SMT Resource's Malcolm Montanjees

The Great Manufacturing Recession of 2001-03 was not a usual time to launch a company. But SMT Resource Group is not your usual company. Founded by three industry veterans who combined had more than 70 years experience in electronics engineering and marketing, the trio merged their independent rep operations to form a sort of supergroup for SMT equipment.

Malcolm Montanjees, executive VP of sales, cofounded SMT Resource (smtresource.com) with Chris Thornton and Eric Berg, whom he met while at GE Capital’s SMT remarketing group. The 18-employee firm works with banks that lease equipment to assembly companies, with SMTR acting as the banks’ agent in the field. They recently installed 50 pieces of equipment in two weeks in Mexico for a major U.S.-based EMS company. They carry $4 million worth of inventory and have a $5 million line of credit, which enables them to find and buy equipment and move them as needed. He spoke in May with Circuits Assembly’s Robin Norvell.

 

CA: How do manufacturing demand cycles correlate to demand for refurbished equipment? With the uptick in 2004-05, have you seen a decline in the amount of available pre-owned equipment?

MM: When there is stability in the market – no outsourcing, plant closures, movement of product offshore and not much in the way of acquisitions – we see a minimal demand for used or refurbished equipment. There are always the inevitable requirements for capacity increases, upgrades, later model equipment or technology requirements such as lead-free. Typically we sell single tools rather than entire production lines during these stable times. When there is instability within the industry, it creates opportunities for both buying and selling. SMTR provides an array of financial and technical services that take advantage of this instability. This includes entire factory buyouts and moves or working hand-in-hand with the finance groups to assist with disposing of leased equipment that still has time on the contract but is no longer required by the lessee.

With regards to a decline in availability of pre-owned equipment, this is an interesting question for us. It seems every year as we reevaluate our resources and overheads, we worry about where the next piece of equipment, production line or entire factory will come from. But every year we have been able to satisfy the demand by finding quality used equipment. During bad times it is excess; during good times, especially for the larger companies, it is total line upgrades and increased capacity.

 

CA: What incentives or advantages do you provide for companies to purchase new equipment directly from you?

MM: SMTR offers “Best in Class” solutions to customers wanting new and used. At times a customer may need to purchase a new placement system to place the latest component types, say 0201 to CSPs, µBGAs or other large fine-pitch packages. These might be components that older machines were not designed to handle. Limitations often occur in vision systems, feeder types or software programs. By working with our solution, customers can save money when incorporating older peripheral equipment with the new to complete the manufacturing line.

The incentives we provide are financial and full integration responsibility. SMTR has negotiated contracts with several major equipment manufacturers at an integration price, which is lower than if the customer bought directly. We do this not to avoid the OEM distribution channels but to offer the customer cost savings by purchasing new and used. We take on the responsibility of full-line system integration, which guarantees all the equipment within the manufacturing line, new and used, will be compatible and communicate with each other. This eliminates costly delays in installation by multiple OEM technicians and avoiding potential conflicts of responsibility.

 

CA: SMTR recently began offering short-term rental options; what’s the appeal over longer lease terms? Do you offer the same value-add for the shorter leases?

MM: Often a company has a need to increase production short term, but cannot quite make the commitment for capital equipment expenditure or just does not have a budget. They may need extra equipment to win a new, short-term contract, additional equipment for prototypes or perhaps they are uncomfortable with the economy and not willing to commit long term. Short-term rentals meet these needs without long-term commitments. At the end of the rental period, six to 12 months or more, a company can choose to return, continue renting or purchase the equipment. All of our value-add services apply with rentals as they would with a direct purchase. In fact, we make it a point to be involved with both lease and rental installations as part of our acceptance criteria for the customer.

 

CA: What has been your largest market? Internationally, do you sell mostly to local companies or Western-based companies manufacturing abroad?

MM: As a global company we go where the market is. China has been a large part of our business model and will be for some time. We do service multinational Western-based companies as the majority maintains control from their respective headquarters. This will change to a more regional decision as these facilities mature and take on ownership authority and responsibilities.

