increases.

"Sun has been undertaking studies for a number of years looking at fine-pitch devices," he said. "We probably will use some of these in memory applications." The company also is looking at lead-free applications.

Sun Micro is one of the innovative technology leaders in next-generation packaging. Newman outlined the basic elements of Sun's technology road map, which specifies larger numbers of I/O, finer pitches and advanced packaging..


Lucent Technologies — An Emphasis on Communication

Bruce Bernier, senior manager for wire and cable at Lucent Technologies, pointed out that Lucent is selling or spinning off other business segments to place more emphasis on communications.

The company spun off its former Lucent Enterprise Network Group to shareowners of Avaya in September and expects to sell its power systems business by the end of December (editor's note: Tyco Electronics acquired Lucent's Power Systems business in late November). By the summer of 2001, Lucent expects to spin off its microelectronics business—including the optoelectronics components and integrated circuits divisions—into a separate company that will be the world's leading provider of communications semiconductors.

Bernier noted that Lucent is expected to reduce its supply base by 50% in 2001 and create a cost-competitive and profitable business in supplier alliances, sharing information "so that our alliance partners know as much or more about our business as we do."

Lucent, Bernier declared, intends to migrate its wire/cable and cable assembly business from a locally managed business to a globally focused strategy that integrates the strategic suppliers into a long-term relationship with the goal of creating value both for the supplier and Lucent.

Lucent is among the top OEMs who purchase the highest dollar value of connectors, cable assemblies and backplanes annually. In 2000, total procurement will reach $1 billion..


Lucent Technologies — Communications Fueling the New Economy

"Communication fuels the new economy," declared Carmen Sidbury of the Lucent Technologies' technical staff, pointing out its applications in homes, buildings, computers, wireless, smart cards, handheld devices, smart vending, entertainment devices, intelligent transit and smart appliances.

She noted that with a self-reinforcing system driving exceptional market and network growth, an efficient transport network infrastructure is essential to keep pace. Network traffic and fiber capacity are accelerating while costs continue to decrease.

"The global market forecast for fiber optic connectors is $1.4 billion in 2002, rising to $2.48 billion by 2005 and soaring to over $5 billion by the year 2009," Sidbury commented. End users must choose the best-performing connector in the marketplace, she said, and cabling infrastructure is a 10 to 20-year investment that will support multiple generations of electronics.

The market, Sidbury pointed out, is expanding and changing rapidly and new designs must be available quickly. The optical component market is sustaining a 40% to 70% of annual growth and will reach $5 billion by the end of 2000 and approach $23 billion in 2004.

Lucent is one of the industry's innovators in fiber optics and connectors. Examples are the ST and LC. In particular, the LC currently is one of the hottest fiber-optic product lines. .


Nortel Networks — External Manufacturers' Input Critical

Nortel's Po Yin Tse emphasizes the role of the external manufacturer (EM), noting that "our product success depends on superior quality components on our product assemblies that are being manufactured at our EM site. Support at our EM will serve a tremendous purpose to ensure the success of our products in the market."

The EMs, Tse explained, are the contract electronics manufacturers (CEMs) who are the other strong arms of OEMs. This segment of the industry is projected to do $100 billion worth of business in the worldwide electronic manufacturing market in 2000. They include such companies as Solectron, Jabil Circuit, SCI Systems, C-MAC, Sanmina, Celestica and Flextronics.

"The external manufacturer's input at the early R&D stage is crucial," he stated. "A product life cycle is inversely proportional to the frequency of involvement with the EM by the suppliers." Communication, he noted, is essential among all three stake holders—the OEM, the supplier and the EM.

Special challenges to interconnect suppliers, Tse said, include special process requirements at manufacturing, the availability of insertion and extraction tools, product specification, and optimal design layouts. Periodic meetings between the EM and the OEM are crucial for sharing of ideas.

Nortel will purchase in the year 2000 about $275 million of connectors, cable assemblies and backplanes..


ERNI — Succeeding as a Second-tier Company

Although the subtitle of his presentation was "How a leading German company did it," ERNI Components' Michael A. Savage, senior vice president of sales and marketing, pointed out that ERNI's roots are Swiss, not German, "though most people perceive us as a German company."

ERNI, which is 100% privately owned, was started by Ernst Erni in 1947 and became a DIN 41612 connector manufacturer in 1968. The company now has three divisions—ERNI Europe, ERNI Americas and ERNI Asia. ERNI's growth has exceeded that of the industry itself since 1992, with projections for growth of 90% against an industry total of 10%.

