Schoeller Electronics Presenting a New Organizational Structure in North America
At the recent SMTA International show in Rosemont, Illinois, I met Padraig McCabe at Schoeller Electronics Systems’ booth. It was obvious that they had a lot going on so it was good to be able to sit down and get the full story of their new organizational structure, name change and the recent acquisitions of PCB companies.
Patty Goldman: Good morning Padraig, it’s great to meet you. I’m looking forward to learning more about you and Schoeller Electronic Systems. Schoeller is based in Germany, correct?
Padraig McCabe: Good morning, Patty. That's correct. Schoeller Electronics Systems is a company based close to Frankfurt in the small town of Wetter in Hessen. We have been producing printed circuit boards for more than 50 years—an organization that is very well known in Germany. One of the reasons we're at the show is to present our new organizational structure for the first time in the North American market.
European Electronic Systems (EES) was founded in the spring of 2016. This is an umbrella organization to which Schoeller Electronics Systems now belongs.
Goldman: So there are other members then, shall we say?
McCabe: There are, yes. That's the important point that we're trying to present here in North America. Schoeller Electronics Systems emerged from a restructuring program in spring of this year. Through that managed process we acquired a new investor and we have restructured the company and re-branded it. Formally, what was Schoeller Electronics is now Schoeller Electronics Systems, (SES) with a new investor and new ownership. The EES organization has also acquired two additional PCB facilities in Germany. These are facilities that are very well known in the European marketplace, but less well known here in North America, but which we feel will also enhance the scope of services that EES can bring to the marketplace.
Let me tell you about each of those companies, if that's okay. The first facility that I'd like to speak about is Hans Brockstedt. This is a small, quick turnaround facility in the Northern Germany town of Kiel. It's an organization with about 50 people and 40 years’ production experience, specializing in the production of boards to military standard-approval levels. This facility has what you could describe as a ‘super QTA capability;’ they can produce boards in as few as 18 hours all the way up to regular 20-day turnarounds. We see this as a strategic enhancement to the activity that SES has been traditionally involved in.
A further acquisition that took place just recently is the acquisition of GGPeters now GGP−Electronics. Again, another PCB board shop based in Germany which was very well known in the German speaking marketplace but less well known internationally. They've specialized in medium volume board production, particularly of rigid boards including HDI, thick copper and heatsinks. Again, they didn't have any promotion to the rest of the marketplace outside of Europe. What this trilogy of factories now represents together is a new, enhanced group which can offer services to our customers right throughout the product design cycle. When a customer is considering a product design at the outset, SES and the applications engineers that we have there can go deep into that customer's design process and we facilitate decisions from a PCB perspective on materials, on layups, on panelizations, on aspects of interconnected structures, so that we assist customers to mature and optimize their designs.
Now with the acquisition of Hans Brockstedt (HBL) we can also provide them with rapid prototyping. This allows us to facilitate those design discussions with proof of design concept boards rather quickly. Then as the design matures and reaches a point where it might need to undergo regulatory or end use approval testing, for example FDA approval, then we can move the board into production in the mainstream SES facility in Wetter and take it through to volume and industrialization. If a specific product, that develops into even higher volume with perhaps a lower cost target, we have the option to migrate that further to the GGPeters facility (GGP) so that we can handle the entire product life cycle within our group of companies.
Goldman: Those two companies have been folded into Schoeller Electronics Systems, correct?
McCabe: Not exactly. They're all part of the umbrella group, European Electronic Systems.
Goldman: So everybody retains their own name.
McCabe: They retain their own name, with some slight enhancements. These companies have gone through a restructuring process over the last six months and they've emerged from that process together with the main investor that is behind the EES organization, which is a company based here in the USA in New York, in fact. Their name is AIAC, American Industrial Acquisitions Corporation. This is a corporation with revenue in excess of a billion dollars. They have investments in 61 manufacturing locations worldwide, including here in the USA, 20 in Europe, and a number in Asia. This overall group, AIAC, invests in organizations globally, but primarily on manufacturing organizations. It then builds strategic subgroups of like-minded companies that can create additional services for that market.
Goldman: Very interesting. Does AIAC own other printed circuit board facilities?
