A GROUP OF PEOPLE FROM THE NEW PRODUCT Induction (NPI) team of electronic contract manufacturer SMT Unlimited (SMTU) are in discussion with a client. The NPI consists of people in departments as diverse as materials (purchasing) to QA. All of them are in the meeting for one reason. They are going to be involved in prototyping a board for a gaming company’s new box. What is new, you may ask. While most electronic contract manufacturing services companies wield the NPI business within the realms of materials, SMTU’s NPI is a standalone profit center.

When Chief Executive Officer Raj Upadhyaya founded SMTU in 1994, his charter was in creating a company that would be at the cutting edge of technology. Upadhyaya wanted to leverage the market demand for product testing engineering talent but at the same time create a company that would be able to add to the Original Equipment Manufacturer’s (OEM) manufacturing skills. “There was a need at that time for a company that would be able to provide services ranging from testing boards for semiconductor makers to prototyping a new product for an OEM. We based our company around that niche,” says Upadhyaya.

As the company grew it came up against technological obstacles such as the Ball Grid Array (BGA) testing problem. The densely packed BGAs in a board made testing a nightmare. Physical access to test points and to many of the devices themselves was nonexistent. As a result, SMT’s in-circuit test (ICT) equipment could not be used to locate and diagnose the problem. So the company evolved the X-Ray laminography inspection in order to efficiently test the BGAs.

As it turned out, over the next nine years, the company grew to take on progressively more complex charters. Each customer need prompted Upadhyaya to acquire competencies in a particular field. “One of our first customers was a semiconductor company that wanted a BGA attachment process. The technology was evolving in that direction and we acquired the competencies to execute that project.” Having executed that first order to everybody’s satisfaction, Upadhyaya found SMTU had created a niche for itself in the valley. Eventually, SMTU became a market pioneer in BGA technology. And with its testing skills and processes thrown in, the company discovered that it could provide larger lifecycle services to OEM clients that were constantly looking to cut costs.

Infact, customer-oriented technology growth has been a hallmark at SMTU. For a company that has received just one round of institutional funding from Sigmatron International in 1994 (Upadhyaya had in early 1994 received funding from an angel), SMTU’s growth has been steady, if not phenomenal. Rather than throw money into technology, Upadhyaya decided that SMTU’s growth would be based on existing market needs.

“Sometime in 1996, a customer came to us with a project that wasn’t within our ambit of operations. They had reached critical mass and wanted help in assembling a board. So we acquired the technology and took the project on,” says Upadhyaya.

Each time the company added a different competency; it set up a different department within itself to handle the projects. Eventually, SMTU saw customers offering projects as diverse as warranty repairs to testing ICs. The company also started providing product integration services where, if the customer wanted to test a new board, the company set up a department, allocated resources, brought together the various contributing departments within SMTU and delivered the product, all with turnaround times which could be as low as 8-24 hours.

During its growth phase, the company often found itself pitted against multibillion-dollar giants—like Tier 1 contract manufacturers, that boast of volumes of $2 billion in its contract manufacturing business. But SMTU retained its marketshare by remaining a niche player whose competencies revolved around its nimbleness and proprietary technologies. Says Don Madsen, Vice President of Program Management and customer service; “Slowly we got a reputation within the valley as a niche player with a very quick turnaround.

What really worked for us was that being a mid-level volumes company, we could concentrate on our customers better than the large Electronic Manufacturing Services (EMS) providers. It speaks a lot about our capabilities that we can serve the requirements of the small enterprises as well as the big players with big volumes.”

In fact, Madsen claims the size of the company helps it garner business from OEMs. What the company essentially does is work with OEMs in NPI. “We build the first prototype based on the OEMs processes and requirements. And then the OEMs move the product on to the pilot production stage,” says Don Madsen. This takes a very close relationship because it is not a manufacturing support process but an engineering support process, which is infinitely more complicated.

In addition to the other skill sets that the company has acquired over the years, its specialty is still BGA replacement and testing within the NPI group. Says Madsen, “In most companies, the NPI group is like the unwanted child of the manufacturing group.

But we’ve structured the business in such a way that the NPI is separate from our materials department or testing plant. It is a standalone group. And taking that approach to the NPI business has been a real strength for us.”

Typically, SMTU is the domestic NPI group for most of their clients. The company runs the first phase of pilot productions for six months, then transfers the process to the client’s production facility. In some cases SMTU even does the actual manufacturing for the clients.

It has inked pacts with manufacturers in China and set up subsidiaries in Mexico to leverage the manufacturing cost advantage for its clients.

Roadmap
Now that the go-go years of stringent time to markets and constant innovations are gone, SMTU has found it easier to compete in the market place. Owing to its small size the company has stayed profitable even through the worst of the downturn. “Even now, we are finding that customers are still there for companies that are able to provide value. The fact that we have a relatively smaller customer base makes it easier for us to build relationships with each of them,” says Upadhyaya.

Madsen attributes the company’s survival and growth to its niche status. “We have weathered the downturn by not trying too many things at the same time. Our future success will also depend on how well we are able to provide the whole range of services ranging from design through prototypes to the actual production, within the niche that we have created.”