JDS HIRING LIKELY TO SLOW
by Bert Hill, Ottawa Citizen
Automation, offshore plants will cut costs, boost
production; JDS must double production annually
for at least the next few years to keep up with
customer demand.
Bert Hill
The Ottawa Citizen
The spectacular growth in employment at JDS Uniphase Inc. has been the
brightest light on the Ottawa economy for several years.
But that could soon come to an end.
JDS is actively considering plans to automate its labour-intensive production and
shift more jobs offshore.
Michael Fitzpatrick, chief executive of E-Tek Dynamics of San Jose, California,
which was swallowed up by JDS this week, revealed the choices for the
company.
"We do intend to really go after off-shore manufacturing, because it is all about
volume and it is also about ensuring we can meet cost-reduction targets that our
customers are giving us. We really can't do that unless we add both automation
and reduce our labour costs, and we can do that by going offshore."
Mr. Fitzpatrick made the comments in a conference call with analysts on the
$15-billion U.S. takeover of E-Tek.
JDS Uniphase chief executive Kevin Kalkhoven quickly added that JDS is not
altering its plans for rapid employment growth in Ottawa, the U.S. and Europe in
the next year. E-Tek will also stick to plans for big expansion of its San Jose
manufacturing operations.
Mr. Kalkhoven said JDS plans to reduce production costs aggressively. Indeed,
he said the increased volume of business in the combined company will open the
door to automation and reduced costs to customers.
E-Tek provides an opening to Asia, where it has just opened a large new plant in
Taiwan.
Mr. Fitzpatrick said Ming Shih, a founder of E-Tek, is also developing a plant on
mainland China to ramp up production of high-demand components like
dense-wave division multiplexing gear. He predicted this will lead to a strategy of
building components and other lower-cost commodity products in Asia and
doing assembly and module building in North America.
Mr. Fitzpatrick gave explicit details of a strategy JDS officials have been
discussing in vague terms in months of industry presentations and at the
company's annual general meeting.
The first part of the strategy is well-known: JDS must double production
annually for at least the next few years to keep up with customer demand.
But the other part of the strategy has received scant attention: JDS must reduce
the cost of products to keep Internet-driven traffic and demand for its growing.
One huge potential market is the urban or metropolitan business that is still
dominated by copper-wire transmission for cost reasons.
Employment in Ottawa at JDS Uniphase Inc. and JDS Fitel, the predecessor
company, has jumped from 500 to 5,500 since 1996 as market demand for
fibre-optic gear has soared with the growth of the Internet.
It is a remarkable pace of growth that Newbridge Networks -- the previous
measure of fast growth -- took 13 years to accomplish.
In the next year, JDS plans to add another 2,500 employees in Ottawa as it
increases production to try to keep ahead of market demand for fibre-optic
components and modules.
But current production methods and costs can't support that growth rate for
long. The major reason employment has grown so quickly at JDS Uniphase is
that manufacturing the products is an extremely labour-intensive operation.
The production of fibre-optic gear like the technology itself is still in its infancy.
Much more of the work is still done by hand than in the computer and
semiconductor industries.
The merger of JDS Uniphase and E-Tek sets the stage for big changes in how
and where the company makes its products.
And if the computer and semiconductor industries are any guidelines, it means
much more automation and much more production in Asia.
The result will probably mean big changes in Ottawa. It is unlikely to be as
catastrophic, for example, as when Compaq Computer shut the former Digital
Equipment plant in Kanata and put 2,000 people out of work.
But it is probable that fibre-optic production will follow the computer and
semi-conductor industries to automation and production in Asia.
But it will also probably mean that JDS Uniphase will probably be employing
more research and development staff and fewer production employees in Ottawa
in future years.
The combination gives JDS about $1.6 billion in annual sales or about 30 per cent
of the $5.5-billion world market for components and modules.
"Automation is all about scale," Mr. Fitzpatrick said. "You need large amounts of
volume to truly do automation and with this combination (of companies) we now
have the volumes."
The two companies plan to focus on their immediate production strengths: JDS
is strong in products like filters while E-Tek is strong in packaging technology to
make modules. |
