EMSNow journalist Philip Stoten sat down virtually with our CEO, Mike Szymanski, to discuss SEACOMP, adjusting to change brought on by the pandemic, and future expectations within electronics manufacturing. The interview took place during the middle of July. Watch it here:
Philip Stoten (00:10):
From my home to yours, welcome to EMS@C-Level. I’m here with Mike from SEACOMP group. Mike, thanks very much for joining us. I want to talk a little bit about what's going on with you guys with respect to the whole COVID-19 and how that looks from the from different sides. But first of all, give me a bit of an introduction to you. Maybe how you got to Hong Kong and a little bit about the group, because you have some diverse elements in that.
Michael Szymanski (00:32):
Yeah, absolutely. First of all, Philip, thanks for having me on the show. SEACOMP is comprised of three divisions. So two of those are component divisions and the third box building manufacturing. Displaytech LCDs, the first of the component divisions, you can think of anything from a one to 12 inch monochrome or color LCD, primarily sold through distribution: RS, Mouser, Digi-keys in the world. The second is HDP Power, and this is small wattage, 36 watt, smaller, globally certified medical certified in most cases. Kind of higher end certification, more with a global approach, power supply range that also led us to numerous MFI programs. Being in Southern California around a lot of the design activity. And then the third that kind of all rolls up into MH Manufacturing. Most of the components that we sell go into a finished goods that we build at our Dongguan factory.
Michael Szymanski (01:55):
I would say 50% of those programs we’re helping with the design. A design team in Southern California, close to the customer facing. A lot of guys come to us with an idea and we execute all the way through, from sketch to finish the product and the Displaytech acquisition, formerly we were a US America's office for Displaytech. That's what brought me to Hong Kong. And as I was mentioning earlier, coming up on my eighth year anniversary for what was originally slated to be a few years, but we love it there and I have no desire to go anywhere else. That's how we got here.
Philip Stoten (02:46):
And that's exciting when you look at the process of bringing people into that manufacturing, which is that kind of a broad play EMS are a lot of those coming in as of needing display technology or needing other technologies from those components. Do they all feed each other?
Michael Szymanski (03:09):
Yeah, typically I would say people lead their design choices around the LCD. So if you came to me with a new device and you had not chosen the LCD - the mechanicals are not done though, led drivers, you haven't laid out your board. It’s certainly the first item that's chosen in a design. And a lot of times what people are trying to accomplish and the speed at which they're trying to accomplish that and asking those initial questions lead us to shortcuts. Hey, we've already done something that's 90% similar. And what you find with most LCD projects is just that there's 90% overlap. If you took a seven inch in a refrigerator versus a GPS, 90%, the same product, maybe a few extra chips, different sensing. That leads to a lot of the parts that we've built. And actually the same is true with power. Power supplies and lithium batteries playing well together. And when we're looking at that from the initial design, we have more of an inclusive overview of what certifications we need to go through, what design considerations. Both lead us to our manufacturing partnerships. And the reality is today I'd say 50% come from a components and 50% through referrals. We've been really fortunate to have a lot of guys doing this in Asia, specifically for the size of customer that we entertain.
Philip Stoten (04:56):
Yeah. And it's really important in the EMS industry. It's matching the customer or the supplier size and scale and thinking about that whole process. I wanted to explore it a little bit about your experience with respect to the pandemic, because obviously you're predominantly in China. You've got that manufacturing activity that would have been hit by supply. Then you would have that supply impacts happening elsewhere and then demand disruption in various different markets that you're in. How's that look to you since Chinese New Year?
