2014 IPC APEX EXPO EMC Management Council

THE EMS SOLUTION 2.0:HOW & WHY THE BUSINESS MODEL IS

CHANGING

Eric Miscoll(817) [email protected]

IPC EMS MANAGEMENTCOUNCIL MEETING 2014

© 2013 Charlie Barnhart & Associates LLCInsights into the world of global electronics manufacturing

“It is not the strongest of the species that survives, nor the most

intelligent that survives. It is the one that is the most

adaptable to change.”

- Charles Darwin

2


TRENDS IMPACTING INDUSTRY

3


TRENDS IMPACTING EMS INDUSTRY

1. Demand Cycle has Shortened2. Risk in the Supply-Chain at Unprecedented Levels3. EMS/ODM Prices Are Converging4. Costs in China Are Rising Far Faster Than Predicted5. Regionalization Is Gaining Momentum6. Global Capacity Utilization Is Increasing7. Margin deterioration across sectors8. Slower Rate of Growth of Electronics Outsourcing9. Insourcing by OEMs10. OEMs are reclaiming the supply chain11. EMS Are Trying to Diversify Their Revenue Stream

4


ODM SHIFT

• Acer & ASUSTeK: – Computer OEM

• HTC: – Smartphone OEM

• Inventec & Quanta: – Servers

• Pegatron: – Consumer electronics (e.g., tablets)

• Wistron: – Cloud computing, after-sales service, medical equipment, and

recycling

“For the sake of increasing margins, people are eyeing diversification and vertical integration and looking for new cornerstones in this competitive landscape.”

- Elton Yang, CFO, Quanta

5


Manufacturing costs in China continue to rise with the potential for much larger increases should labor pressures continue to escalate or should the Yuan be allowed to float against global currencies.

ESCALATING COSTS IN CHINA

6


HISTORICAL LABOR RATES

PCBA CY2009 CY2010 CY2011 CY2012 CY2013

Australia $46.50 $42.70 $42.40 $43.20 $43.32 Brazil $26.45 $30.23 $31.00 $31.45 $32.32 Canada $49.12 $41.78 $42.15 $44.17 $43.67 China $10.15 $11.31 $12.45 $13.38 $17.26 E. Europe € $47.30 $50.10 $51.00 $53.76 $55.57 E. Europe non € $26.13 $30.02 $30.40 $32.23 $33.75 India $9.21 $9.91 $9.95 $10.37 $10.79 Israel $35.97 $34.81 $34.89 $34.83 $37.43 Malaysia * * $16.29 $16.88 $17.26 Mexico - Border * * $16.80 $17.51 $18.28 Mexico - Central * * $11.32 $11.99 $12.50 Philippines * * * * $8.98 Singapore $25.15 $26.10 $28.15 $29.20 $29.96 Thailand * * * $19.39 $20.08 Turkey * * * * $16.13 United Kingdom $93.63 $93.11 $92.75 $95.49 $95.49 USA $37.96 $39.30 $39.40 $39.61 $39.78 Vietnam $8.75 $8.80 $8.95 $9.36 $10.11 W. Europe $89.37 $92.16 $90.10 $92.99 $95.81

Historical Cost of Labor/PCBA (EMS only)

7


With the exception of large low-mix/high volume projects it is now cheaper, on a landed-cost basis, to utilize low-cost regional versus cross-hemispheric solutions.

RETURN TO REGIONALIZATION(Build in the region for the region)

8


EXAMPLES OF REGIONALIZATION

9

http://www.google.com/enterprise/apps/business/landing/campaign/gonegoogle/

http://www.google.com/enterprise/apps/business/landing/campaign/gonegoogle/

http://group.electrolux.com/en/

http://group.electrolux.com/en/

http://www.axiom-ms.com/

http://www.axiom-ms.com/

http://www.koss.com/en



MARGIN DETERIORATION

Sector <1$ $1 $5 $10 $25 $50 $100 $250 $500 $750 $1KMil/Aero -7.0% -5.0% -3.0% -3.0% -2.0% -1.0% -1.5% -1.5% -1.0% -1.0% -1.0%Ind/Med/Auto -4.0% -3.0% -2.0% -2.0% -1.0% -1.0% -0.5% -0.5% 0.0% 0.0% 0.0%Com/Comp/Cons -5.0% -3.0% -1.0% -1.0% -0.5% -0.5% -0.5% 0.0% 0.0% 0.0% -0.2%

10


INSOURCING BY OEMS

11



http://www.johnsoncontrols.com/content/us/en.html

http://www.johnsoncontrols.com/content/us/en.html


BEYOND OUTSOURCING ROADMAP

12


IMPACT OF TRENDS

13


WHAT DOES THIS MEAN FOR EMS?

• Change is already happening• Margins will not return to what they were• If you are not already seeing this or

planning for the future, then you better GET BUSY!

• Innovative thinking is required

14


QUESTION FOR EMS

• What percentage of your revenue stream have you converted from commodity services?– E.g., PCBA & Box Build

15


EMS THAT ARE CHANGING

• Lightspeed MFG: Repair services• CTS Corporation: Components & Sensors• Tepcomp: LED modules• Stadium Group: Displays OEM • Circuitronics Inc.: Prototyping• Foxconn: Components, retail outlets, etc.• Celestica: Supply Chain as a Service• Nam Tai: Property development and mgmt

16


OEM-EMS RELATIONSHIP

• Change by one party in a relationship impacts the other party, whether desired or not. (e.g., child, partner, supplier)

• So as EMS diversify their revenue stream, OEMs will be impacted. – Fewer external options– Higher prices– Lower leverage

17


CBA’S ADVICE

18


WHAT TO DO?

1. Improve your bottom line2. Fire or renegotiate unprofitable

customers3. Make “lean” part of your fabric4. If small (<$100M) stay small5. Innovate6. Diversify revenue stream

19


MANAGEMENT METRICS

• Revenue per Employee– $300K-$350K

• Customer Base– Top 5 more than 50%of Revenue– Bottom 5 not less than 5% of Revenue– No customer over 25% of Revenue (>2 years)– No customer under .25% of Revenue

20


CLOSING THOUGHT

“It is not necessary to change. Survival is not mandatory.”

- W. Edwards Deming

21


Thank You.

Questions?

22

Achieving Operational Excellence for Electronics ManufacturersSpeaker:Matthew LittlefieldPresident and Principal Analyst, LNS Research

Agenda

• About LNS Research• Industry Drivers and Challenges• Operational Excellence Journeys• Operational Excellence Goals & Metrics• Accelerating Success – People• Accelerating Success – Process• Accelerating Success – Technology• Summary / Recommendations• Q&A

©LNS Research 2014

©LNS Research 2014

Manufacturing industry research firm that helps clients innovate and achieve Operational Excellence…

People, Processes & Technology

Research & Consulting Areas: Enterprise Quality

Sustainability / Energy Management

Manufacturing Operations Management

Differentiators: Experienced analysts

Primary research – large data sets

Interactive analysis & data visualizations

Deep industry executive contacts

Social media activity

About LNS Research - www.lnsresearch.com

Global Executive Council

Starbucks – VP of Global Quality and Regulatory Affairs

Onyx Pharmaceutical – VP of Global Quality

Whirlpool – Director of Quality

Lindt Chocolate – VP R&D and Quality

Oriflame – Corporate Quality Lead

Champion Technology – VP Quality and EH&S

Gurwitch Products – VP Research and Quality

Newell Rubbermaid – Director of Quality

Hygia Health Service – VP of Operations

Discount Tire – VP of Quality

Daikin McQuay – Director, Corporate Quality

Bio-Rad Laboratories – Director of Quality Assurance

Owens-Illinois – VP of Global Quality

Harley-Davidson – Director Corporate Quality

Alcoa – Director Corporate Quality

Bridgelux – VP Corporate Quality

Plexus – VP Corporate Quality

Fresenius – VP Corporate Quality

Alent – VP Corporate Quality

Corbian – VP Quality

Kellogs – VP Quality

Research Model

©LNS Research 2014

Industry Drivers and Challenges

©LNS Research 2013

Electronics Industry Overview

•Area of Focus•Component Manufacturing, Printed Circuit Boards, and Final Assembly

•Competitive Landscape•Global

•All sizes: multi-billion dollar companies to small job shops

•Market leaders include: Flextronics, Celestica, Sanmina-SCL, Jabil, and Plexus

•Customers•Generally large, powerful, and demanding

•Regulated and unregulated industries

•Medical Device, Aerospace and Defense, Industrial Equipment, etc.

©LNS Research 2012

Major Industry Challenges

•Shrinking Operating Margins•High competition/market concentration

•Pressures for large and small players in U.S., Europe, Mexico, and Asia

•Balancing Cost and quality

•Complex Supply Chains•Keeping operating margins low

•Issues with traceability and quality

•Disparate compliance standards

•Service and Warranty Management•Quality and traceability issues surface as higher warranty reserves and increased use of service

©LNS Research 2012

Major Industry Challenges

•Short Product Lifecycles•Rapidly changing consumer demands

•Collaboration and integration across the value chain: MOM, CRM, SCM, PLM, and EH&S

•Uncertain Demand•Cyclical and economic volatility

•Changing consumer tastes/preferences

•Sustainability/Regulatory Requirements•Tightening laws/regulations in electronics

• Companies are beginning to consider the product lifecycle beyond disposal

• Example: EU passed REACH and RoHS to protect environment

©LNS Research 2012

Research Demographics300+ Respondents to LNS Research Manufacturing Survey, 500+ Respondents to Quality Survey

©LNS Research 2014

Top Objectives & Challenges

©LNS Research 2014

• The top objectives are customer focused• The top challenges are people & systems related

Operational Excellence Journeys

©LNS Research 2014

Operational Excellence Journeys

Operational Excellence Goals & Metrics

©LNS Research 2013

Goals & Metrics - Alignment & Deployment

Goals & Metrics - Alignment & Deployment Process

1.) Understand and Articulate Strategy: have a clear and universally understood manufacturing strategy that is in support of the corporate business strategy2.) Translate Strategy into Specific Goals: turn that strategy into specific goals for business groups and associated supply chains, as well as plants, units, and production lines3.) Map Goals and Specific Measures for Success: use a cross-functional team to map each detailed translation across the enterprise4.) Determine Key Performance Indicators: develop a set of manufacturing KPIs to measure progress toward your goals5.) Establish Communication Procedures for KPIs: make sure the right information is getting to the right people in a timely manner6.) Set Processes for How to Act on KPI Information: determine best practices for individuals from the shop to top floor to interact with KPIs7.) Match Performance Incentives to Aligned Goals: reinforce the effectiveness of measuring KPIs by incentivizing progress

Categories/Sets of Operational Excellence Metrics

Top 28 Manufacturing KPIs within Categories/Sets

Improving Customer Experience & Responsiveness:1. On-Time Delivery to Commit2. Manufacturing Cycle Time3. Time to Make Changeovers

Improving Quality:4. Yield5. Customer Rejects/Return Material Authorizations/Returns6. Supplier’s Quality Incoming

Improving Efficiency:7. Throughput8. Capacity Utilization9. Overall Equipment Effectiveness (OEE)10. Schedule or Production Attainment

Reducing Inventory:11. WIP Inventory/Turns

Ensuring Compliance:12. Reportable Health and Safety Incidents13. Reportable Environmental Incidents14. Number of Non-Compliance Events / Year

Reducing Maintenance:15. Percentage Planned vs. Emergency Maintenance Work Orders16. Downtime in Proportion to Operating Time

Increasing Flexibility & Innovation:17. Rate of New Product Introduction18. Engineering Change Order Cycle Time

Improve Financial Performance:19. Total Manufacturing Cost per Unit Excluding Materials20. Manufacturing Cost as a Percentage of Revenue21. Net Operating Profit22. Productivity in Revenue per Employee23. Average Unit Contribution Margin24. Return on Assets/Return on Net Assets25. Energy Cost per Unit26. Cash-to-Cash Cycle Time27. EBITDA28. Customer Fill Rate/On-Time delivery/Perfect Order Percentage

Selecting and Implementing the Right Operational Excellence Metrics

• Benchmark• Decide / Commit• Choose metrics that directly

relate to SMART goals• Ensure that the metrics can

be reliably and efficiently produced

• Create team-based and role-based metrics

• Most people can only optimize their own time/activities around 5-6 metrics

• Plan, Do, Check, Act• Reward

Accelerating Success - People

©LNS Research 2014

Accelerating Success – People: Building Organizational Capabilities

Knowledge Management Issues & Opportunities: People, Process & Technology

People:• Aging Workforce (10,000 retiring per

day in US – Pew Research Center)• Knowledge Capture• Knowledge Transfer• Training & Certification• JIT Information Access• Leveraging SMEs• Team, Partner and Customer

