SMARTFLEX ALSO MEMBER OF THE IOMG FAMILY Message Board

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Non-Tech : SMARTFLEX ALSO MEMBER OF THE IOMG FAMILY

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To: kolo55 who wrote (280)	7/15/1997 7:56:00 PM
From: rich evans	of 558

I talked to al castlemen today at 4:30 rand indicated I and we were confused on the capacity issues. He clarified the matter for me and was quite forthcoming . The company historically has operated at 70-75 of capacity to be able to meet new customer demands and to stay ahead of the business curve. At that point they start thinking of plant expansion and certainly at 85-90 start worrying.Right now after their 3 plant expansion based on Q2 revenues they had too much excess capacity and were at 50-55% capacity. 100% capacity however is somewhat of a theorectical number and subjective because of product mix and based on the maximum possible units from the best mix and is not generally acheivable because of order flow rates, setup time etc. But in Q2 one could say that based on this theoretical number, they were at 55% for SMT and 50%for COF. During the balance of 97 they will be working hard to fill this plant up of course but unlikely to be much above 75% their historical average and for 98 their capital acquisiton committee would be looking at more expansion again if they reach these numbers based on their determination of customer demand, future orders etc after "scrubbing" the numbers and talking to customers. Their forecasts are difficult becasue of volatility but they were successful in 96 to reasonably forecast. The SEG downturn came with no advance warning from their customer. Normally in the industyr they keep their ears close to the jungle drums and can get advance warnings and adjust. Major threat is if our HDD industry loses to the Japanese competitors who use different (MKE) supplier. So ourestimates are not too far off but represent 75% about of full theoretical capacity.So a 200 million annual run rate seems acheivable this year and we are faced with the question of when. A conservative approachis probably what you and Doug indicated on earlier posts. I hope this clears up the capacity and new capacity plans. The 70% firure given by Healy was a historical figure before plant expansion. Rich

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