‘The United States of Éolane’ Print E-mail
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Written by Mike Buetow   
Tuesday, 23 April 2013 12:46

France-based EMS Éolane has been creeping up the CIRCUITS ASSEMBLY Top 50 for years, but after acquiring Groupe Lagasse and certain Elcoteq plants last year, revenues really jumped – up to $463 million. Moreover, the company, which differentiates itself by focusing on designing and building electronic “platforms” for a variety of end-markets, has set its sights on further expansion.

CIRCUITS ASSEMBLY editor in chief Mike Buetow interviewed Marc Pasquier, Éolane Group general manager, and Grace Colin, managing director, Éolane Technology (Suzhou) and Eolane Sourcing, in April.

CA: What is Éolane’s basic management philosophy when it comes to servicing customers?

MP: We have six values over the 35-year duration of the company. They have always been the same. 1.) Customer first. All attention, all effort is customer-oriented. It’s very important to understand that if we succeeded the past few years, it is because we focused on the customer relationship. 2.) Respect the people. Éolane is not only a manufacturing company; it is a “human” company. The owners are very close to the customers and employees. That management style, that organization has two dimensions. They are very close to the customer in each country we are located in. In all the different countries we are in, we make the decisions locally. And the director is informed of all decisions taken by the local managers. When you gather these two values, you have the leverage to succeed.

GC: Also, a third value is, we keep our engagements. Whenever we make an engagement, we keep it.

Every day we receive key information from the subsidiaries in each country. Every week we receive a report with all decisions from the week and all the decisions needed for the coming week. It’s a very practiced communication process. Even for very important decisions, it’s a 24-hour to 5-day period.

CA: How are you differentiating yourself from other EMS companies?

MP: I think the main difference is we are not only an EMS company; we provide additional services that others are not able to provide. Especially, when I speak of these services, we are one of the ODMs that can deliver design, mechanical parts, make prototypes, small batch and mass production. We are able to support the product with total lifetime service. The big difference is we are able to provide a high level of services around the manufacturing.

GC: We are working on the technological “brick.” We have identified 10 technology bricks in order to be prepared and have shorter time to market. We have been proactive and innovative. This can be a kind of platform that can be integrated with embedded software and hardware. You can put them inside the OEM product no matter the market – industrial, transportation, etc.

MP: And we are a private company. It is important because we are not under pressure for gaining market share.

GC: We don’t have the pressure of the shareholders’ decisions or opinions. Some public companies have short-term objectives to be profitable. We can make decisions for the long-term for revenue growth.

MP: Also, our management is very stable. That’s important to customers who want stable management in their partners.

CA: AsteelFlash and Zollner are the two largest European-based EMS companies. Are they also the companies you compete with on a regular basis?

GC: We are competing in Europe and China. For Asteel, our customer base is very different. They focus on bigger accounts and on consumer and telecom products. Those are not our targets. We focus more on industrial and professional markets, and we can provide excellent R&D services. We have eight market segments: Defense, Aeronautics, Railway, Energy, Industrial, Medical, Professional Telecom and Automotive, with some specific competencies in lighting, chip on board technology….

For Zollner, they are more focused on automotive markets. Right now, we are competitors.

MP: As of last year, we have a subsidiary in Germany. State by state, we are penetrating the German market.

CA: How much of your future success will rely on convincing more OEMs to outsource production?

MP: Our strategy is to increase revenues around the manufacturing services. So, R&D, sourcing, after-market services. We are adding additional services. Part of our growth will come from those additional services and more value-added.

CA: What is the target size of a Éolane customer?

MP: There is no small or big customer. There is the interesting and non-interesting customer. An interesting customer is one with whom we can work for a long time. We don’t want one-stop business. Second, even if business is small, the technology could be good: for example, a customer with a small PO but an interesting new technology that can push us in new and different ways. We can explore the other business that can be gained. It is not the millions of dollars of business we are doing that is the only way to select the customer. It is the technology we can provide and the position we can be in for the next product.

CA: What percentage of your business is turnkey? Does that include design? Is logistics part of your business model, and if so, to what extent?

MP: The majority is turnkey. About 99%. Twenty-five percent of the product lines are from our R&D centers. It’s a huge part of our revenue, and it will increase to 35% in the next three or four years. This is a trend. Customers are looking for companies looking to take care of the project from BoM conception to product end of life. Logistics is a small part on a revenue basis, but we want it to grow.

GC: One of the services we provide is stock management for the end-customer.

CA: Can you make a profit on just assembling SMT boards?

MP: We can make a profit just on an SMT board, but it is more and more difficult. There are a lot of competitors if you focus just on the SMT line.