Collaboration

Process & Technology:

Accelerating Success - Process

©LNS Research 2013

Accelerating Success - Process

Building Manufacturing Process Capabilities• Most companies are using combinations of 2 to 4 programs• Choose the most important programs by industry and issues• Training, certification, widespread engagement, collaboration

Accelerating Success - Technology

Architectural Approach to Quality Software

©LNS Research 2013

Accelerating Success – Technology

Accelerating Success – MOM Software

Accelerating Success – Real-Time Performance

Role-Based OI / EMI Capabilities

OI / EMI – Dashboards & Analytics

• Functional expectations & opportunities are growing

Big Data Analytics

• Big Data Analytics is about harnessing a collection of massive amounts of structured and unstructured data from across the enterprise• Exponential explosion of manufacturing data coming from connected devices / IoT – estimated 13.5 Billion manufacturing devices connected by 2022 (Cisco) • Previously unknown interrelationships between data will come to light with new analytics technologies like Hadoop

Big Data – Manufacturing Application Examples

• Enabling better product/production forecasts that tie to consumer trends• Improving interactions with suppliers based on dynamic sourcing needs• Providing faster customer service and support - harnessing knowledge• Better understanding customer requirements for new products• Better correlations of performance across multiple plants• Better understanding plant performance across multiple metrics• Performing predictive modeling of manufacturing data• Enabling real-time alerts based on analyzing manufacturing data• Correlating manufacturing and business performance information together• Mining combinations of manufacturing and other enterprise data to uncover new improvement and business opportunities

Mobile Technologies

• Mobile devices and applications have removed the restrictions of required on-site access, enabling workers to access the performance and decision support information applicable to their respective role, including:• Executives• Plant Managers/Supervisors• Plant Operators• Technical/Quality Personnel

• Can create an entirely paperless manufacturing environment• Allows information to be shared between suppliers and customers via similar mobile capabilities• 18% currently have Mobile Operations Visualization &Management capabilities• 14% have Mobile Operations Visualization & Management capabilities planned within 1 Year

Cloud Adoption for MOM Applications

• Cloud / SAAS Adoption Rates More Than Doubling in Manufacturer’s Future Plans

• 90% of MOM Vendors Either Have or Are Developing Cloud-based Solutions

Cloud Benefits for Manufacturers

• Benefits of Cloud versus On-Premise Solutions• Proven in IT applications

• Requires less internal IT resources

• Automatic software updates

• Unlimited capacity upgrades

• Built-in disaster recovery

• Universal remote access

• Easier to aggregate information across plants

• Little to no capital expenditures

• Lower lifecycle / maintenance costs

Top Selection Criteria for MOM Software

• Having Sufficient Functionality is Paramount• Cost & Ease of Integration with Existing Applications Come Next

Case Studies

©LNS Research 2013

• Before Software Supporting Operational Excellence• Heavy documentation requirements = management of

(literally) tons of data and paper.

• Cumbersome and time-consuming work flows to ensure tracking

• Reactionary approach to quality issues, struggles to meet ISO-9001 and AS-9100 requirements

• Reliance on nearly 40 stand-along spreadsheets to track all company data but each was a silo of information, lots of redundancies

Real-Life Example

• After Software Supporting Operational Excellence• Automated electronic workflows and electronic data

management.

• Efficient, non-redundant process flows

• Improved productivity• Exceeding standards for traceability, document

management and process controls• 25% cycle time reduction for audits• Eliminated manual processes and duplication of effort

• Leaner operations

• 32.5% reduction in scrap/waste

Case Study: Real-Life Example

Market Leaders Create a Holistic SQM Strategy

©LNS Research 2013

Summary / Recommendations

©LNS Research 2013


• Start or refine your Operational Excellence journey• Ensure alignment with strategy, goals, actions and metrics• Empower people with both team-based and role-based, real-time

performance information• Build organizational capabilities for sustainable success• Implement the most important process / programs to accelerate

progress• Over time, build a continuous improvement culture• Support process improvements and knowledge management with

technology – in particular, MOM software integrated with information in Enterprise and Automation Systems

• Investigate and experiment with new technologies – Cloud, Mobile, Big Data Analytics

• The appropriate scope of your journey may be at the plant, line of business or enterprise level


Thank You!!For More Information -Contact:

Matthew LittlefieldPrincipal Analyst – LNS [email protected]

• Leading OEMs, Distributors, Suppliers & EMSs use SiliconExpert Daily

• Our Electronic Component Database of over 250 million components powers our:

o Comprehensive software toolso Integrated solutionso Professional services

About Us

Reactive vs. Proactive Approaches to Obsolescence Management

250 Million+ Orderable Part Numbers

Up to 42 Parametric values/product line

Risk Analysis & Obsolescence Forecasting Algorithms developed with CALCE

Environmental Data tracked: EU & China RoHS, REACH, WEEE compliance & Material Declarations

Parametrically-derived cross-references for millions of parts

Our Database

Identifying the Impacts of SEC Regulations in the Electronics

Industry

Conflict Minerals

• Defined by Dodd-Frank Act Section 1502(e)(4)

• Tantalum, Tin, Tungsten, and Gold

• A mineral is conflict free if it did not originate in the DRC or surrounding countries

Definition of Conflict Minerals

Environmental Team

Access to this information is quickly becoming imperative as the first report is due on May 31, 2014

for the 2013 calendar year and then annually.

Conflict Minerals- Products

Top 10 Products with 3TG Parts

SiliconExpert Research and Analysis

Conflict Minerals Process

• Determine the requirements for each supplier within the regulations

• Determine due diligence responsibilities of each supplier/OEM

• Establish communication with supplier

• Determine documentation available and data collection procedures

Reactive vs. Proactive Approaches to Obsolescence ManagementSiliconExpert & Conflict Minerals

Data Collection

Most Up to Date Conflict Mineral Statuses-Over 1,000 suppliers

All Documents & Templates-EICC, COC, Conflict Minerals Policy, Responsibility Report, History

Search by Supplier or Smelter- Access to smelter & mining information

* EICC stands for: Electronic Industry Citizenship Coalition* COC stands for : certificate of compliance (company statement)

Conflict Mineral Module

New Module: Conflict Minerals

Market OutlookSmall & Medium EMS Companies

Custer Consulting Groupwww.custerconsulting.comMarch 2014

20140303

Challenges

Financial data on individual, small EMS companies typically not publicly available

Markets can be very localized

Topics

Global & U.S. EconomyElectronic Equipment- World overview- Target Domestic MarketsActive & Passive ComponentsEMS/ODM Markets- Global- N AmericaSummary & Forecasts

Business ConditionsAfter a weak 1H’13 global business conditions improved in the second half of the year

2013 finished strong

U.S. economy is currently expanding but there are signs of slower global growth

Weaker domestic military market offset by continued growth in instrument & control sectors

Encouraging Signs:- Electronic equipment shipments growing in all regions- Leading indicators are generally positive except for China.- Some re-shoring to N America

20140303

Global & U.S.Economies

Industrial Production – World% Change vs. One Year Earlier

Britain + 1.8 DecCzech Republic + 9.3 DecFrance + 0.5 DecGermany + 2.9 DecItaly - 0.7 DecNetherlands + 1.8 DecRussia - 0.2 JanSpain + 3.5 DecEuro Area + 0.5 Dec

Canada + 2.6 NovUSA + 2.9 JanChina + 9.7 DecIndia - 0.6 DecMalaysia + 4.8 DecSingapore + 3.9 JanS Korea + 2.6 DecTaiwan - 1.8 JanThailand - 6.1 DecJapan + 7.1 Dec

www.economist.com + Eurostat

20140301

U.S. Industrial ProductionIndex (2007=100)

www.federalreserve.gov/releases/g17/table1_2.htm

6065707580859095

100105110

1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014

IP

20140214

U.S. GDP Growth% Change vs. Prior Quarter (2005 $)

-10

-8

-6

-4

-2

0

2

4

6

8

10

1/95

3/95

1/96

3/96

1/97

3/97

1/98

3/98

1/99

3/99

1/00

3/00

1/01

3/01

1/02

3/02

1/03

3/03

1/04

3/04

1/05

3/05

1/06

3/06

1/07

3/07

1/08

3/08

1/09

3/09

1/10

3/10

1/11

3/11

1/12

3/12

1/13

3/13

www.bea.gov/national/

20131221

Purchasing Managers

Indices(Leading Indicators)

Global "Purchasing Managers" IndexDiffusion Index, >50 = Growth

Markit Economics

30

35

40

45

50

55

60Ja

nM

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pJa

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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PMI

20140303

China "Purchasing Managers" IndexDiffusion Index, >50 = Growth

Markit Economics

20140303

40

45

50

55

60

Jan

Apr Ju

lO

ctJa

nA

pr Jul

Oct

Jan

Apr Ju

lO

ctJa

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pr Jul

Oct

Jan

Apr Ju

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pr Jul

Oct

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pr Jul

Oct

Jan

Apr Ju

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Oct

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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PMI

U.S "Purchasing Managers" IndexISM

Diffusion Index, >50 = Growth

ISM

30

35

40

45

50

55

60

65

70Ja

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ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

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Dec

May Oct

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Sep

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May Oct

Mar

Aug Ja

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Feb

Jul

Dec

May Oct

Mar

Aug Ja

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1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014

PMI

ISMGrowth >50

20140303

PMI Leading Indicator as

EMS Forecasting Tool

U.S PMI Leading Index vsN American EMS Shipments

ISM & IPC

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

Jan

Mar

May Ju

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Mar

May Ju

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2007 2008 2009 2010 2011 2012 2013 2014

PMI Leading Indicator

EMS Shipments

Zero Growth

20140303

3/12 Growth

1 yearLead

BusinessCycles

Industry Dynamics

BUSINESS CYCLE Electronic Equipment, EMS/ODM Companies, Components, Materials & Capital Equipment

-6

-4

-2

0

2

4

6

0 30 60 90 120 150 180 210 240 270 300 330 360

Electronic Equipment

EMS/ODM

Components

Raw Materials

Capital Equip

Expansion ContractionTime ->

20130915

% Growth

+

-

0

U.S. Electronic Equipment, N. American PCBs, Small/Med EMS & PCB Process Equipment

$ Shipment Growth20140222

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

PCBElec EquipPCB Process EquipmentZero GrowthSmall/Med EMS

3/12 Rate of Change

IPC, U.S. Dept of Census & Process Equipment Financial Reports

WorldElectronic Equipment

Production

World Electronic Equipment Shipmentsby Region 2013 @ 2012 Exchange Rates

Electronic Outlook 10/13

20%

15%

6%52%

7%

N AmericaW EuropeJapanRest of AsiaROW

Total Production: $2,002 Billion

FinalAssembly

World Electronic Equipment Production by Type@2012 Exchange Rates


2012 TOTAL: $1,991 Billion

2.3%

22.0%

13.1%

7.5%26.4%

9.0%

10.1%

9.7%BusinessCommunicationConsumerAutoComputerGov/MilitaryIndustrialInstrument

20130101

World Electronic Equipment ProductionBy Type20140221

0

100

200

300

400

500

600

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Mill

ions

industr+instrugov/milComputer & PeripheralsautomotiveconsumerTelecom/DatacomBusiness

based upon some historical estimates

+5.6%

Electronic Equipment SuppliersComposite of 141 Public Companies

Revenue, Net Income & Inventory

Computer 13, Internet 9, Storage 10, Communication 20, SEMI 20, Medical 23, Instruments 11, Military 6, Business & Office 3, Consumer 13, Automotive 11

20140221

-100

0

100

200

300

400

500

600


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ Billions

Revenue

Income

Inventory

+5.6%

Electronic Equipment SuppliersComposite of 141 Public Companies

Quarterly Revenue Growth

Computer 13, Internet 9, Storage 10, Communication 20, SEMI 20, Medical 23, Instruments 11, Military 6, Business & Office 3+ Media tablets from all vendors, Consumer 13, Automotive 11

20140221

-20

-15

-10

-5

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5

10

15

20

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Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

% G

row

th

Global Electronic Equipment Shipment Growth 12/12 & 3/12 Rate of Change

141 OEM company sales composite

20140221

0.800.850.900.951.001.051.101.151.201.251.30


2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Rat

e of

Cha

nge

12/12 3/12 0 Growth

Inventory/Sales Ratios Large Component Distributors, Semiconductor, EMS & OEM Companies