Plans are in place to acquire more equipment from China, refurbish it in China and remarket it back into China as well as into other parts of Southeast Asia. To be responsive to the local market and local customer, we offer local refurbished machines supported locally. The Chinese market, while appreciating value-added services, is not as appreciative when it comes to paying more for those services. To be competitive in a country like China we use local labor, facilities and material.

We have established a partner company in Germany to sell and support European customers from within Europe. Due to EU requirements for safety, cost and time to ship, it is more effective to buy, sell and service from within Europe so have offices, warehouse facilities and technical support in Germany.

Mexico continues to be a large part of our sales strategy. Mexico has seen something of resurgence with electronics assembly. Why? We believe the higher quality products lend themselves to be built better in Mexico. There is a stable workforce that has built up considerable experience during the maquila days as plants have moved from the borders closer to where the labor force lives. It is closer to the U.S. for travel, time zones are the same, visas are not required and there are fewer intellectual property concerns.

 

CA: How many machines have you installed to date? Are typical orders for one or two pieces of equipment, or is there a demand for more complete lines?

MM: SMTR has installed close to $45 million worth of equipment during our first three years in business. This equates to approximately 400 individual pieces of equipment made up of primarily conventional surface-mount and peripheral equipment. Demand goes from a simple one-piece conveyor to a full factory line, sometimes multiple lines. One large CM recently rented two complete lines of multiple chipshooters, fine-pitch machines, printers and ovens. Total pieces exceeded 50 individual machines, which included all of our usual support service, installation and training.

 

CA: With the lead-free initiatives upon us, have you seen demand pick up for any particular equipment?

MM: The entire focus at the Apex show was lead-free equipment: reflow ovens, wave, chemicals and AOI. Leaving things to the last minute is an American prerogative, so yes, the demand is high. Lead-free reflow requires higher temperatures, sometimes center rail support and precise control of material processing; we tend to recommend buying new equipment over used. Lead-free equipment has not been around long enough to be available in quantity on the used equipment market. We do not suggest that a machine is capable of processing lead-free products outside of the OEM’s specifications, which is why we recommend new technology. Waves have to be retrofitted with titanium-coated pots and the impellors have to be replaced as well as the covers around the solder pot. In fact, anything that comes into contact with the solder has to be replaced. Again, new over used. Lead-free is not an issue for most other equipment, perhaps with the exception of AOI machinery that requires software and lighting adjustments.

 

CA: Do you work with SEC/N (the global used equipment consortia), or adhere to its guidelines?

MM: Not at this time. I attended a SEC/N meeting in Las Vegas last January to evaluate the benefits of being associated with the organization. We found the organization heavily weighted toward the semiconductor industry, not the printed circuit assembly industry we are involved with at this time. We do, however, agree with and abide by their code of ethics, professionalism and quality. At some time we plan to revisit their organization.

 

CA: What sort of warranty do you provide?

MM: Warranties are provided upon request and priced accordingly. They can range from 30 to 90 days or longer, depending upon the customer’s level of experience and the final destination for the machine. The warranty is best used to provide a level of comfort, limit the risk of ownership when purchasing a used or refurbished machine and to offer support where experience in buying used equipment is limited or knowledge of the machine in question is limited. All machines leaving any of our facilities are guaranteed to be fully functional, with no missing parts and in full working condition.

 

CA: How does the equipment depreciation schedule of certain countries play into the way you buy/sell equipment?

MM: We purchase large volumes of quality equipment for resale. Sometimes sellers are forced to sell equipment based on depreciation schedule information. In a typical tool purchased for cash transaction, the depreciation on the books could force a loss on the profit and loss statement. SMTR uses flexible financial solutions such as equipment trades, leasing transactions and rental programs that can eliminate this issue for the seller. Different depreciation schedules should really not be an issue when coupled with one or more of our financial solutions.