CA: What is the target size (in revenue) of a Éolane factory?

MP: In France we have 12 factories. We are addressing eight segments of business: defense, aeronautic, new energy, industry, private telecom infrastructure and multimedia, automotive, medical and railway. Those eight segments are handled by those 12 factories. In this strategy, we want to have two factories to address each segment and to be close to the customers.

There is a minimum size (in revenues) to ensure we cover the fixed costs. We have 100 people per factory at a minimum. The Éolane strategy is not to have a big plant with lots of people. We want to be reactive and flexible. We believe there is a right size – 400 to 500 people – because we are focusing on professional markets.

GC: It’s like the United States of Éolane. We want to keep this flexibility to be able to offer the services to the customer and to be near them.

MP: Business is like a war: Do you think you can win a war with a big army? Or can you win one with a small number of troops? I prefer to have a small team that’s very mobile and very smart. I believe you can win a war with this type of organization, instead of a big, heavy, and difficult-to-move army.

GC: We are facing the medium-sized industrial customers, so flexibility and agile supply chain is the key to customer satisfaction.

CA: It appears from your history that most of your facility growth has been through acquisition. Is there a stated internal preference for acquisition over greenfielding? If so, why?

MP: It is true that our main growth is through acquisition. But you have to know that, every week, we see companies (for sale) in different countries in the world. So it is easy today to do this. The problem is to verify that the target is in a good direction for us in terms of size of business, customers and location. Today we have the possibility to acquire other factories, but not all are fits for our strategy. They are too big, or a spinoff of a company that is not interesting to us. For us, because we have limited cash to start operations in a country, acquisition is faster for us. The key point, again, is that to grow the company, we have to have people that we have confidence in.

CA: What makes Morocco a good place for manufacturing? Do you expect Northern Africa to become a significant electronics manufacturing center in the foreseeable future?

MP: We have two factories in Morocco: One is specialized in PCBA, and the other is specialized in wiring and cabling. Morocco is good for providing to France or Europe. It’s competitive with Eastern Europe for labor cost. And some special tax exemptions between France and Morocco. Morocco’s wages are very stable, and it’s French speaking.

But there is no big business in Morocco. So I don’t think Morocco will become a manufacturing center. It is an extension of Europe industrial capacities.

GC: Another reason is the supply chain. It is not mature in Morocco.

CA: Explain the decision to acquire some assets of Elcoteq. Was that a lengthy decision? How did you decide which factories to acquire? How has the integration gone?

MP: Very simple: because Elcoteq was in different countries we are interested in, and their origins in Europe. It was important for us to have those locations. The integration is working very well. You have to know that we are happy to integrate a new company. We have an action plan when we buy a new company. We apply this to the new company, in Estonia, India, Germany when we bought last year. I feel that Elcoteq site management team is very happy to join Éolane. Since February we have organized site directors meeting every eight weeks in France, and spend time with directors to work on different topics. All Éolane subsidiaries directors/general managers are invited and participate in brainstorming and discussion. We talk about what we can do to improve our processes and position.

For India, it was part of our strategy to have a footprint there.

CA: Is a facility in the US on your roadmap?

MP: Yes. Because the US, as you know, for me, it’s a dream country. I believe the US is the head of innovation. For that, we have decided to have an office as a first step of our US strategy. And we would like to follow in the coming years. We are in the observation phase to see what we can do. We can do business with US companies. If we can go further, we will do that.

GC: We want to ID the opportunities to have R&D centers first.

CA: What changes in technology have you identified in your key end-markets? What is Éolane doing to stay ahead of those changes? Are there markets you are not in that you see as potentially attractive in the future?

MP: Innovation is a differentiator for us. We started R&D services in 1978. This is not a recent strategy. We believed, even 30 years ago, the future of EMS companies would be to provide to customers additional services like R&D. It is not new for us; it is in our blood.

That clearly is our roadmap. There are two paths we have to follow: technology, in terms of the platforms we invest in. We invest in 10 bricks. We consider those 10 bricks as coming from the market.

Another is assembly. We have CoB (chip on board) technology in France; it’s a heritage from Motorola. We have very high competency in chip-on-board and die assembly. This technology was considered dead a few years ago. It’s been reborn. More and more, the sensors you need in different applications like automotive and research, you are looking for low wave, wireability, portability; this is a very good solution to answer those technical issues. When we had the opportunity to
discuss with Motorola to acquire this technology, we jumped on that.

A second example is package-on-package. We have extensive experience in that. We have a roadmap in our customer survey.

We can provide customers something they never imagined. We can help the customer think outside the box.

 

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