McCabe: No, they don't. This is their first activity in the printed circuit board market. What they've done in other markets, for example in metal, in castings and in plastics and in other core carve outs from companies like Raytheon, Boeing, Smiths, etc, they've carved out activities where production was being done within one of those larger organizations, they've taken the organisations that were providing that core competence, and then helped those facilities to grow by investing in the skillset, in machinery, and in the facilities of those companies.
Getting involved in the PCB industry in Europe for AIAC was important because there is a consolidation happening anyway in the PCB industry worldwide. Perhaps the most obvious example of that would have been the TTM acquisition of Viasystems here in North America last year. That's on the top end of the scale in terms of the sizes of the companies. Acquisitions are occurring everywhere by necessity. There were, you could argue, too many players in this $60–65 billion market and it was becoming increasingly difficult for companies to continue at the level of investment to continue to support themselves and to keep pace with technology developments, and to grow organically.
Acquisitions are occurring throughout the industry and we're seeing that in Europe. For example, today there are maybe in excess of 250 PCB organizations of one type or another that are registered in Europe, but actually there are only a small number, less than 40 of those, that have revenues in excess of 10 million euro per year. There is a need for those smaller groups to either grow and combine or unfortunately they will continue to struggle and face the challenges of the market, and in some cases with poor outcomes.
By investing, as AIAC have done in Schoeller Electronics Systems first, they have created a nucleus company that has a wide range of technical capabilities, but which already had an international sales organization to which I belong. Now in adding Hans Brockstedt and adding GGPeters we have enhanced services and we can now use the sales network of Schoeller Electronics Systems to bring these additional capabilities to market, to new customers, and indeed to provide additional support to our traditional customers.
Goldman: Now you're based in Ireland?
McCabe: I'm based in Ireland, nominally. As an international business development manager, my role is to take the capabilities of Schoeller Electronics, both commercially and technically, and to present and articulate this service to customers worldwide. We have a direct sales team based in central Europe supporting our traditional markets there and then we have a smaller team who are providing international business development services. Of course, as our international customer base grows, we will be supplementing that sales team with additional resources.
Goldman: I can imagine. What international markets are you targeting?
McCabe: I think based on our competence and based on the market niches that we support—areas such as aerospace, military applications and defense, automation and industrial products, and the medical industry—those industries are particularly located in America and in Europe, and to a certain extent also in Israel. We are supporting those marketplaces first. It's not in our current plan to have sales activities in Asia, at this time.
Goldman: One thing at a time, right?
McCabe: Exactly. We do have a Director of Sales on the ground here, Michael Schumacher, based in Minneapolis. He is assisting us with the growth strategy in North America now. As I said, as we continue to develop new business and new customers here in North America we will supplement that sales organization as it makes sense to do so. With SES’s mode of selling, I suppose what differentiates us a little bit from other PCB vendors, who may receive a Gerber data package or an ODB++ package and then execute that design or convert it into a PCB, is that SES provides additional value add as a service. We go deeper into the design process, adopting a PCB perspective and joining collaboratively with design communities so that we facilitate choices, interconnect strategies, reliability decisions, regulation decisions. We help customers because we've noticed that the design process has changed over the years.
Historically, products may have been designed within an OEM where there were a lot of stakeholders internally in that company that understood what was necessary. You would have, for example, PCB experts, assembly experts, regulations experts, all within an OEM and so all could participate in that design process. Because of the way globalization has occurred and outsourcing has occurred, we now have situations where the design may happen in Site A, purchasing in Site B, and manufacturing in Site C, so the stakeholders may not be present during the design process. This can lead to sometimes awkward designs, sometimes poor designs, or at minimum it elongates the design cycle.
What we do in SES is try to help our customers by bringing our PCB experience and our assembly experience and our materials experience into the design cycle and collaborating proactively during that cycle so that the Gerber data or ODB package which emerges from that process is more ready and optimized for production.
Goldman: Wonderful. You must travel a lot.