Custer Consulting Group based upon company financials

20140222

0.15

0.25

0.35

0.45

0.55

0.65

0.75

0.85

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Semiconductor

EMS

OEM

Component Distrib

Ratio: Inventories/Sales

RegionalElectronic Equipment

Production

European Computer, Electronic & Optical Products Production

Eurostat, C26 category, EU 27 countries

20140212

80

85

90

95

100

105

110

115

120

1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Index (2010=100), Seasonally Adjusted

Japan Electronic Equipment Production by Month 2000 to Present

0200400600800

100012001400160018002000

1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Elec Application EquipElectronic Measuring InstrumentationCommunications EquipmentComputers & Related EquipmentElectronic Business MachinesConsumer Electronic Equipment

JEITA www.jeita.or.jp/

20140221

Yen Billion

Taiwan/China Electronic Equipment ProducersComposite of 101 Manufacturers

Consolidated Revenue

Taiwan listed companies, often with significant manufacturing in China

20140212

0

100

200

300

400

500

600

700

800

900

1000

1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Dec 2013 up 10.3% compared toDec 2012 and up 1.1% compared to Nov 2013

NT$ Billions

U.S. Electronic Equipment Orders & ShipmentsComputer, Communications, Measurement & Control and Military

www.census.gov/indicator/www/m3/

20140301

14

16

18

20

22

24

26

28

30

32

34

Jan

Jun

Nov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014

Thou

sand

s

Orders

Shipments

$ Billions (monthly, seasonally adjusted)

Regional Electronic Equipment Shipment Growth

20140301

0.60.70.80.91.01.11.21.31.41.51.61.71.81.92.0

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Taiwan/China

Japan

USA

Europe (EU27)

Zero Growth

3/12 Rate of Growth (in local currency)

Sources: IPC, JPCA, Taiwan/China composite; Eurostat "wiring devices" for Europe

Calendar Year

World Electronic Equipment Monthly Shipments

Converted @ Constant 2012 Exchange Rates

Source: Custer Consulting Group & Electronic Outlook Corp

20140221

0102030405060708090

100

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

USA

W Europe

Japan

Taiwan+China

ROA

ROW

US$ B


Converted @ Constant 2012 Exchange Rates


20140221

0%10%20%30%40%50%60%70%80%90%

100%

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

ROWROATaiwan+ChinaJapanW EuropeUSA

% of US$ Total


Converted @ Fluctuating Exchange Rates


20140301

80

100

120

140

160

180

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

January 2014 up 8.4% vs January 2013

US$ M

U.S. Electronic Equipment -Orders, Shipments &

Inventories

U.S. Electronic Equipment Order & Shipment GrowthComputer, Communications, Measurement & Control and Military


20140301

0.70

0.80

0.90

1.00

1.10

1.20

1.30

Jan

Jun

Nov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014

ShipmentsOrdersZero Growth

3/12 Rate of Change

U.S. Electronic Equipment Orders & ShipmentsComputer, Communications, Measurement & Control and Military


20140301

14

16

18

20

22

24

26

28

30

32

34

Jan

Jun

Nov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014

Thou

sand

s

Orders

Shipments


U.S. Electronic Equipment OrdersMonthly Data


20140301

0

2

4

6

8

10

12

14

16

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014

Search & NavigationElectromedical, Instr & ControlCommunicationComputerDefense


U.S. Electronic Equipment OrdersMonthly Data


20140204

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jan

Jun

Nov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Medical, Measuring & Control

Search & Navigation - non Military

Communication- non Military

Computer & Related

Military-Search & Navigation

Military-Communications


U.S. Electronic Equipment InventoriesMonthly Data


20140301

0

2

4

6

8

10

12

14

16

18

20

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014

Thou

sand

s Search & NavigationElectromedical, Instr & ControlCommunicationComputerDefense


U.S. Electronic Equipment Inventories vs. Orders


20140301

1.00

1.20

1.40

1.60

1.80

2.00

2.20

2.40

Jan

May Se

pJa

nM

ay Sep

Jan

May Se

pJa

nM

ay Sep

Jan

May Se

pJa

nM

ay Sep

Jan

May Se

pJa

nM

ay Sep

Jan

May Se

pJa

nM

ay Sep

Jan

May Se

pJa

nM

ay Sep

Jan

May Se

pJa

nM

ay Sep

Jan

May Se

pJa

nM

ay Sep

Jan

May Se

pJa

nM

ay Sep

Jan

May Se

pJa

nM

ay Sep

Jan

May Se

pJa

nM

ay Sep

Jan

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014

Ratio Inventories/Orders

Market Segments

Volume (Shift to Low Cost Areas)Personal ComputersMobile PhonesOther Consumer ElectronicsDatacom/TelecomAutomotive

"Protected"MilitaryMedicalInstruments & ControlsHigh IP Content

Prototype, Quick Response, Short Run, Need for Local Support

Global Electronic Supply Chain Growth 4Q'13 vs. 4Q'12 (Preliminary)

6-4

-83

017

-57

59

-432

53

612

88

136

4

-10 0 10 20 30 40Electronic Equipment

MilitaryBusiness & Office

Instruments & ControlsMedical

CommunicationInternet

ComputerData Storage

AutomotiveConsumer

SEMI EquipSemiconductors (SIA)Passive Components

PCBsComponent Distributors

Large EMS (excl Foxconn)ODM

PCB Process EquipmentMaterials

PCB Laminate

% Change

20140302

US$ equivalent at fluctuating exchange; based upon industry composites including acquisitions

European Electronic Supply Chain Growth 4Q’13 vs. 4Q’12

00

3-6

-210

8

76

-25

-8 -6 -4 -2 0 2 4 6 8 10 12

Electronic EquipmentOffice equipment

Instruments & ControlsMedical electronics

Domestic Electric AppliancesMotor Vehcles

Airplane/Aerospace

Semiconductors (SIA in euros)Electronic components & boards

Loaded electronic boardsWiring devices

% Change

20140212

Euro denominated growth rates; Eurostat, SIA & Custer Consulting Group

U.S Electronic Supply Chain Shipment Growth 4Q’13 vs. 4Q’12

04

-4-3

-2-6

146

1

170

31

3

-10 -5 0 5 10 15 20

Electronic EquipmentElectromedical, Measurement & Control

Search & NavigationComputer Related

CommunicationDefense

AutomotiveAirplane/Aerospace - non Defense

Airplane/Aerospace - Defense

Semiconductors to N AmericaSmall EMS

PCBsPassive componentsIndustrial Production

% Change

20140304

Custer Consulting Group

Electronic Equipment

Markets of Interest

ChangingElectronicEquipment

Markets

Smart Connected Device Shipments by Type

Gartner 1/14

20140114

2012 2013 2014 2015Oth Ultramobile (Hybrid &

Clamshell) 9 17 40 64

Mobile Phone 1,746 1,804 1,893 1,965Tablet (ultramobile) 120 180 263 325PC (Desktop & Notebook) 341 299 278 268

0

500

1,000

1,500

2,000

2,500

3,000Units (millions)

AutomotiveElectronics

World Motor Vehicle Production by Geography 2013

Autos, Trucks & Busses


TOTAL: 86.7 Million Units

18.8%

14.3%

10.6%24.8%

17.3%

14.3%

Vehicles

N AmericaW EuropeJapanChina (PRC)Rest of AsiaROW

Automotive Equipment SuppliersComposite of 11 Public Companies


Autoliv, Borg Warner, Continental AG, Delphi, Federal Mogul, Gentex, Johnson Controls, Lear, TRW Automotive, Valeo, Visteon

20140225

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ BillionsRevenueIncomeInventory

+9.4%

U.S. Vehicle Shipments

0

5

10

15

20

25

30

1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Lt Trucks & Utility Vehicles Heavy Duty Trucks Automobiles

www.census.gov/indicator/www/m3

20140204

US$ Billion

Aviation, Government &

Military Electronics

U.S. Aircraft & Parts Shipments

02468

101214161820

1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Non-Defense Defense

www.census.gov/indicator/www/m3

US$ Billion

20140301

Military EquipmentComposite of 6 Public Companies


General Dynamics, Harris, Lockheed, Northrop Grumman, Raytheon, Rockwell Collins

20140209

-5.00.05.0

10.015.020.025.030.035.040.045.0


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ Billions

Revenue

Income

Inventory

- 4.1%

Global Military Equipment Shipment Growth 12/12 & 3/12 Rate of Change

Industry sector sales composite

20140209

0.85

0.95

1.05

1.15

1.25

1.35

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014

Rat

e of

Cha

nge

12/12 3/12 0 Growth

U.S. Defense Capital GoodsOrders & Shipments


20140301

0

5

10

15

20

25

30

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

Jan

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014

Thou

sand

s

Orders

Shipments


U.S. Military Electronics Orders & ShipmentsDefense Communication & Search & Navigation Equipment


20140204

0

1

2

3

4

5

6

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Thou

sand

s Orders

Shipments


U.S. Government & Military Electronics Production by Type

2013

Electronic Outlook

TOTAL: $83.5 Billion

7.0%7.7%

27.5%

25.7%

0.7%

10.6%

14.4%

0.8% 5.6%

Vehicles

RADAR

GUIDANCE/CONTROL

COMM & NAVIGATION

ELECTRONICWARFARESIMULATION & TRAIN

COMPUTER

ELECTRO-OPTICAL

More DetailsAvailablefor eachCategory

U.S. Government & Military ElectronicsCommunication & Navigation

2013

Electronic Outlook


9%

22%

22%9%

14%

15%

2%5%

2%

Vehicles Telecommunication

Radio Communication

Microwave communication

Comm Checkout & Support

Other Communication

Airborn Navigation

Surface/marine/ground nav.

Underwater navigation

Nav checkout & support

Instruments & Control Equipment

U.S. Electromedical, Measurement & Control EquipmentOrders & Shipments


20140204

4

5

5

6

6

7

7

8

8

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Orders

Shipments


U.S. Industrial Electronics Production2013

Electronic Outlook


26.6%

25.1%

9.7%

15.0%

0.6%11.7%

11.2%

Vehicles

ControlsProduction EquipmentProduction Support/ServEnvironmental SystemsAppliance ControlsOther Ind ElecAll Other

Note: Similar data available for other electronic equipment sectors

U.S. Instrumentation Equipment Production2013



8.0% 4.1%

53.2%

20.7%

1.3%1.4%

8.2%

3.3%

$

Test & MeasurementAutomatic TesterMedicalAnalyticalNuclear InstrumentOptical & UltrasonicAvionicOther


Instruments & Control EquipmentComposite of 12 Public Companies


Agilent, Ametek, Emerson, Itron, Keithly, LeCroy, PerkinElmer, Rockwell Automation, Teledyne, ThermoFisher, Varian, Woodward Govenor

20140222

-2.00.02.04.06.08.0

10.012.014.016.018.0


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ Billions

Revenue

Income

Inventory

3.4%

Rank Company 2011 Sales $M 2011/2010 Growth1 Danaher (T&M div) 3,391 19.7%2 Agilent Technologies (EMG div) 3,316 19.1%3 Teradyne 1,429 -8.8%4 Rohde & Schwarz 1,300 private5 Advantest (semiconductor test div) 1,272 52.6%6 National Instruments 1,024 17.3%7 Anritsu (T&M div) 882 31.9%8 Yokogawa (T&M div) 436 -0.7%9 Aeroflex (ATS div) 348 -1.6%10 Electro Rent 220 43.1%11 LeCroy 194 25.7%12 LTX-Credence 179 -30.3%13 McRath RentCorp (TRS RenTelco div) 125 16.2%

Test & Measurement Equipment SuppliersPublic Companies

Frost & Sullivan 6/12

Danaher Corp.Revenue, Net Income & Inventory

CY

20140201

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Q1Q2Q3 Q4Q1Q2Q3Q4Q1 Q2Q3Q4Q1Q2Q3 Q4Q1Q2Q3Q4Q1 Q2Q3Q4Q1Q2Q3Q4 Q1Q2Q3Q4Q1Q2 Q3Q4

2005 2006 2007 2008 2009 2010 2011 2012 2013

$ Billions

Revenue

Income

Inventory

DHR

+ 6%

Medical EquipmentComposite of 23 Public Companies


Analogic, Bio-Rad Laboratories, Boston Scientific, Bruker, CareFusion, Covidien, Draeger, Guidant, Hill-Rom, Intuitive Surgical, Invacare, Kinetic Concepts, Medtronic, ResMed, St Jude Medical, Smith & Nephew, STERIS, Stryker, Varian Medical, Waters, Zimmer, Zoll