Michael Szymanski (05:34):
Yeah, absolutely. Well, there's certainly never a good time to have a global pandemic. The benefit of being a China based manufacturer was things came through rather quickly, right? We're in Chinese New year, we're learning about this in late January and because of the Chinese New Year loop and iterations of that, our customer base is pretty well experienced to order a bunch of their goods shipped before Chinese New Year. And those weeks after, is a triple back and slowly opening up of things. In terms of it coinciding with Chinese New Year, that was really a benefit. By the time that we would get back into our normal manufacturing cycle, it, we hardly skipped a beat from that standpoint. Then it turned to our customers, right? They were having their slowdowns, which brought on new challenges. But for us having it all happened early in the year after large shipping worked out well. We had a handful of people from the Hubei province that were kind of the last to make their way back. But we were running at capacity. We were only short an extra week and within three weeks, we were up and running. We had the ability, being a medical devices manufacturer, of being one of the first factories to reopen in the area.
Philip Stoten (07:15):
Yeah. Because you have the essential status. And what were the challenges with reopening, I guess you had to have a sufficient PPE for everybody, various different criteria. How challenging was that?
Michael Szymanski (07:30):
Honestly, the government was really involved and extremely helpful in terms of getting in and auditing early. And they had a very thorough, detailed list of what they wanted to see happen. Probably the biggest changes were in the cafeteria - several hundred employees trying to get everyone fed in a safe environment to where you're not traditionally packed in as you would otherwise be. Breaking that up, installing vertical partitions so that if people were sitting across from each other that was safe. And then a lot of it was focused on where have you been, do you need to isolate. Then working out the piece that we don't talk a lot about is getting our meetings back with our supply chain within China. That is probably the slowest thing to resume. I wouldn't say we're as used to video discussions typically it's, “Hey, we're working on this thing, come in tomorrow, let's talk about it.” And all the precautions around bringing new people onto the campus and just building a safety net around that. But we had a lot of great guidance and I think being in Asia, we've been through this before. People were very quick to know what protocols to put in place. And that's been a huge difference. I can elaborate that on Hong Kong and other parts…
Philip Stoten (09:12):
Yeah, no, that's the impression I've had. The whole experience with SARS meant that when people got a cold on, they would tell people to put masks on and they put them on straight away. And that was, you mentioned that your own supply chain, how disruptive was your own supply chain?
Michael Szymanski (09:31):
It wasn't that disrupted. And still we made a conscious choice when we purchased the factory to keep the supply chain rather close. So in my life, we were designing products in Southern California. We had a team of a dozen people over here going to numerous factories based on what they were best at, whatever the solution was. When we finally got everyone on one campus to control our own destiny and all be in one place, we said, “Let's have the supply chain within at least an hour radius.” Because I had personally been on those three hour commutes from Shenzhen and Dongguan. Because we all opened together, there wasn't a huge supply disruption for what we needed.
Philip Stoten (10:30):
That's great. That's really good. And you mentioned medical and special essential status. What kind of products were you producing or are you producing for that kind of fight against the pandemic?
Michael Szymanski (10:42):
Yeah absolutely. Anything from insulin monitoring, that's probably been one of the more successful categories for us during this time period. I don't know the exact science, but there's something related between COVID-19 and a diabetes insulin requirements. I think if you looked at public reports, there's been an uptick. We do a lot of post-elective surgery devices, so cold therapy, compression therapy, medical devices to that. That obviously has gone the other way because without the elective surgeries taking place in the US, that's slowed down a bit. But anything from electric toothbrushes to electronic pill dispensers.. pretty wide breadth medical product.
Philip Stoten (11:41):
Okay. Yeah. That's good. Where do you see demand moving forward? What do you see the impacts of this with respect to your future? Because now we're hearing about people wanting to reduce their supply chain dependence on Asia. For example, talking about supply chain and diversity, is that impacting you and what are you seeing at the moment?
Michael Szymanski (12:10):
It's not, but it's certainly opening the conversation. Let’s take, for example, obviously with supply chain, you're only as strong as your weakest link. And when we talk about near shoring, whether for the customers in the Americas, these different models, there are concerns for categories such as LCDs. There are not a lot of LCD manufacturers outside of China today. I think I know one in Malaysia, that's kind of doing low end monochrome displays and then the other lithium batteries, are cell manufacturers going to start popping up in Mexico and other places? Now I haven't seen that yet. It started a dialogue to say what other risk mitigation steps can we take. But the reality is either customers start to hold more inventory or really it's so complex in terms of the weakest link, the LCDs, batteries, et cetera, unless those factories start moving to near shoring capabilities, we're still in the same situation, in my opinion.
