Jabil Circuit eyes long road to success in Japan
Wednesday January 16, 4:31 am Eastern Time
TOKYO, Jan 16 (Reuters) - U.S.-based contract electronics maker Jabil Circuit said on Wednesday it was prepared for a long journey before finding success in the potentially huge Japanese market, where rivals who arrived earlier have scored major deals.
``Japanese business decisions are not made overnight. They take time to cultivate,'' Rick Evans, VP of Jabil's Asia Pacific business development, told a news conference.
``We are committed to being here and in fact I'd like to have been here a little bit sooner.''
Evans said the Japanese market has substantial room for growth as manufacturers, battered by Japan's extended economic slump and urgently needing to bolster competitiveness, seek to cut costs by farming out production to providers of electronics manufacturing services (EMS) such as Jabil.
``Top Japanese OEMs (original equipment manufacturers) such as NEC and Sony are leading the way inside Japan and the pace is increasing at home and abroad,'' Evans said.
``We estimate these OEMs should outsource as much as 30 percent of their total manufacturing requirements over the next five years.'' Earlier this month, Celestica Inc (CLS), the world's third-largest EMS firm, said it signed a five-year supply agreement with NEC Corp worth $2.5 billion in revenues.
Celestica will buy two NEC telecommunications equipment plants in Japan and take on 1,200 of the electronic conglomerate's workers.
NEC also announced a deal in October to lease a computer server and workstation plant to Solectron Corp (NYSE:SLR - news), the world's biggest EMS firm.
Solectron also struck a deal in 2000 to take over Sony Corp plants in Japan and Taiwan.
Jabil opened an office in Tokyo in February 2001 and on Wednesday appointed two top executives for its operations in Japan, including a former NEC official.
Despite its potential, the global EMS market has been hit hard over the past year by a pullback in corporate capital spending.
Last month, Jabil said its quarterly earnings fell more than 80 percent as orders from computer and telecoms companies stalled.
Jabil Seeking to Buy Equipment Plants in Japan (Update1)
By Minoru Matsutani 01/17 02:58
Tokyo, Jan. 17 (Bloomberg) -- Jabil Circuit, which builds electronic equipment for brand-name companies, has held talks to buy factories in Japan that make products such as optical telecommunications equipment, medical gear and digital consumer electronics, an executive said.
``We've been shopping,'' said Rick Evans, vice president in charge of Asia Pacific business at St. Petersburg, Florida-based Jabil. ``Yesterday would be a good answer'' to the question when Jabil wants to obtain plants in Japan, he said.
Jabil, which currently has no factories in the country, wants to acquire manufacturing capacity in the world's second-largest economy to be closer to potential customers and gain technology and manufacturing know-how, Evans said.
Though Japan is one of the most expensive countries in terms of wages and operation costs, Jabil would benefit by obtaining the customers from the companies whose factories it buys.
``There are a lot of reasons for us to be in Japan,'' Evans said. Japanese manufacturers lead the world in the production of goods such as ``communications products, medical equipment and automotive products,'' he added.
Losses
Jabil may have plenty of opportunities to buy factories because Japanese makers, most of which will lose money in the year ending March 31, want to cut costs, analysts said.
``Japanese electronics makers such as NEC Corp. and Toshiba Corp. are likely to sell some of their domestic plants,'' said Yoshihide Ohtake, an electronics analyst at Tsubasa Research Institute Ltd.
Jabil would not be the first so-called contract manufacturer to buy a factory in Japan. With the economy in its third recession in a decade, Japanese manufacturers have shed unprofitable businesses and assets such as factories.
Milpitas, California-based Solectron Corp., the biggest maker of electronics for other companies, bought a plant in Miyagi prefecture, northern Japan, that makes automotive electronics such as car navigators and car audio systems from Sony Corp.
Toronto-based Celestica Inc. this month said it will buy two plants used to make communications equipment from NEC Corp., the third-largest chipmaker.
Contract manufacturers such as Solectron and Flextronics International Ltd. make computers, mobile phones and phone gear for companies such as Cisco Systems Inc., Nokia Oyj, Ericsson AB and Alcatel SA. |