20140222

-5

0

5

10

15

20

25


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ Billions

Mill

ions Revenue

Income

Inventory

+0.1%

U.S. Medical Instrument Production2013



15.2%

4.1%

33.4%

22.5%

1.3%

Vehicles

DiagnosticTherapeuticOther Medica InstrRadiologicNuclear Medicine


Medtronic IncRevenue, Net Income & Inventory

CY

20140221

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0


19992000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ Billions

Revenue

Income

Inventory

MDT

+ 3%

Medical Semiconductor Market Forecast

IC Insights 12/13

3.23.6

4.0 4.1 4.44.9

5.66.5 6.8

-5%

14%10%

5%7%

12%15% 16%

4%

-0.1

-0.05

0

0.05

0.1

0.15

0.2

0.25

0.3

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

2009 2010 2011 2012 2013 2014 2015 2016 2017

US$ billions

20131222

% Change

CommunicationEquipment

Communication Equipment SuppliersComposite of 20 Companies

10 mobile phone makers, 10 other telecom equipment makers plus estimate of other mobile makers


3COM, ADC Telecom, Alcatel+Lucent, Ciena, Ericsson, Motorola Solutions,, Nokia, Polycom, TellLabs, Palm ; Apple iPhone, HTC, Huawei Device, LG, Motorola Mobility, Nokia, RIM, Samsung, Sony Mobility, ZTE; Euros & Krona converted at fluctuating exchange; mobile phone volumes from company reports & Gartner Dataquest quarterly unit shipment estimates; historical data included for acquired companies

20140209

-40-20

020406080

100120140160


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ Billions

Mill

ions Revenue

Income

Inventory

+ 16.8%Preliminary 4Q’13 results; smartphones driving growth

U.S. Communication Equipment Orders & Shipments


20140301

0

2

4

6

8

10

12

14

16

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014

Thou

sand

s Orders

Shipments


InternetInfrastructure

"Internet" Equipment SuppliersComposite of 9 Public Companies


ADTRAN, Cisco Systems, Extreme Networks, Juniper Networks, Mattson Technology, Netgear, Sierra Wireless, Sonus Networks, Sycamore

20140222

-4.0-2.00.02.04.06.08.0

10.012.014.016.0


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ Billions

Revenue

Income

Inventory

-4.9%

LargeCiscoDecline

Layer 2/3 Ethernet Switch Vendors 3Q’13

www.idc.com 3Q'13 World Total US$ 5.36 Billion

62.6%9.4%

3.6%2.7%2.0%

19.8%

$

CiscoHPAlcatel-LucentJuniperDellOthers

Cisco SystemsRevenue, Net Income & Inventory

CY

20140214

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ Billions

Revenue

Income

Inventory

CSCO

- 8%

$639 M due to Scientific Atlanta acquisition

Computers &Related Products

U.S. Computers & Related ProductsOrders & Shipments


20140301

0

2

4

6

8

10

12

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014

Thou

sand

s Orders

Shipments


Makeup of Personal Computer Market

IC Insights 5/12

20121027

2009 2010 2011 2012 2013 2014 2015Tablets 1 17 63 110 160 249 341Netbooks 26 27 15 8 6 5 4Notebooks 137 167 184 205 225 253 279Desktops 146 155 154 155 153 156 159

0100200300400500600700800900

1,000

2010-2015 CAGRTablets + 82.9%Netbooks - 31.7%Notebooks + 10.8%Desktops + 0.5%

Units (millions)

World Server Shipment Revenue

Gartner Dataquest 2/14 & prior reports

0

2

4

68

10

12

14

1618

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2005 2006 2007 2008 2009 2010 2011 2012 2013

RevenueUS$ Billions

20140226

-6.6%

World Server Shipments4Q’13

Gartner Dataquest 2/2014


28.1%

26.5%15.2%

4.7%

4.2%

21.3%HPIBMDellCiscoOracleOthers

Industrial Robots: Share by Market

IFR 1/14

39.7%

20.5%

8.6%

7.2%

3.1%21.0%

Automotive

Electronics/Electrical

Metals/Machinery

Chemical, Rubber &PlasticsFood & Beverage

Other

159.3 Million Units in 2012

Industrial Robots: Sales by Region

IFR World Robotics 2013

20140505

2006 2007 2008 2009 2010 2011 2012Total 111.1 114.4 113.0 60.0 120.6 166.0 159.3India 0.8 0.9 0.9 0.4 0.8 1.5 1.5ROW 2.6 2.8 1.7 1.0 3.7 9.2 7.2Asia Pacific 5.9 4.3 6.8 3.6 8.7 11.1 12.0China 5.8 6.6 7.9 5.5 15.0 22.6 23.0S Korea 10.8 10.1 11.6 7.8 23.5 25.5 19.4N America 17.4 18.7 16.2 8.4 16.4 24.3 26.3Japan 37.4 36.1 33.1 12.8 21.9 27.9 28.7Europe 30.4 34.9 34.7 20.5 30.7 43.8 41.2

111.1 114.4 113.0

60.0

120.6

166.0 159.3

020406080

100120140160180200

Units (000)

Robots: Accelerating Demise of Factory Jobs?

ElectronicComponents

Semiconductors

World Semiconductor ShipmentsMonthly US$

SIA

20140303

0

5

10

15

20

25

30

Jan

Aug Mar

Oct

May

Dec Ju

lFe

bSe

pA

prN

ov Jun

Jan

Aug Mar

Oct

May

Dec Ju

lFe

bSe

pA

prN

ov Jun

Jan

Aug Mar

Oct

May

Dec Ju

lFe

bSe

pA

prN

ov Jun

Jan

Aug Mar

Oct

May

Dec Ju

lFe

bSe

pA

prN

ov Jun

Jan

Aug Mar

Oct

May

Dec

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Thou

sand

s

3-Month AvgUS$ Billions (3-month average)

2009 recession much sharper but shorter than 2001

Total Semiconductor Shipments to an AreaMonthly Shipments - Reporting Firms

SIA website: www.sia-online.org/

20140303

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Jan

Jun

Nov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Japan

N America

Europe

Asia-Pac

$B (3-month average) SE Asia

N American Semiconductor ShipmentsMonthly & 3-Month Average Shipments

SIA website: www.sia-online.org/

20140303

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Jan

Jun

Nov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Thou

sand

s

Month

3-Month Avg

$ Billions

Semiconductor Shipments to N. Americavs. U.S Electronic Equipment Production

Total $ Semiconductor Shipments from All Countries to N. America www.sia-online.org/U.S. Electronic Equipment Shipments www.census.gov/indicator/www/m3/

20140303

0.3

0.5

0.7

0.9

1.1

1.3

1.5

1.7

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Semiconductors

El Equip

3/12 Rate of Change(US$)

Semiconductor Fab, Assembly, Packaging,Test & Measurement

Equipment

Semiconductor Capital Equipment Shipments by Area

www.semi.org, www.seaj.or.jp/ 9/13

20130914

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

ROW

China

Taiwan

S Korea

N America

Japan

Europe

$ Billions

Semiconductor Fab, Test & Measurement Composite of 20 Public Companies


Applied Materials, ASM Intl, ASML, Advantest, KLA Tencor, Novellus, Hitachi Hi Tech, Lam Research, BTU, LTX-Credence, FEI, FSI, Intervac, Kulicke & Soffa, MKS Instruments, Rudolph, Teradyne, Ultratech Stepper, Varian semiconductor, Veeco

20140222

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

US$ Billions @ fluctuating exchange

Chart TitleRevenue

Income

Inventory

+33%

Global Semiconductor & Semiconductor Capital Equipment3-Month Shipment Growth Rates on $ Basis

Sources: SIA; Semiconductor Equipment Association of Japan, www.semi.org, Custer Consulting Group SEMI equipment sector composite growth

20140303

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Jan

Aug Mar

Oct

May

Dec Ju

lFe

bSe

pA

prN

ov Jun

Jan

Aug Mar

Oct

May

Dec Ju

lFe

bSe

pA

prN

ov Jun

Jan

Aug Mar

Oct

May

Dec Ju

lFe

bSe

pA

prN

ov Jun

Jan

Aug Mar

Oct

May

Dec Ju

lFe

bSe

pA

prN

ov Jun

Jan

Aug Mar

Oct

84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

SemiconductorsSEMI Capital EquipZero Growth

3/12 Rate of Change

Passive Components

Passive ComponentsComposite of 11 Companies


AVX, Bel Fuse, Diodes, International Rectifier, Littlefuse, Murata, RF Micro, Rohm, Vishay, TDK, Yageo;Euros, Yen & NT$ converted to US$ at fluctuating exchange rates

20140214

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ Billions

Revenue

Income

Inventory

+1.8%

U.S. Production: "Other" Electronic Components (excludes semiconductors)

Orders & Shipments

http://www.census.gov/indicator/www/m3/

20140208

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Thou

sand

s

Orders

Shipments

$B (Seasonally Adjusted)

Calendar Year

PCB Fabrication

World PCB Monthly ShipmentsConverted @ Fluctuating Exchange Rates

Source: Custer Consulting Group

20140221

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

Thou

sand

s ROWRest of AsiaKoreaTaiwan/ChinaJapanEuropeN America

US $ Billions

Calendar Year

World PCB Shipments (with forecast)Converted @ Fluctuating Exchange Rates

20140222

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

ActualForecast

+1.3%

-1.1%

$ Billions

Source: Custer Consulting Group - 2010 base year expanded by monthly growth of N. American, European, Japanese & Taiwan/China monthly PCB shipments

Calendar Year

Growth calculations:Europe = Eurostat “Wiring Device”Japan & N. America from JPCA & IPC dataTaiwan/China:46 rigid & flex company compositeRest of Asia growth = Taiwan/China 44 company compositeIncludes S Korea data for 2011-2013

+4.9%

2012 World PCB Production by Region

IPC 8/13

5.0%

4.5%

14.7%

42.8%

12.6%

13.4%6.6% 0.4%

N AmericaEuropeJapanChina/HKTaiwanS KoreaRest of AsiaROW

20130831

Total: $60.0 Billion

(US$ M @ Average 2012 Exchange)

2012 World PCB Production by End Market

IPC 9/13

20.1%

34.2%

17.8%

3.9%

9.3%

2.5%

4.5%7.7%

PC/OfficeCommunicationConsumerDefense/SpaceIndustrialMedicalOthersAutomotive

20131111

Total: $60 Billion

Rank Maker Country US$M1 Nippon Mektron Japan 2,8882 Unmicron Taiwan 2,3833 SEMCO Korea 2,0024 Young Poong Group Korea 2,0005 Ibiden Japan 1,9246 Zhen Ding Taiwan 1,5127 Tripod Taiwan 1,3968 TTM Technologies USA 1,3109 Sumitomo Denko PC Japan 1,21910 Daeduck Group Korea 1,14711 HannStar Board (GBM) Taiwan 1,11212 Viasystems Group Inc USA 1,08013 Nanya PCB Taiwan 1,00714 Kingboard PCB Group HK/China 93515 CMK Corp Japan 90816 Shinko Electric Japan 86917 Mflex USA 81918 Kinsus (+Plotek) Taiwan 78819 Compeq Taiwan 78320 Meiko Electronics Japan 75921 TPT (Taiwan Techvest) Taiwan 72222 AT&S Austria 69823 Multek USA 65024 WUS Group Taiwan 64425 LG Innotek Korea 600

World’s Top PCB Companies - 201220131111

Dr Hayao Nakahara, N.T. Information Ltd 9/2013

N American Rigid & Flexible PCB Shipments & Orders

20140204

0

50

100

150

200

250

1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11

2008 2009 2010 2011 2012 2013

Shipments

Orders

2013/2012 Rigid & Flex PCB Shipment Growth:

-1.9%

Note: IPC survey captures "market" not domestic production. About 15% of the above represents imported boards resold by N American PCB producers in survey.