Philip Stoten (13:34):
I absolutely agree. And I think people sometimes don’t look far enough down the supply chain to figure out where those dependencies are and that you've got $4 trillion worth of manufacturing going on in China. You can't just squeeze that into Vietnam or Malaysia or somewhere else because there isn't the available capacity and it also just doesn't make sense. I think that analysis is required.
Michael Szymanski (14:06):
Yeah. Even being here on the ground in China, I'm part of CEO organizations, specifically manufacturing, and I've had the opportunity to watch the first movers. A lot of close friends that have gone to Vietnam, gone to other places, that have only otherwise operated in China, you're seeing it in the financial reports. It's not easy and a lot of people move back. And then just the sheer magnitude of people available here in China. If the Philippines and Vietnam are only a hundred million population and what we just have in Southern China, in terms of workers available, I don't see how we can quickly spread that out. And I think even when you look at the new trade numbers, you're seeing, it's not really slowing down.
Philip Stoten (15:10):
I don't see it as doing that. The other thing that you mentioned there was people owning a bit more inventory and I think we're seeing a little bit of a battle between the old, well, not the old school, but the current “just in time” thinking and then a little bit more “just in case.” We have to balance that and it's maybe gone too far towards lean, everybody thought inventory was the enemy and it really isn't, it’s strategic inventory if it makes sense.
Michael Szymanski (15:39):
Yeah, absolutely. If I were sitting at a C level desk on the OEM side of the US right now, especially given that we still don't know how this is going to evolve. You saw the fizzle in Beijing of new cases; really anything's possible. If I were sitting at that C level desk today, I think I would go to the board and say, “We're going to take on more inventory. We're going to get it in country or wherever that customer base is. And for this period over the next six months, that's just how we're going to play this.” Because again, you're as strong as the weakest link and everybody's weakest link is probably in one geographical location. I just haven't found any clever way to mitigate it outside of that.
Philip Stoten (16:35):
No, and I think that makes perfect sense. One of the issues, when I look back, for example, at the tech wreck in 2000, when we had a massive inventory overhang was a lack of visibility, particularly in real time visibility. We didn't know what we had. We didn't know where stuff was and we didn't know how to get stuff. I think that's changed. But I think what we're seeing now is that an even greater desire to have that real time visibility. Do you see this as that as an accelerant for that digital transformation?
Michael Szymanski (17:08):
I think these things always start dialogue. Unfortunately what happens a lot is dialogue starts, the world changes. All of these iterations, like the COVID-19, but all these massive challenges that we've gone through, what I've learned is they're very quick. Even if they're six months, nine months, 12 months, they come and go really quickly. I mean, we don't spend a ton of time talking about tariffs anymore and it's all we talked about. They come and they go. The good news is they start dialogue. Everybody's having the right conversations. All the C Suite has much more time available to sit and work on the business and strategize about where do we want to take this? And, things like your show, things like having a ton of conversations around, what can the future look like and how can all the stakeholders benefit and what challenges do we need to face together? That's the best outcome I think that we could ask for.
Philip Stoten (18:20):
Yeah. And I think that desire to collaborate and communicate has been greater than this crisis and I've seen it previously. So that's encouraging. It's a really important time for leadership and that's a really important time to keep the team together. And I guess you worked pretty much, as a business, you've been quite displaced and dispersed around the world right from the get go. Has that been a challenge or has that been something that you've just dropped into and you've been able to keep everybody?