McCabe: Yes, I travel a lot. I'm based in Ireland, but the key statistic there is I’m about 40 kilometers from the airport in Dublin, which as a major international hub for a number of the American airlines and also our national carrier, Aer Lingus. So there is the opportunity to easily fly to locations all over Europe and of course direct to North America. I'm typically visiting our facility in Germany one time per month and then we're visiting here in the U.S. every six to eight weeks, together with our existing sales director here, Michael Schumacher. We then schedule a series of meetings in a condensed period of one to two weeks and I attend those visits, assisting those discussions. Where necessary, we take our technical experts from Germany to join those meetings so that we can supplement those discussions with the right people.
Goldman: How long have you been with Schoeller?
McCabe: The story is a little bit complex. I began my relationship with the Schoeller Electronics factory when it was part of the Ruwel Group in Germany, back in 2005. Since that period in 2005 the facility has remained largely the same and the skillset largely the same, but the ownership has changed a couple of times. What was a facility, as part of the Ruwel Group at that time, became Schoeller Electronics and then Schoeller Electronics Systems, which is the organization we have today. My own personal story is also a little varied in that I spent nine years initially working with the facility in Wetter. I then left for a period in 2014 and began working with Viasystems/TTM, and I've only just restarted again with EES on the first of September of this year.
I'm resuming my relationship with the organization, but very excited to do that because the situation in Schoeller and the umbrella group EES is now considerably stronger than before. We have a very, very suitable investor who understands the nature of manufacturing and who is investing resources into Schoeller and indeed in our sister companies, and we have a very exciting and dynamic leadership team in our CEO Michael Keuthen. Michael is now overseeing the continuing restructuring of Schoeller and our sales strategy to bring all three entities into the marketplace. So very exciting times.
We're very pleased about it and we think the synergies that will come from the three organizations working together will be excellent. We will be able to leverage our purchasing in a way we couldn't do before as an individual facility. Our material sourcing strategy can change. We can leverage and share engineering experiences across all three facilities and of course we can leverage our individual customer bases and begin to utilise the reference customers that each factory had independently and bring those together.
Goldman: Are your customers mostly OEMs or a lot of EMS? How does that work? I'm curious.
McCabe: Our initial contact typically is with an OEM customer with the design organization within that customer base. Invariably then assembly is being done more and more with EMS companies. We are typically shipping our raw boards from Germany either to EMS contractors in Europe, also here in North America, and even to facilities in Asia. So we have an interesting scenario where we are producing PCBs in Europe and shipping them for consumption or at least assembly in Asia, for example in Singapore and Malaysia.
Goldman: This may be a crazy question, but does Schoeller normally choose the EMS company or does the OEM pick it?
McCabe: No, of course the OEM will typically have an existing assembly relationship with their EMS company. Then they will align us with that company. In many cases, because of our longstanding history in the industry we already have a direct relationship to those EMS companies anyway. All of the larger EMS companies you would think about, we are already doing business with. We have a customer service group who will then provide the logistic support to that EMS company, but the primary relationship is typically with the OEM.
Goldman: That must be the best way. Having the relationship with the OEM has got to be very important.
McCabe: Yes, it is. It's the key to our ongoing development. We're lucky and fortunate to enjoy very longstanding relationships with some of the blue-chip OEM organizations in Europe and also here in North America. We feel that by continuing with our applications engineering approach to sales and the knowledge-based service that we provide to those OEMs that we will be in a position to continue those relationships.
Goldman: I'm hearing more and more, from many people, that service, service, service is so important—personal or whatever-it-takes. Not just quick turnaround, getting it back to you fast, but all the in-between, the working together with the designers and going back and forth. Just having that close relationship.
McCabe: It's imperative, Patty. We see that on both ends of the contact relationship, you could say. The contact that we have during the design phase is critical but also the contact that we have in the fulfillment phase, when we ship orders and how we manage that. There are consignment inventory programs. There are kanban programs. There are logistical solutions that must be put in place, and these can become complex when EMS companies are also involved because they may have their nuances that we must facilitate. We may need to coordinate in a parallel approach with the OEM and the EMS provider to make sure everybody has the right level of information from our customer service and logistics teams. So, service at the fulfillment end and service through the design and the product maturity and industrialization phases are all very, very important.
Goldman: This is all great information. Padraig, thank you so much for your time.
McCabe: Thank you Patty, it’s been a pleasure.