$M (statistical sample of about 50% of producers)

IPC

U.S. Electronic Equipment vs. Rigid & Flex PCBs$ Order Growth

20140301

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

Jan

Jun

Nov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

Aug Ja

nJu

nN

ov Apr

Sep

Feb

Jul

Dec

May Oct

Mar

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

PCB

Equipment

Zero Growth

3/12 Rate of Change

IPC & U.S. Dept of Census

Inventory builds and excess orders

Inventory/order corrections

2012 Vertical Markets for PCBs in N America(US$)

WECC 8/2013

26%

15%11%

11%

32%

2%11.0%

Military/AerospaceComputersIndustrialInstrument/MedicalCommunicationsAutomotiveConsumer

20130912

Total: $3.0 Billion

EMS & ODM Companies

EMS & ODM Estimated Global Revenue vs. Total Available Market

20131119

2009 2010 2011 2012 2013 2014 2015ODM 227 308 299 270 272 299 320EMS 75 86 96 116 105 110 115TAM 1195 1284 1388 1394 1399 1485 1614

11951284

1388 1394 13991485

1614

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800$ Billions

ODMEMSTAM

Custer Consulting Group 11/13, TAM = 0.7* Electronic Equipment Production at Fluctuating Exchange

2013/20122012 2013 Growth %

Hon Hai (Foxconn) Taiwan 141,122 133,349 -6%Flextronics Singapore 24,670 24,197 -2%Jabil Circuit USA 17,462 18,200 +4%Sanmina-SCI USA 6,086 5,872 -4%Celestica Canada 6,507 5,809 -11%Benchmark Elec USA 2,468 2,450 -1%Plexus USA 2,308 2,232 -3%Venture Mfg Singapore 1,912 1,831 -4%Sypris USA 342 331 -3%

Total 202,877 182,386 -10%

Large Global EMS Providers20131117

Sources: Company data, 4Q’13 estimated by Custer Local currency converted at fluctuating exchange

2012 vs. 2013 Sales ($M)

Large EMS Providers Composite of 9 Public Companies


Benchmark+Pemstar, Celestica, Flextronics+Solectron, Foxconn, Jabil, Plexus, Sanmina-SCI, Sypris, Venture Mfg

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

US$ Billions @ fluctuating exchange

Revenue

Income

Inventory

+7%

20140208

-1%Q1'14/Q1'13

Guidance

Large EMS Providers Composite of 8 Public Companies


Benchmark+Pemstar, Celestica, Flextronics+Solectron, Jabil, Plexus, Sanmina-SCI, Sypris,Venture Mfg

20140208

-40

-30

-20

-10

0

10

20

30

40

50

60


2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Excludes Foxconn

Foxconn Electronics (Hon Hai), TaiwanRevenue, Net Income & Inventory

CY

20140115

0

200

400

600

800

1000

1200

1400


1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

NT$ (Billions)

Revenue

Income

Inventory

2317

+17%

FlextronicsRevenue, Net Income & Inventory

CY

20140201

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0


19992000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014

$ Billions

Revenue

Income

Inventory

+ 17%

5.9-6.31/29/14

FLEXFY ends March 31

Plexus CorpRevenue, Net Income & Inventory

CY

20140126

-100

0

100

200

300

400

500

600

700


19992000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014

$ Millions

Revenue

Income

Inventory

+ 1%

535-5651/15/14

PLXSFY ends September

Medium Size EMS Providers Composite of 10 Public Companies


CTS, Keytronic, LaBarge, NamTai, Nortec, Raven, Sigmatron, Sparton, Sypris, Winland

20131127

-200

0

200

400

600

800

1000

1200


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ Millions

Revenue

Income

Inventory

-6%

Nortech Systems IncRevenue, Net Income & Inventory

CY

20131119

-5

0

5

10

15

20

25

30

35


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ Millions

Thou

sand

s

Revenue

Income

Inventory

NSYS

+ 7%

Raven Industries IncRevenue, Net Income & Inventory

CY

20131127

0

20

40

60

80

100

120

140


1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ Millions

Thou

sand

s

Revenue

Income

Inventory

RAVN

+ 8%

Sypris SolutionsRevenue, Net Income & Inventory

CY

20131119

-150

-100

-50

0

50

100

150

200


1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ Millions

Revenue

Income

Inventory

SYPR

- 3%

SigmaTron International, IncRevenue, Net Income & Inventory

CY

-20

-10

0

10

20

30

40

50

60


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

US$ (Millions)

Thou

sand

s

Revenue

Income

Inventory

20140126

SGMA

+ 7%

SMTCRevenue, Net Income & Inventory

CY

20131119

-100

-50

0

50

100

150

200

250

300


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

US$ (Millions)

Revenue

Income

Inventory

- 4%

TSE.SMX

Sparton CorporationRevenue, Net Income & Inventory

CY

20140207

-20

0

20

40

60

80

100


19992000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ Millions

Revenue

Income

Inventory

SPA

+ 28%

EMS Inventories/Sales 9 Large & 12 Medium Sized Companies

Large: Benchmark+Pemstar, Celestica, Flextronics+Solectron, Foxconn, Jabil, Plexus, Sanmina-SCI, Sypris, Venture Mfg

20140208

0.15

0.25

0.35

0.45

0.55

0.65

0.75


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Large Medium

Medium: CTS, Keytronic, LaBarge, NamTai, Nortec, Raven, Sigmatron, Sparton, Sypris, Winland

Ratio: Inventories/Sales

2013/20122012 2013 Growth %

Foxconn (Hon Hai) 136,515 133,238 -2%Pegatron 30,800 32,029 +4%Quanta Computer 33,400 29,666 -11%Compal Electronics 23,567 23,341 -1%Wistron 22,869 21,793 -5%Inventec 15,406 15,537 +8%Asustek Computer 15,237 15,616 +2%Chimei Innolux 16,241 14,244 -12%Lite On Technology 7,266 7,171 -1%Total 301,301 292.635 -3%

Large Taiwan ODM Providers20140110

Source: Company data, NT$ converted at constant avg 2013 exchange (29.672 NT$ = 1US$)Consolidated company sales (to be updated soon to consolidated sales)

2012 vs. 2013 Sales ($M)

Taiwan ODM CompaniesComposite Sales of 11 Large Manufacturers

20140114

0100200300400500600700800900

1,000

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Jan 2014 was 3.8% below Jan 2013 and 25% sequentially below Dec 2013

NT$ (Billions)

Asustek Computer, Chei Mei, Compal Electronics, Foxconn, Chimei Innolux , Inventec, Inventec Appliance, Lite On Technology, Mitac International, Pegatron, Quanta Computer, Wistron, Chei Mei Display replacing Chei Mei & Innolux Display 3/10 & later

Calendar YearCompany Financial Releases

Large ODM Companies Composite of 10 Public Manufacturers


Asustek Computer, Compal Electronics, Foxconn, Chimei Innolux, Inventec, Inventec Appliance, Lite On Technology, Mitac International, Pegatron, Quanta Computer, Wistron

20140114

-40

-20

0

20

40

60

80

100

120


1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Structure of European EMS Industry2012

Reed Electronics Research 12/12

13.27

3.39

3.75

5.55

Group 1 Group 2

Group 3 Group 4

20140118

Group 1 Group 2

Group 3 Group 4

Number of CompaniesTurnover of Each Segment

Eur billion

850+

52

6 19

European EMS by Region

Reed Electronics Research 1/14

2201401180131020

14.6 14.4 14.7 14.9 15.3 15.8

11.0 11.1 11.3 11.4 11.7 12.0

0

2

4

6

8

10

12

14

16

18

2012A 2013E 2014F 2015F 2016F 2017F

CEE, N Africa & OthW Europe

Euro (Billions)

Forecasting EMS Salesusing

Leading Indicators

Global EMS & ODM Companies Composite of 53 Public Companies

Revenue

0

20

40

60

80

100

120


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

US$ Sales @ fluctuating exchangeM

illio

ns +3.4%

20140208

US $ Billions

IPC Small & Medium N American EMS Company Revenue Index

0

20

40

60

80

100

120

140

1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11

2007 2008 2009 2010 2011 2012 2013

20140208

Index 2010 avg month = 100

IPC Small/Medium EMS vs Composite of 53 Public EMS/ODM Companies

Revenue

0

5000

10000

15000

20000

0

20

40

60

80

100

120


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

53 CompanyIPC Small/Medium

20140208

US $ Billions

IPC EMS Small & Medium CompanyN. American Shipments & Bookings

Markit Economics & ISM

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

2007 2008 2009 2010 2011 2012 2013 2014

PMI

Ship

Book

Zero Growth

20140303

IPC Small & Medium Company EMS vs N. American PCB Shipments


0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

2007 2008 2009 2010 2011 2012 2013 2014

PMI

Small/Med EMS

PCB

Zero Growth

20140303

IPC N American Small/Medium EMS vsComposite Sales of 53 Global EMS/ODM Companies


0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PMI

IPC N AmericanSmall/Medium

53 Company EMS/ODM

Zero Growth

20140303

U.S Purchasing Managers Leading Index vs IPC EMS shipments & bookings


0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

2007 2008 2009 2010 2011 2012 2013 2014

PMI

PMI Leading IndicatorEMS ShipEMS bookZero Growth

20140303

Global PMI Leading Index vsComposite Sales of 53 Global EMS/ODM Companies


0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

PMI


EMS/ODM Shipments

Zero Growth

20140303

U.S PMI Leading Index vsN American EMS Shipments

ISM & IPC

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

2007 2008 2009 2010 2011 2012 2013 2014


EMS Shipments

Zero Growth

20140303

3/12 Growth

1 yearLead

U.S PMI Leading Index vsN American EMS, PCB & Semiconductor Shipments


0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

2007 2008 2009 2010 2011 2012 2013 2014

PMI

PMI Leading IndicatorEMS ShipPCB ShipZero GrowthSemiconductors

20140303

Using This Information to Forecast Your

Company’s Sales

Data Sources

• Trade Organizations• IPC, ZVEI, SIA, SEMI

• Government Statistics• US Department of Commerce, Eurostat

• Published Market Research Studies• Company Financial Reports & Consolidated Sector Data• Leading Indicators

• Purchasing Managers Indices, Conference Board CLI• Your Own Company’s Sales

Forecasting Your Company Sales

• Organize monthly or quarterly sales in spreadsheet• Obtain related industry time series for same time period• Compare industry data and/or leading indicators to yoursales using 3/12 growth rates• Determine lead times vs. your data• Forecast your sales based upon lead times• Estimate your market share gains/losses by comparingyour company growth to a related industry sector

•Custer Consulting Group can assist by providing: • Historical industry data• Help with analysis

Forecasts

Walt

World 2.5 2.5 3.2 3.9 3.7

USA 2.8 1.9 2.7 3.4 3.3

EU -0.4 0.0 1.2 1.5 1.9

Japan 1.4 1.8 1.9 1.6 1.2

Four Tigers 1.9 2.5 3.6 3.9 3.7

China 7.7 7.7 7.9 8.2 7.7

Henderson Ventures 2/2014www.hendersonventures.com

2012 2013 2014 2015 2016

GDP GrowthConstant $ Growth Rates Converted @ Constant Exchange Rates

20140209

World 1.0 -2.9 4.7 5.9 5.7

USA -0.9 -3.3 2.7 4.9 5.1

W. Europe -3.4 -4.6 1.6 3.2 3.4

Japan -2.6 -10.3 4.3 4.1 3.2

Four Tigers -1.2 1.8 4.4 5.7 5.4

China 2.6 -2.9 6.2 7.0 6.6

Henderson Ventures 2/2014www.hendersonventures.com

2012 2013 2014 2015 2016

Electronic Equipment Production Growth

Constant $ Growth Rates Converted @ Constant Exchange Rates

20140209

World Rigid & Flex PCB ProductionConverted @ 2012 Exchange Rates except Japan @ 100Y/US$

H Nakahara 2/14

20131111

59.9 59.8 59.862.7 64.9 66.6 67.7

0

10

20

30

40

50

60

70

80

2011 2012 2013 2014 2015 2016 2017

TotalOther AsiaThailandS KoreaTaiwanJapanChinaOther EuropeGermanyAmericas

$ Billion (@2012 exchange rates)

N. American Supply Chain Forecast2014 vs. 2013

0 2 4 6 8

Small/MediumEMS

Semiconductors

PCBs

ElectronicEquipment

Combined GDP



Henderson Ventures

HV

Henderson Ventures

% Change

20140222

Key PointsAbility to target each end market sector by key companies, size and growth rate

Size & growth of each sector of world & U.S. electronic supply chain

Leading indicators to forecast domestic and global EMS growth

Tools & methodology to forecast your companies growth

Likely N American Small/Medium EMS Growth about 3% in 2014

Future Presentations

Financial data on small EMS companies not publicly available

Markets can be very localized

Leading indicators appear very promising as forecasting tool

Cooperative efforts with individual companies would be welcome

More work needs to be done

Custer Consulting Group Products

Daily News Services (6 days/week)- Global electronics supply chain- Solar/Photovoltaic supply chain

Business Outlook- Market charts & data

Global marketOEMsComponents, EMS, ODM, materials & process equipSolar/Photovoltaic

- Weekly Market Comments with latest charts

20111007

Strictly private & confidential

Lincoln International’s Presentation Regarding:

The Dynamic EMS Industry

March 24, 2013

Lincoln International Snapshot

Paris

Frankfurt

ChicagoNew YorkLos Angeles

London

Vienna

Madrid

Mumbai

Tokyo

AmsterdamMoscow

São Paulo

Beijing

Americas▪ Offices in Chicago, Los Angeles

and New York▪ Office in São Paulo

Europe▪ Offices in Amsterdam, Frankfurt,

London, Madrid, Milan, Moscow, Paris and Vienna

Asia▪ China – Office in Beijing▪ India – Office in Mumbai▪ Japan – Office in Tokyo

International Industry-focused Leader 15 offices with nearly 300 bankers in

key global economies – half outside the U.S.