"As a second-tier company, we can react faster to customers' needs," Savage pointed out, "and we can focus on fewer products and become product leaders. In our organization, company leaders have more opportunity to wear more hats and gain broader experience."

Savage stressed the concept of "co-opetition"—the behavior of business partners simultaneously working both with and against each other. Some tenets of this philosophy are cooperation to expand the market and competition for the largest share possible.

ERNI is the leading worldwide producer of DIN connectors, also the market leader of backplanes in Europe and is rapidly becoming one of the major suppliers of 2mm connectors. .


Bomar Interconnect — A Small Company With a Personal Touch

Bomar's president, Bob Behrent, entitled his presentation "David and Goliath," casting his company in the role of the biblical slingshot marksman, and outlining how Bomar succeeds in the land of the giants. For one thing, he places a heavy emphasis on customer service, two words that, in too many larger businesses, have become an oxymoron.

"Out first few million dollars of sales were mostly linked to the LAN data networking market," Behrent explained. "With all the cheap junk on the market, we were able to compete by designing several internal features into some of the products. We stocked the product in quantity and developed a distributor network to supply the products to local customers."

The key to Bomar's success, he explained, was marketing. "You present yourself as any large company would," he noted. "Gate crashers act like they belong, so they do. Dale Carnegie tells us not to sell the steak, but to sell the sizzles. So we show our specialty products and net designs first. Attention getters."

Behrent quipped that his company created a product line within its standard line with part numbers beginning with the letters "EJ"—which stand for "economy junk," and it's marketed exactly that way. It's sourced in Taiwan and "we say this is the best junk on the market.".


FCI Electronics — Changing Complexities in High-speed I/O

Ed Cady, marketing development engineer at FCI Electronics, presented a highly technical address on "changing complexities within high-speed cable I/O." He noted that "high speed always is a challenge, but now we have a new set of challenges to address."

"If you're going to be doing cable, you have to be a member of a trade association to be successful," Cady stressed. "Cable, connector and chip people all have to improve their quality and work as a team."

The key to being successful in the industry, he believes, is working together cooperatively. "You have to look at a lot of performance issues and have cables and connectors certified by an outside independent lab. If you're caught shipping products with a logo and no license, you'd better have a good legal staff."

Cady pointed out that standards bodies such as Fiber Channel, Infiniband and 10 Gigabit Ethernet are starting to work together, like "birds of a feather." Since new and more costly testing equipment is needed, companies now have to do their testing together. "Even deep-pockets people have their challenges," he noted.

Cady defined the number of cable assembly designs that have been introduced in the recent period, such as ATA 16, ATA 33, ATA 66, ATA 100, ATA 150, ATA 300, ATA 600, Cat-6e, cLAN 1.25, cLAN 2.5, D-Bay, DMicro 68, Dsub 9, FC 12.8, FC 40, FC 106, FC 202, FC 425, FC 850, GbE 1000BaseT, GbE 100BaseCX, GbE 12.5, GBIC, GLM, HIPPI 6.4/10Gbs dual 68 VHDCI, HS9 D-sub, HSSDC-1, HSSDC-1e, HSSDC-2, IB 2.5, IB 5.0, LDT, MicroGigaCN, MPO, Myrinet 1.28 GBs 40 VHDCI, PC 52, PLX/PCI 64 dual 90 VHDCI, QuickRing 50 VHDCI, RapidIO, S/P 1.25, SCA-2, SCA-3, SCA-4, SCI-10 GBs dual 50p VHDCI, SCI-20 GBs dual 50p VHDCI, SCSI 40, SCSI 80, SCSI 160, SCSI 320, SCSI 640, Sebring Ring II PCI 32 Quad 68 VHDCI 4.2 GBs, ServerNet2 1.25, SFP-1, SFP-2, VHDCI-1 and VHDCI-2.

Crown Communications — Wireless Growth to Triple in Five Years

Understanding the customer's business was the key to the address by John Powers, vice president of regional markets for Crown Communications, who spoke on "Outsourcing Dynamics—the New Customers."

"Better, faster, cheaper" still applies, Powers declared. Wireless will more than triple over the next five years, and much greater capacity and overage will be needed. Traditional cellular and cordless phones are merging into PCS, the "handheld identity."

"The Internet has created much more one-on-one interface," he pointed out. "It's created a whole new community. You need to leverage the Internet to find the information you need. We're seeing more integration and consolidation today, new players are popping in because of the Internet."

Powers stressed the need to understand a customer's needs on a regular basis and anticipate those needs from as many perspectives as possible. "It's important that sales people identify the true decision makers," he said. "Products must be made smarter and easier to use."