TTM Technologies Inc. has taken an unconventional route to become the nation’s largest printed circuit board maker.
The company competes in one of the most commoditized sectors in technology, but an early emphasis in custom-designed printed circuit boards gained favor with a diverse base, from the most influential consumer electronics maker to the Pentagon.
TTM moved up 12 spots on the Business Journal’s annual list of the biggest public companies to No. 14, with a $1.7 billion market cap (see related stories, this page and pages 3 to 5).
It was established in 1998 through an acquisition of Pacific Circuits Inc. in Washington state and moved to Santa Ana a year later after acquiring Power Circuits Inc.
Orange County’s high cost of business and other barriers tend to deter large-scale electronics manufacturing, but Costa Mesa-based TTM operates two production plants here encompassing 180,000 square feet combined that specialize in quick turnarounds for a broad range of customers across the western U.S., including the defense and commercial sectors.
“We’ve always focused on the high end of the technology curve,” Chief Financial Officer Todd Schull, who joined TTM in 2013, said in a recent interview at the company’s headquarters near Harbor Boulevard and the San Diego (405) Freeway. “All our products are custom.”
Its 82,000-square-foot plant at 2630 S. Harbor Blvd. in Santa Ana is home to more than 400 workers.
TTM is the world’s largest printed circuit board supplier to the U.S. military. A circuit board is a thin plate where chips and other electronic components are placed and is found in nearly every electronic or computing device. Its boards, typically stacked so that each layer serves as its own board to pack in more functions, are found in complex military applications, including missiles, ballistics defense systems, infrared sensors and surveillance equipment.
More than 240 people work at its 96,000-square-foot plant in Anaheim, which it acquired in 2015 through its blockbuster $950 million buy of Viasystems Group Inc.
Race for World Title
The deal for the St. Louis-based manufacturer created one of the world’s largest printed circuit board makers, with about 30,000 employees and 28 plants in the U.S. and China.
TTM, which is neck-and-neck with Tokyo-based Nippon Mektron Ltd. for the title of the world’s largest printed circuit board maker, had $2.5 billion in sales last year, up 20.8% over 2015, and adjusted profits of $142.3 million, up 75.4%.
“We had a great year, and it wasn’t by accident,” Schull said.
The company zeroed in on improving profitability and yields, two distinct but linked challenges in microelectronics manufacturing.
“This is really a blocking and tackling business,” he said. “You have to execute the little details.”
Buys Bring Diversity
The Viasystems buy, which has boosted TTM’s top and bottom lines, provided entree to the lucrative and growing automotive market. Vehicle production is projected to increase from 90 million units last year to 110 million in 2020, a 4.4% annual growth rate, according to the National Transit Institute.
Electric vehicles, specifically, carry many more printed circuit boards than do traditional cars.
Vehicle electronic content is on a similar trajectory as more automakers boost infotainment options and include assistive technology for parallel parking, turn warnings, collision avoidance and other applications.
“Viasystems got us into engine systems and braking and core technology, so now we really play everywhere,” Schull said.
Indeed, the auto segment accounted for 20% of TTM sales last year, compared to only 3% before the acquisition.
“That’s been the fastest growing end market,” said Stifel Nicolaus analyst Matthew Sheerin in an interview.
The turnabout has been welcomed on Wall Street; TTM shares are up about 158% in the past 52 weeks to $1.7 billion.
Investors had knocked the company for years for its reliance on Apple Inc., its largest customer. The Cupertino tech giant accounted for as much as 20% of revenue in some years, fueling big swings in quarterly financials if an iPhone model wasn’t a hit or if a long lull occurred between releases.
Last year Apple accounted for roughly 15% of TTM sales as the company released the iPhone 7 and 7 Plus in September.
The Viasystems buy helped TTM diversify its customer and market bases, according to Sheerin.
“It’s a much stronger company in terms of margins and exposure,” he said.
TTM’s five largest customers—Apple, Autoliv, Cisco, Huawei and Robert Bosch—accounted for a third of sales last year, down from 44% in 2014, according to its annual report.
TTM entered the mobile device market in 2010 following its $521 million buy of Meadville Holdings Ltd.’s printed circuit board business in China, which specializes in high-end boards for consumer electronics.
Roughly two-thirds of TTM circuit boards are produced in China, including nearly all of its products geared to consumer electronics.
The Santa Ana and Anaheim plants are among 13 TTM operations in the U.S., each with its own specialization, technological focus or targeted end market.
Its 281,000-square-foot factory in Chippewa Falls, Wisc., is the largest circuit board manufacturing facility in the country and produces high level, or complex, boards. It was acquired in 2002 in a $2 million acquisition of Honeywell’s Advanced Circuits operation, a buy that provided inroads into the networking and telecom markets, and added major customers, such as Cisco, Sun Microsystems and IBM.
The mature networking and communication segment was TTM’s largest last year, accounting for about 23% of revenue.
The company’s $226 million buy of Tyco International Ltd.’s printed circuit business in 2006 added complex, high-performance and specialty boards geared to the defense and aerospace sectors, which accounted for 15% of TTM sales last year.
The Viasystems acquisition prompted a global restructuring plan that trimmed $55 million in expenses and redundant costs in the first 12 months after the transaction. The buy came more than two years after Viasystems bought Anaheim-based circuit board maker DDi Corp. for $268 million, ending DDi’s 12-year stint as a NASDAQ-listed company.
Cuts, Tweaks
As part of the Viasystems integration plan, TTM in late 2015 reclassified its business lines into Communications and Computing; Automotive, Medical, Industrial and Instrumentation; and Aerospace, Defense and Specialty. It classified the Electro-Mechanical Solutions segment as a separate line.
An executive was assigned to lead each business unit.
The shift prompted it to lay off 80 people worldwide. That came three months after it announced closures of manufacturing plants in Cleveland, Milpitas and Juarez, Mexico, that eliminated about 550 workers.
It consolidated operations at the facilities into nearby factories.
TTM entered this year with about 28,360 workers, roughly 682 of them in OC, including about 35 at its headquarters, where it houses corporate personnel in management, human resources, administration and legal services, among other departments.
“With the Viasystems acquisition, we needed to integrate everything else we’ve had in the last 15 years,” Schull said. “The key to a successful company is focusing on your customers, and the best way to do that is to organize your business around your customers.”