Experienced local bankers with deep strategic relationships within each region

14 global industry groups led by experienced senior bankers

Significant transactional experience and deep relationships within each sector

Ranked one of the top two middle market investment banks in the world(1)

Ranked as the #1 investment bank for the sale of private equity owned businesses for 2013

Since 2001 has completed more EMS transactions than any investment bank in the world

Milan

(1) According to MergerMarket for M&A transactions less than $300 million completed in 2013 (Rothschild was the other top ranked bank)

Contents

Section 1 General Middle Market M&A Environment 1

Section 2 EMS Industry Financial Metrics 3

Section 3 EMS Industry Merger and Acquisition Activity 8

Section 4 Overview and Traditional Drivers of Buyer Valuation 13

Section 5 Long-Term Strategic Outlook: Eliminating the “E” from EMS 16

Section 6 Conclusion 23

APPENDIX

A Officer Bio

2014 - IPC Presentation_v1.4.pptx

T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O RAMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA

General Middle Market M&A Environment

Section 1

9,035 7,250

10,448 11,836 11,455 10,812

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2008 2009 2010 2011 2012 2013

Num

ber o

f Dea

ls

M&A activity has solidly rebounded from great recession levels in 2009

The combination of low interest rates and slow growth creates an ideal environment for M&A

A more robust M&A market is expected in 2014 due toincreased M&A activity in the second half of 2013 carrying into 2014, as well as continued strength in M&A activity fundamentals

Middle market M&A ($10-$500M EV) is expected to continue driving the majority of deals in 2014

Middle-Market M&A OverviewM&A activity decreased in 2013, but is expected to increase in 2014Overview Activity

Sponsor Activity Financial sponsors have over $400 billion of equity funds to

invest and pressure to deploy this capital 4,000+ portfolio companies currently need to be exited or

recapitalized Continued low interest rates Leverage multiples have returned to pre-recession levels,

allowing sponsors to often out pay strategic buyers for assets

Strategic Activity $2.2+ trillion of cash on hand to fuel acquisitions, offset

slow organic growth to meet strategic initiatives Seeking growth through M&A to counteract the low organic

growth environment Increased cross-border activity due to globalization

Yearly M&A Volume (Transaction Size $10M – $500M)

Source: Capital IQ

Section 1: General Middle Market M&A Environment 2


M&A as a Strategic Value Enhancing Tool

Section 2

Sparton Corporation (NYSE:SPA) Acquisition History

November 15th, 2012

June 6th, 2013

August 30thth, 2013

December 11thth, 2013 2014

Sparton acquired Onyx EMS, LLC, a leading EMS provider of complex applications to medical OEMs

Sparton acquired Aydin Displays, Inc. to add engineered product content of enhanced flat panel display and touch-screen solutions

Sparton acquired Creonix LLC, a leading EMS provider, in order to build out cable and wire harness engineering and manufacturing capabilities

Sparton acquired Beckwood Services, Inc. to provide electromechanical controls for the machine tool, analytical instruments and military markets

Section 2: M&A as a Strategic Value Enhancing Tool 4

** Lincoln International involved transaction

**

**

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14

Sparton Corporation (NYSE:SPA) Acquisition History (continued)

Announcement of Onyx acquisition

Announcement of Creonix acquisition

Announcement of AydinDisplays acquisition

Announcement of BeckwoodServices acquisition $31.6

$12.6

Source: Capital IQ, February 25th, 2014

Share price

Section 2: M&A as a Strategic Value Enhancing Tool 5


EMS Industry Financial Metrics

Section 3

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Q1-03 Q1-04 Q1-05 Q1-06 Q1-07 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-13

Inde

x V

alue

A

s of

3/3

1/03

Large Mid Small

EMS Industry Stock Performance

EMS Stock Index

Small and Mid sized EMS public company stocks have greatly outperformed Large EMS company stocks over the last 10 years

Since 2002 Small and Mid sized EMS companies have traded at higher valuations than large EMS companies, prior to that the large companies dominated market valuations

Large EMS companies searching for opportunities to differentiate and increase margin and create shareholder value

Note: Large index: Celestica, Flextronics, Jabil and Sanmina Corp.; Mid index: Benchmark, CTS Corp, Key Tronic Corp., Nam Tai Electronics, Plexus Corp. and Sypris Solutions Inc.; Small index: IEC Electronics Corp., Nortech Systems, Sigma Tron International, SMTC Corp. and Sparton Corp.

740%

114%

(25%)

Section 3: EMS Industry Financial Metrics 7

(30.0%)

(20.0%)

(10.0%)

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Q1-03 Q4-03 Q3-04 Q2-05 Q1-06 Q4-06 Q3-07 Q2-08 Q1-09 Q4-09 Q3-10 Q2-11 Q1-12 Q4-12 Q3-13Large Mid Small

EMS Revenue Growth Rates

Small size EMS companies are exhibiting the highest YoY LTM revenue growth rates while Mid and Large (excluding Foxconn) EMS companies are exhibiting declining revenue growth

Small size EMS companies are exhibiting YoY LTM revenue growth rates above their respective historical averages

Year-over-Year (YoY) Last Twelve Months (LTM) revenue growth rates

Note: Data sourced from Capital IQ as of the last day of each quarter; Large index: Celestica, Flextronics, Jabil and Sanmina Corp.; Mid index: Benchmark, CTS Corp, Key Tronic Corp., Nam Tai Electronics, Plexus Corp. and Sypris Solutions Inc.; Small index: IEC Electronics Corp., Nortech Systems, Sigma Tron International, SMTC Corp. and Sparton Corp.

7.1%

9.2%

5.4%

Averages:

7.9%

(2.4%)

(13.8%)


2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

Q1-03 Q4-03 Q3-04 Q2-05 Q1-06 Q4-06 Q3-07 Q2-08 Q1-09 Q4-09 Q3-10 Q2-11 Q1-12 Q4-12 Q3-13Large Mid Small

EMS EBITDA Margins Over Time

Large and Mid size EMS companies are operating above their historical EBITDA margin averages

Large EMS companies are exhibiting recent margin improvement

Note: Data sourced from Capital IQ as of the last day of each quarter; Large index: Celestica, Flextronics, Jabil and Sanmina Corp.; Mid index: Benchmark, CTS Corp, Key Tronic Corp., Nam Tai Electronics, Plexus Corp. and Sypris Solutions Inc.; Small index: IEC Electronics Corp., Nortech Systems, Sigma Tron International, SMTC Corp. and Sparton Corp.

EBITDA Margins

4.8%

6.2%

4.3%

Averages:


0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13

Mul

tiple

of E

BIT

DA

Large Mid Small

EMS Company Valuations

Enterprise Value / EBITDA

Note: Data sourced from Capital IQ as of the last day of each quarter; Enterprise Value is calculated as market cap plus debt, preferred equity and minority interest less cash; Large index: Celestica, Flextronics, Jabil and Sanmina Corp.; Mid index: Benchmark, CTS Corp, Key Tronic Corp., Nam Tai Electronics, Plexus Corp. and Sypris Solutions Inc.; Small index: IEC Electronics Corp., Nortech Systems, Sigma Tron International, SMTC Corp. and Sparton Corp.

EMS company valuations in general have improved over the last year

Small EMS companies are being valued at new historical averages

Large and small size EMS companies are trading above historical averages; Mid size companies are trading right at historic averages

6.7x

6.7x

4.9x

Averages:



EMS Industry Merger and Acquisition Activity

Section 4

5148

24

46

3229

24

0

10

20

30

40

50

60

2007 2008 2009 2010 2011 2012 2013

# of

Tra

nsac

tions

Total EMS Merger and Acquisition ActivityM&A activity in the EMS industry has decreased since 2010

Transaction volume

Transaction volume equal with historic lows of 2009

Activity is indicative of buyers becoming more selective

Industry unlikely to bounce back to 2007 levels

Section 4: EMS Industry Merger and Acquisition Activity 12

9 98

7

2 2

45

6

10

5

10

2012 2013

# of

Tra

nsac

tions

U.S./Canada Europe Asia Cross-Border (High/High) Cross-Border (High/Low) Other

EMS Merger and Acquisition Activity – by GeographyM&A activity decreased, or remained flat, in all but Cross-Border (High/Low) transactions

Transaction volume by geography

Cross-Border M&A activity between high-cost regions has exhibited the most growth with year-over-year transaction volume increasing 25%

Cross Border activity between high-cost and low-cost regions has exhibited the greatest percentage decrease in activity with transaction volume down from six to zero

Transactions between Asian countries have remained flat


13

1514

10

3 1 1

15

7

10

77

1 2 1

8 8

3

5

0

2

4

6

8

10

12

14

16

2010 2011 2012 2013

# of

Tra

nsac

tions

EMS Consolidations OEM Divestitures Vertical/Horizontal Convergences

EMS Divestitures Private Equity Investments

EMS Merger and Acquisition Activity – by TypeM&A activity in the EMS industry has primarily been concentrated within Consolidations and Convergences

Transaction volume by target company category

Consolidations continue to be the main source of M&A activity within the EMS industry

While investment into EMS by private equity is slightly below 2010 levels, Lincoln is currently seeing renewed interest by private equity in EMS



Traditional Drivers of Valuation and Current Buyer Trends

Section 5

Traditional Drivers of Value

Drivers Commentary

Margin

Growth

Highest EMS valuations occurred when industry growth rates exceeded 20%

individual companies that can achieve double digit growth rates will attract higher valuations

Difficult to sell a business that is in decline Historically, EMS valuations were not driven by margin due to extraordinary growth rates

As the industry has matured margins have become more important than growth

Average EBITDA margins for high mix providers are 7% - 8%

Premium valuations are given to companies with double digit EBITDA margins

Customers and End Markets

Historically, telecommunications and computing were attractive end markets due to their inherent growth rates

Today, medical, military and industrial end markets are valued due to their customers’ higher margin profiles

Automotive, which was highly unflavored, has returned as a more promising end market due to a higher growth rate and a change in auto OEM behavior to allow their supply chain more profitability

Customer diversity is rewarded over customer concentration

Section 5: Traditional Drivers of Valuation and Current Buyer Directions 17

Capabilities

Historically automated SMT capability was valued

Today, overall complexity of work, level of integration and box build are what drives value

Any unique capabilities add value (e.g. ruggedization, special software integration, etc.)

Engineering capability is also more valued today

Location Historically, globalization was the main driver of value

Today location is important, but value drivers are more varied (e.g. low cost, proximity to customers, logistics considerations, etc.)

Current Buyer Interest Trends

Trend Commentary

Outside Acquirers Looking in the EMS

Industry

Tier I Providers Looking Outside Typical EMS

Industry for Acquisitions

Tier I providers are reluctant to acquire mid-size and small EMS companies due to industry maturity Customers who do business with mid-size and small EMS companies typically do not want to do

business with Tier Is

The need to increase margins to create shareholder value and meet Wall Street expectations is paramount for Tier Is Looking outside EMS for higher margin businesses Looking internally for cost saving opportunities Increasingly building up engineering and IP content

Manufacturers in contracting industries (e.g. defense) are looking for rapid diversification Natel Engineering (leading defense hybrid components manufacturer) acquiring EPIC Technologies

Mechanical products manufacturers within an end market looking to expand capabilities into electronics Duccomun (a mechanical DOD company) acquiring LaBarge A current maker of mechanical components for automobile applications actively seeking companies

with electronics expertise

Companies who dominate a specific niche needing to use acquisitions to achieve external growth Leading manufacturer of micro-electronics for communication applications seeking acquisitions

outside their niche including potential EMS companies

Private Equity Investment Trends

Leverage multiples have returned to pre-recession levels, which combined with low interest rates and unvested capital, make private equity more active and competitive buyers

Fragmentation and relatively low multiples make EMS an attractive industry for the PE model

Mid-tier Consolidations Consolidations were the leading type of transaction in 2013 and are expected to repeat in 2014

Need for scale, geographic expansion and market penetration are driving Mid-tier consolidations

Section 5: Traditional Drivers of Valuation and Current Buyer Directions 18


Long-Term Strategic Outlook: Eliminating the “E” from EMS

Section 6

Valuation of Large Industrial Conglomerates

Section 6: Long-Term Strategic Outlook: Eliminating the “E” from EMS 20

EV / EBITDA Multiples

12.4x

15.2x

12.9x

10.1x

12.7x

9.9x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

Actuant Ametek Danaher EmersonElectric

Teledyne Tech. TE ConnectivityEBITDA Margins

18.2%

26.0%

21.8%19.6%

14.2%

19.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

ActuantCorporation

Ametek Danaher Corp. EmersonElectric Co.

