Consolidation could be in store for makers of printed circuit boards, a sector concentrated in Orange County.
Up to 13% of the production capacity for circuit boards in North America could be erased this year as big players move work to Asia, according to a recent report by Credit Suisse First Boston LLC.
San Jose-based Sanmina-SCI Corp., which has a large plant in Costa Mesa, is seen leading the consolidation, according to Credit Suisse, along with St. Louis-based Viasystems Group Inc., which closed a Lake Forest plant a few years ago.
“The weak pricing environment is a direct result of the industry’s widespread overcapacity,” according to the Credit Suisse report. “However, we believe the pain is finally becoming too much to bear for some participants.”
Consolidation actually could benefit other circuit board makers here, including Santa Ana-based TTM Technologies Inc. and Anaheim’s DDi Corp. and Multi-Fineline Electronix Inc.
Unlike Sanmina, which makes a range of computer products for other companies, TTM, DDi and Multi-Fineline just make circuit boards.
When another big contract electronics maker, Singapore’s Flextronics International Ltd., shifted production to Asia a few years back, smaller players benefited, according to Credit Suisse.
Printed circuit boards,flat pieces of fiberglass or plastic with circuits embedded on them,make up the innards of computers, wireless phones and other electronics.
The boards have been a staple of OC’s technology sector for years. The county’s biggest contract electronics makers, which make circuit boards and other products, employ more than 3,360 workers, according to a Business Journal survey last fall.
Sanmina has one of its largest plants in Costa Mesa, near the end of John Wayne Airport’s runway. The plant has been cutting costs, said George Dudnikov, senior vice president in charge of Sanmina’s printed circuit board business, but isn’t slated to close.
“It’s the biggest producer in North America, if not the world,” Dudnikov said.
Sanmina already has done some consolidating here. Three years ago, the company closed a 400-person Irvine plant and shifted workers to its Costa Mesa operation after it bought Alabama’s SCI Systems Inc. in 2001.
The Costa Mesa building, which has an estimated 170 workers, has features similar to a semiconductor fabrication plant.
Bought from Honeywell International Inc., the Costa Mesa facility is used to design products and carry them into volume production.
The plant has size and volume on its side, though its high-cost location could be a strike against it.
“A lot of Sanmina’s (printed circuit board product) is lower level stuff,” said Scott Robertson, an analyst with Sanford Financial Group. “And there’s just too much domestic capacity right now.”
Sanmina also has a printed circuit board facility in San Jose.
Just as Sanmina is expected to reduce its overall manufacturing, another local circuit board maker said last month it doesn’t have enough factory space to meet all its demand.
Last month, TTM reported sales of $59.2 million, up 9% from a year earlier but down 5% from the third quarter.
TTM blamed the quarter-to-quarter drop on “capacity constraints” at its Chippewa Falls, Minn., facility late in the third quarter and early in the fourth quarter. The company makes printed circuit boards for quick turnaround. Companies come to it with large orders they need filled quickly.
Would Sanmina’s Costa Mesa plant be attractive to TTM?
While agreeing that the facility would give TTM increased capacity here, Robertson said it “would be a gigantic buy for a company that’s always been very conservative.”
The company does have its own ties to Honeywell.
TTM moved its headquarters to Santa Ana in 2003 after the former Redmond, Wash.-based company bought Advanced Circuits Inc., a Honeywell unit, which has a plant in Santa Ana.
“In my opinion, TTM doesn’t need any more capacity,” said Robertson, who notes that while the Chippewa facility is operating at 85%,considered full capacity,the Santa Ana facility is at about 55%.
Another TTM plant in Redmond, Wash., is at about 65%, he said.
TTM and DDi benefited from the pickup in the economy in 2003 and the early part of 2004. As demand for computers, networking gear and other products returned, companies turned to them and other rapid-fire electronics makers, rather than sign long-term deals for circuit boards.