Michael Szymanski (18:51):
Because of the way that we're structured and having a management team spread out around the world, we're pretty used to working within the constraints of what we have today. The management call involves Europe, San Diego, Hong Kong, China. We were used to a weekly iteration of going through that process. We're used to engaging our key customers in video conversations. I think the biggest dynamic is during the NPI process. We would typically have teams of people here working with us. And right now we're spending a lot of our time thinking about how can we do that piece better, if we're not going to be able to get together? I mean, for myself sitting here in Hong Kong, I still can't go to China. I would typically be there every week. We're really looking at how does that relate to NPI-wise as a global operation. I think we're all pretty comfortable having video conversations…
Philip Stoten (20:07):
It is creating that it tends to have a new product hitting the line and managing that, it's going to be interesting. But actually even gave you some, some improved processes, as you say, it's that catalyst for a dialogue and for a conversation that's hugely valuable. One of the things that everybody's missing is kind of getting out to restaurants and getting to the theater and doing all those kind of things that are not. How much of that has reopened in Hong Kong? What are you doing to stay safe? What's keeping you…
Michael Szymanski (20:41):
Yeah, it's a great question. Well, I think we've probably been one of the most fortunate locations specifically because the minute that there was concern of the virus, we're at 99% face mask coverage, even today. Wow. We've had a recent death, but otherwise we had had four deaths, the last March 13. Very low mortality rate that left most places open at reduced capacities. If you wanted to, as probably no more than four people, you could still go out and get a meal. Then we moved into gyms, cinemas, other things slowly reopening. Now we're pretty much back to normal for the most part. Youth sports is back to everyone being able to participate. I think the big challenge here is going to be, how do we sustain that and open the borders which we eventually have to do.
Philip Stoten (21:52):
Yeah. And I think that's the same in many places.
Michael Szymanski (21:55):
Yeah. Some new behaviors, little things. The gym closed here for a long time and something that came out of it for me was I just started walking home. You've been to Hong Kong. It's about an hour walk – it is directly uphill.
Philip Stoten (22:14):
That's a good point.
Michael Szymanski (22:16):
It’s kind of neat - you experiment, you try new things, you see what works and any, take a break. You spend a lot of time with the family. You take a lot of time kind of laying out the framework of what's the business look like for this time.
Philip Stoten (22:35):
It's nice to be strategic, that's been a benefit. And you know, I think that probably the thing that's given you the most free time is that, it's that travel time. That weekly commute to the mainland to visit the factory, with that out of the way, and it does give you a bit of time to think more clearly, especially as you walk up that hill - that's a pretty big march.
Michael Szymanski (23:02):
Good one. And then we took the opportunity. We had been waiting to redesign all of the offices do construction in China and we kind of looked and said, “Well, there's no visitors. We're at reduced capacity. Why don't we just get the construction out of the way now?” So we completely went through a renovation the last couple months, just tying up some loose ends that was low hanging fruit for the last few years.
Philip Stoten (23:32):
I think everybody's doing that. Everybody's house and everybody's businesses has had a little bit of a tidying up from the whole thing. That's a good thing. Last thing before we depart, what advice would you give to your peers, particularly that I use that have got manufacturing in China right now? What would be your advice to them moving forward?
Michael Szymanski (23:57):
Yeah, the first and foremost is certainly stay safe. We’ve got to think more about the bottom line right now and how can we all, with large headcounts of teams and employees? How can we do our part to make sure that everyone is staying safe? Have those conversations with your customers they're more open than ever to help you strategize over that. I would say over communicate. With my team globally, every Monday, I'm doing a video blog to the whole team because people are concerned. They're watching their friends, their jobs, they're stuck at home. We tell everyone, number one KPI right now is talk to people, right? And then when you can, do it over video, because if you're sitting in your home, it's good to talk to as many people as possible and then be patient. Because as I said, I've been doing this since 2001. And the struggling points that I'd been through have been fast in hindsight, when you look back at it and maybe take notes. Write down what you're going through now, because you'll always refer back to this one when the next cycle comes through.
Philip Stoten (25:29):
Well there’s a great book somewhere in there, isn’t there Mike? That’s for sure when we get to the end of this, there’ll be some interesting stuff to look back upon. Thanks for your candor. It's been an absolute pleasure to chat and for everybody watching until next time, we'll see you on.