TeledyneTechnologies

Inc.

TE ConnectivityLtd.

EMS Average 5.2%

EMS Average 7.5x

Long Term Trend: “DMS”


The 3D vs. Virtual World

“There will always be 3D stuff to build”

EMS companies will convert into Diversified Manufacturing Services (DMS) companies

Jabil: an Emerging DMS Company


Focusing the company on engineering and manufacturing “3D stuff”

Acquisition of Nypro, a leading plastics manufacturer

Non-electronics account for 30% - 35% of Jabil’s revenue

Divestiture of Jabil Global Services business to focus company on engineering and manufacturing excellence


Conclusion

Section 7

Key Takeaways Heading Into 2014

Expect favorable EMS M&A environment in 2014

Consolidations will continue

Increased activity by private equity

Big EMS companies looking for diversification outside of core EMS business

Outside companies looking into the EMS market

Every EMS company should think about a DMS strategy

Section 7: Conclusion 25

Bios

Appendix A

T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O RAMSTERDAM BEIJING CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA

Jack CalderonAdvisory ExpertiseJack has extensive experience in advising companies on merger and acquisitions, restructuring, fairness opinions, and other strategic matters. In addition to completing multiple transactions for public company, private equity, and private owner clients, Jack also has experience in cross border advisory work encompassing both Europe and Asia. Jack has led numerous sell-side and buy-side transactions. Jack's advisory work is exclusively focused on the commercial and defense electronics industries.

Industry ExpertiseJack is an expert in the electronics industry. He spent 20 years in various operating management positions in the industry, beginning with Honeywell and culminating as CEO of publicly traded EFTC (now part of Benchmark). Jack is a frequent speaker at industry events and publishes the quarterly EMS DealReader which tracks all transactions in the electronic manufacturing services (EMS) industry globally, as well as the EMS Stock Index. Jack is a former member of the Board of Directors of the IPC which is the global standards-setting organization for the manufacture of electronic products. In addition to the EMS industry, he focuses on interconnects (circuit boards, flex circuits, and connectors), defense electronic products, specialty systems, and design and product repair service providers.

Managing Director

Past AffiliationsPrior to joining Lincoln International, Jack served as Chairman and Chief Executive Officer of EFTC, a publicly traded electronics manufacturing service provider, now part of Benchmark Electronics (NYSE:BHE). EFTC specialized in manufacturing complex electronics primarily for the aerospace industry.

Jack began his career in Honeywell's Aerospace and Defense Group in 1979. In his 20 year operating career, he held a variety of positions with several companies including Program Manager; Vice President of Marketing and Contracts; Vice President of Corporate Development; Vice President and General Manager of Latin American Operations and Chief Executive Officer.

Academic CredentialsJack earned a Juris Doctor degree from The American University, and a Bachelor of Arts degree in economics, cum laude, from Case Western Reserve University.

Role at Lincoln International

Jack leads Lincoln International's Electronics group which includes Electronic Manufacturing Services (EMS), Interconnects, and Defense Electronics. He has extensive operating and transaction experience in defense electronics and electronic manufacturing services. Jack leads deal teams, manages key client relationships and markets the firm's services.

Appendix A: Officer Bio 28

Chaim LubinAdvisory Expertise

Chaim has experience in advising companies on merger and acquisitions, restructuring, fairness opinions, and other strategic matters. His experience includes transactions and advisory services for private equity, Fortune 500, and private company clients. Chaimalso has cross-border transaction experience, providing advisory services for transactions involving German, Japanese, and Spanish companies.

Industry Expertise

Chaim specializes in the electronics and renewable energy industries, though he has also been actively involved with companies in the industrial technology, building products, chemicals, office products, and manufacturing & distribution industries. He has relationships with leaders and active acquirers in the electronics industry as well as with contacts throughout the private equity community. Chaim has a strong understanding of the dynamics in the electronics industry, and a keen sense of what makes companies attractive and how best to position these to potential partners.

Vice President

Past Affiliations

Prior to joining Lincoln International, Chaim worked in public accounting for Feeley and Driscoll, P.C. in Boston. Chaim advised and worked with companies in the technology, construction, healthcare, legal, and manufacturing & distribution industries. Chaim is a licensed CPA.

Academic Credentials

Chaim earned a Master of Business Administration degree from the Kellogg School of Management at Northwestern University, a Master of Engineering Management from the McCormick School of Engineering and Applied Science at Northwestern University, and a Bachelor of Science degree from Boston University with Honors.

Role at Lincoln International

Chaim leads or assists in leading deal teams and is active in marketing the services of Lincoln International. Chaimis a key member of the firm's Electronics and Renewable Energy groups and is heavily involved in executing transactions for these groups.

Appendix A: Bios 25

IPC Validation Services QPL/QML Program Overview

Randy Cherry – IPC Director of Validation Services

EMS Management Council, PCB Supply Chain Leadership, and BZ2

Don’t Let This Happen To You!

You Need a Network of Trusted Sources!

What is Validation Services?– Series of programs that provide auditing and

certification services to companies in the electronics manufacturing industry

– They provide a technical in-depth look at the products or processes in accordance with IPC standards and TM-650 test methods

– These programs provide verification of conformance to IPC standards through 3rd party testing

– Offered to both IPC members and nonmembers

What are the Programs?– Qualified Products List (QPL)

• Three programs based on J-STD-004, 005, and 006 standards

– Solder Flux, Solder Paste, and Solder Alloys

– Qualified Manufacturers List (QML)• Two programs based on J-STD-001/610 and the 6010

series of standards including 600– Acceptability of Soldered Electrical and Electronic Assemblies

and Qualification and Performance for Printed Boards (Rigid, Flex, and High Frequency Boards) including Acceptability of Printed Boards

These Programs Are Not!– Training Certificate

• Having individuals certified to an IPC standard does not mean the facility is certified.

• CIS, CIT, and MIT certificates are weighted heavily

– ISO audit– Nadcap audit– Paper-Based Audit Program

Why is IPC Creating These Programs?– Address members’ needs for verification that

companies can build products in accordance with IPC standards

– Market research (survey) was conducted with OEM’s, EMS providers, and industry suppliers

• 75% of the OEM Manager’s viewed a supplier qualification program as VAUABLE!

– IPC Members are looking for Trusted Sources of Supply!

– How do we offer Value and Fill the Gap that exists today with current IPC programs?

QPL & QML Value AddEMS OEM Products

QPL QML

Enterprise & Product Level Certification GAP

What are the Program Details?– Validation Services certifies the facility, qualifies the

products or processes, and provides a list for industry members to use

– Audits are conducted by trained personnel• Certified to IPC standards and have auditing experience

– Certification is valid for three (3) years– Validation services only uses IPC approved test

laboratories for 3rd party testing– All Proprietary Information is kept Confidential!– Once the program is completed, industry exposure is

provided by IPC through several marketing initiatives

What are the Program Benefits?– Provides source of competitive advantage among

peers– Reduces the customer audit timeline when conducting

external quality assurance audits– Certifying facilities to specific IPC standards– Immediate access to a list of Trusted Suppliers– Online access to conformance information by product

and facility– Exposure to global electronics supply chain via IPC

website– Easy identification of IPC Trusted Suppliers through

IPC branded logos and traceability

Who is Certified?– Indium Corporation of America

• Clinton, N.Y. facility• 1st IPC J-STD-004 QPL Certificate

– IEC Electronics Corporation• Newark, N.Y. and Albuquerque, N.M. facilities• 1st IPC J-STD-001/610 QML Certificate

Who Do I Contact for More Information?– Randy Cherry - CID CIT

• Director of Validation Services• [email protected]• +1 847-597-2806

– Tom Baggio• Director of Business Development• [email protected]• +1 847-597-2814

– www.ipc.org/validation

mailto:[email protected]

mailto:[email protected]

http://www.ipc.org/validation

Thank You For Your Time

The Affordable Care Act—Summary of

Employer Requirements

Provisions—January 1, 2014 Individual mandate—mandates all Americans, with some

exceptions, to maintain a minimum level of health coverage or face a tax

Insurance Exchanges—creates health insurance Exchanges and provides premium tax credits to assist eligible individuals with the purchase of coverage

Medicaid expansion—allows states to expand Medicaid up to 133% of federal poverty level

Employer mandate—mandates employers with 50 or more full-time equivalents to offer coverage to full-time employees and their dependents or pay taxes if an employee obtains Exchange coverage and a premium tax credit (99+ employees delayed until 1/1/2015; 50-99 employees delayed until 1/1/2016)

Individual Mandate

The PPACA requires all American citizens and legal residents to purchase qualified health insurance coverage

In 2014, those without insurance will pay the greater of $95 or 1% of household income that exceeds personal exemption for that year

Starting in 2016, the penalties rise—the greater of $695or 2.5% of income; these penalties apply to EACH family member without coverage

The maximum family penalty is the greater of 2.5% of income or three times the per-adult penalty ($2,085 in 2016)

All penalties are capped at the cost of the lowest-priced conventional plan on the exchanges

Individual Mandate

Exemptions to individual mandate Financial hardship Religious objections (see for reference IRS Sec. 1402(g)(1)) American Indians Those without coverage for less than three months Undocumented immigrants, incarcerated individuals Those for whom the lowest cost plan options exceeds 8% of an

individual’s income, and those with incomes below the tax filing threshold

Exchanges & Individual Market

Coverage must be offered on a guarantee-issue basis in all markets and be guarantee renewable

Exclusions based on pre-existing conditions would be prohibited in all markets

Full prohibition on “essential benefit” annual and lifetime limits in all group (including self-funded plans) or individual plans

Premium rating rules are modified community rating with age-rated bands based on a 3 to 1 ratio

Exchanges & Individual Market

It creates sliding-scale tax credits for non-Medicaid eligible individuals with incomes up to 400% of FPL (can be up to $90,000 for a family of 4) to buy coverage through the exchange

The requirement that the subsidies are only available through the exchange is significant

It is a particular threat to employer plans due to other provisions that allow employees to opt out of employer sponsored coverage

Basic Employer Coverage Rules

Large employers may be subject to an excise tax if— At least one full-time employee whose household income is between

100% and 400% of the federal poverty level Receives a premium tax credit for Exchange coverage and an employer

either— Fails to offer coverage to full-time employees and their dependents Offers coverage to full-time employees that does not meet the law’s

affordability or minimum value standards

Who is a Large EmployerUnder the ACA?

Any employer with 50+ full-time equivalents is considered a large employer IRC §4980H applies to all common law employers, including

governmental entities, churches, tax-exempt organizations with at least 50 full-time equivalent employees

Foreign companies with at least 50 full-time equivalent employees performing work in the US with US-source compensation

Determining Large Employer Status For Smaller Employers

For each calendar month of the preceding calendar year, employers must— Count the number of full-time employees (including seasonal

employees) who work on average 30 hours per week per month Calculate the number of full-time equivalent employees by aggregating

the number of hours worked by non-full-time employees (including seasonal employees) and dividing by 120

Add the number of full-time employees and full-time equivalents calculated in the previous steps for each of the 12 months in the preceding calendar year

Add the monthly totals and divide by 12. If the average exceeds 50 full-time equivalents, determine whether the seasonal employee exception applies

Determining Large Employer Status for Smaller Employers

Seasonal employee exception—IRC §4980H does not apply to employers whose workforce exceeds 50 full-time employees for no more than 120 days or four calendar months during a calendar year if the employees in excess of 50 who were employed during that period were seasonal employees. The 120 days or four calendar months are not required to be consecutive

For purposes of determining large employer status until further guidance is issued, employers may apply a reasonable, good-faith interpretation of the statutory definition of seasonal worker, including a reasonable, good-faith interpretation of the standard set forth under the DOL regulations at 29 CFR 500.20(s)(1)

Determining Large Employer Status for Smaller Employers

DOL regulation 29 CF 500.20(s)(1)—Labor is performed on a seasonal basis where, ordinarily, the employment pertains to or is of the kind exclusively performed at certain seasons or periods of the year and which, from its nature, may not be continuous or carried on throughout the year. A worker who moves from one seasonal activity to another, while employed in agriculture or performing agricultural labor, is employed on a seasonal basis even though he may continue to be employed during a major portion of the year

Who is a Full-Time Employee Under the ACA?

Full-time employee—Defined as an employee who works on average 30 hours per week, per month or 130 hours of service per calendar month

Calculation for hourly and non-hourly employee Hourly employees—Count actual hours served Non-hourly employees—Select one of three methodologies that does

not understate hours Count actual hours Days worked equivalence—Count 8 hours for each day credited with at least

one hour of service Weeks worked equivalence—Count 40 hours of service for each week

credited with at least one hour of service

Who is a Full-Time Employee Under the ACA?

General rule—Employees who are classified or determined to be full time are eligible for the employer’s health plan after the applicable wait period not to exceed 90 days

Safe harbors—Available for part-time, seasonal, and variable hour employees to determine when they are treated as full-time employees

Employer Responsibilities

Employer mandate basics final rule Employers must offer medical coverage that meets new standards to

full-time employees and their dependent children up to age 26. New standards Coverage is “affordable” if employee contributions are less than 9.5% of— Employee’s W-2 wages Employee’s monthly wages (hourly rate x 130 hours per month), OR Federal Poverty Level for a single individual A plan must pay 60% of the

costs of covered health services to be considered as providing “minimum value.”


Effective for plans beginning in 2015—

50-99 full-time employees—Does not apply 100 or more full-time employees

Employer must offer coverage to 70% of full-time employees


Effective for plans beginning in 2016—

50 or more full-time employees Employer must offer coverage to 95% of full-time employees


Transition Rules—Employer Mandate Delay For employers with 0-99 full-time employees and equivalents These employers are not subject to penalties in 2015

Numerous requirements must be met

Transition Rules—Employer Mandate Delay For Employers With

50-99 Full-Time Employees Between 2/9/14 - 12/31/14—Employer cannot reduce size of

workforce or employees’ overall hours of service to get below the 99-count threshold Unless for bona fide business reasons

“Coverage Maintenance Period”—Employer cannot eliminate or materially reduce health coverage it offered as of 2/9/14

Employer will have to certify to IRS that it met these requirements

Transition Rules—Non-Calendar Year Plans

Basic Requirements for All Three Types of Transitional Relief Employer must have sponsored a non-calendar year plan as of

12/27/12 After 12/27/12, employer cannot have modified plan year to begin at

later date Employer must continue to sponsor non-calendar year plan in 2015 Plans beginning in 2015 must offer affordable, minimum value coverage

No Coverage

If an employer fails to provide its full-time employees (and their dependents) the opportunity to enroll in “minimum essential coverage”, and

One or more full-time employees enrolls for coverage in an exchange and qualifies for a premium tax credit or cost-sharing reduction, then

Employer penalty = $2,000 for each of its full-time employees in the workforce (not tax deductible)

Unaffordable Coverage

If the employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage, and

One or more full-time employees enroll for coverage in an exchange and qualifies for a premium tax credit or cost-sharing reduction because The employee’s share of the premium will not exceed 9.5%

of income, or The actuarial value of the coverage was less than 60%, then Employer penalty = $3,000 for each full-time employee who receives a

tax credit or cost-sharing reduction

Other Responsibilities

Notice to current employees and new hires about exchange and subsidies Existence of exchange, services and how to obtain assistance Availability of premium assistance Loss of employer contribution and tax exclusion

for contributions Notice must be provided in coordination with the annual open

enrollment period for the Exchange

More Employer Responsibilities

The value of employer provided health insurance must be reported on W-2’s

New ten-page summary of benefits MUST be provided to employees for open enrollment of group-sponsored plans

Completion of form 5500 will become more complex New requirements on claims and appeals are in place

Questions?

Program OverviewMarch 24, 2014

Supply Chain Risk Management

About NetApp

$6 billion (Fortune 500) Storage & data management 12,000 employees 150+ offices worldwide Fortune’s Best Companies to Work For

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=HbHrBHPFh8UDtM&tbnid=gB0Y2TB0yQdgtM:&ved=0CAUQjRw&url=http://www.leadershipnewark.org/summit/summit-partners&ei=s2CFUuHENIHgiAKqx4HgDw&psig=AFQjCNFd_xvAOOCBDhL4qX_fQjCu7sk_Hg&ust=1384559152598603

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=HbHrBHPFh8UDtM&tbnid=gB0Y2TB0yQdgtM:&ved=0CAUQjRw&url=http://www.leadershipnewark.org/summit/summit-partners&ei=s2CFUuHENIHgiAKqx4HgDw&psig=AFQjCNFd_xvAOOCBDhL4qX_fQjCu7sk_Hg&ust=1384559152598603

Vision

“Implement a Supply Chain Risk Management program that anticipates and mitigatesexposure across our products and supply network.”

3

Incident & Crisis Management

(FY13)

Business continuity planning

Crisis management & threat monitoring

Some level of mitigation

NetApp’s SCRM Evolution

Effectiveness and Impact

Org

aniz

atio

nal E

ngag

emen

t

Proactive Risk Management

(FY14) Further BCP assessment

BOM, supplier, & tooling assessment

Matured mitigation and enterprise metrics

Resiliency Management

(FY15+)

SC & HW design for resiliency

Resiliency embedded in processes (NPI & sustaining)

4

Elements of SC Risk Management

Key Elements of Supply Chain Risk Management

• Assess & mitigate risks through upfront sourcing strategies

• Anticipate supplier disruption through predictive tools

How Risk Enters Supply Chain

Iterate

• Real time monitoring for rapid response• Quickly assess potential impact• Playbook for decisive execution• “War games” to ensure organizational readiness

• Map potential impacts to:– Programs– Customers/bookings pipeline– Enterprise

Internal Decisions

Component SelectionSupplier Selection/Mgmt

Tooling Investment

External EventsNatural DisasterPolitical UnrestSupplier Failure

Supply Base Consolidation

Risk ImpactsContinuity of Supply

Cost Trends

5

Risk Monitoring & Resiliency

(real-time)

Supply Chain Mapping

(portal)

BOM SUPPLIER Tooling

“What is the $ impact, for x disruption, for n weeks?”

• Financial alerts• Natural disasters• Disruption at site

Site monitoring

Internal playbook

What-if scenario

(snapshot)

BOM SUPPLIER

ProductAssessment

(portal)

• Financial health• Quality• Delivery• Contracts• BCP

“How robust is the product and its supply chain?”

BOM risk assessment

BCP assessment

Financial health

TOOLING

6

Risk MonitoringIncident Management

7

9/11 Hurricane Katrina

Hurricane Ike

Global Recession

Egyptian/N. African Conflict

Thailand Floods

Dot Com Bubble

Indonesia Tsunami

Political Unrest

Chengdu Earthquake

EU Volcanic Eruption

Japan Crisis

01 130704 1002 03 05 06 08 09 11 12

The “Why”: Disruption Unpredictability

India Power Outage

14

Thailand Political Unrest

http://en.wikipedia.org/wiki/File:2008_Sichuan_earthquake_map_no_labels.svg

http://en.wikipedia.org/wiki/File:2008_Sichuan_earthquake_map_no_labels.svg

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=qV_2v8NaqBw1pM&tbnid=qD93WXERLQaCcM:&ved=0CAUQjRw&url=http://www.ibtimes.com/thailand-tourism-faces-27-billion-loss-amid-unrest-1557412&ei=EI4PU8KwE86JogS1s4GABA&bvm=bv.61965928,d.cGU&psig=AFQjCNH4iW3UXRsqiGDv0ZfRzaT1tT-JQQ&ust=1393614647584989

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=qV_2v8NaqBw1pM&tbnid=qD93WXERLQaCcM:&ved=0CAUQjRw&url=http://www.ibtimes.com/thailand-tourism-faces-27-billion-loss-amid-unrest-1557412&ei=EI4PU8KwE86JogS1s4GABA&bvm=bv.61965928,d.cGU&psig=AFQjCNH4iW3UXRsqiGDv0ZfRzaT1tT-JQQ&ust=1393614647584989

Incident Monitoring

Real-time incident & threat monitoring for NetApp supplier sites– Natural disasters– Geopolitical unrest– Health / pandemic– Man-made disasters– Terrorism, etc.

Redundant tools / team– 24/7 staffed monitoring team (Security group in SVL, RTP, Bangalore)– Automated alert notifications– Scalable, and customizable

Initial coverage: 95% global supplier sites

9

Case (Typhoon Usagi Sept-2013)Background: • 9/18/13 category 5 storm tracked by NetApp security group.• 9/19/13 Typhoon alters course and points toward Taiwan. • 9/19/13 NetApp SCM receives warning (2 days in advance).• 9/19/13 NetApp SCM coordinates with EMS to execute mitigation plans. • 9/20/13 EMS arrange for immediate logistics to avoid disruption.

NetApp security monitoring

NetApp SCM action

Result: • EMS was able to ship product prior to transportation lanes being affected, resulting

in zero impact to NetApp.

10

ResiliencyProduct Assessments

11

Product Resiliency Framework

• Align on Risks

• Prioritize

• Approve

• Execute

• Improve / Control

• Sourcing• Lifecycle• Environmentals• Availability

• BCP• Contracts• Financial health• Revenue impact• Performance

• Likelihood• Occurrence• Recovery time• Impact

12

Resiliency Assessment Philosophy

RESILIENCY INDEX

HIGH

LOW

1

3

5

7

10

CO

MP

ON

EN

T / B

OM

HIGH

LOW

1

3

5

7

10

SU

PP

LIE

R

HIGH

LOW

1

3

5

7

10

TOO

LIN

G /

EQ

UIP

ME

NT

13

Component / BOM Scoring

HIGH

LOW

1

3

5

7

10

CO

MP

ON

EN

T / B

OMLIFECYCLE

AVAILABILITY

SOURCING

ENVIRONMENTAL

DESIGN / QUALIFICATION

• Part lifecycle stage• Program end date

• Part lead time• Worldwide channel inventory (6 mos)

• Sole, single, multi-sourced• Supplier geo/site

• Part compliance (RoHS, REACH, Conflict Minerals)

• NetApp design status for part• NetApp qualification status for part example

14

Supplier Scoring

HIGH

LOW

1

3

5

7

10

SU

PP

LIE

RFINANCIAL

BUSINESS CONTINUITY

CONTRACTS

PERFORMANCE

• Debt, NI, current ratio, WC, equity, Frisk, payment• Monthly trending (2 yr history)

• Currently “on file & assessed, on file, not on file”• Assessment for robustness with scoring

• Currently “on file, not on file”• Assessment for protection with scoring

• Limited to QBR/BBR suppliers (TQRDC)• Expanding to EMS controlled suppliers *

*note: EMS controlled supplier performance data may be limited to quality & delivery data

example

15

Tooling / Equipment Scoring

HIGH

LOW

1

3

5

7

10

TOO

LIN

G /

EQ

UIP

ME

NT

RECOVERY TIME

LIKELIHOOD

OCCURENCE

IMPACT TO REVENUE

16

Case Background: • Initial assessment for program• Cadence: 3 phases

Pre-pilot• Pilot• RTS

• Components assessed: 914• Component risk: 17 high, 42 med

• Suppliers assessed: 65• Supplier risk: 1 high, 1 med

• Developed XX mitigation plans with SCM & Engineering

Results: • Engaged with 2 med-high risk suppliers and closely monitoring financial performance• Partnered with EMS to qualify additional sources for single & sole sourced components• Partnered with EMS to secure inventory on highest risk supplier and components

17

Backup

18

BOM / Component Assessment(example)

return

19

Supplier Assessment (example)

return

20

Financial Assessment

Current Process Manual Z-Score + DnB As-needed Reactive Point in time Not scalable

Future Process Automated Multiple elements Monthly Predictive Point in time + trend Scalable

Financial risk assessment team has developed an automated financial dashboard solution

21

Dashboard Output

22

Process Flow

Financial Dashboard Output (w risk

levels)

Quantitative Risk Level

Monitor on Monthly Cadence

WatchlistCredit Assessment

LOW RISK

REPEAT

Add to Watchlist YES

NO

MEDIUM / HIGH RISK

REMOVAL

23

Supplier Watch list (concept)

Financial Watch list

24