Former electronics manufacturer in Denmark now serves Danish and Swedish companies with components from Singapore, the Philippines and other places in South East Asia.
“They are cheaper and better,” says Mr. J๘rgen Sylvest Jensen, who wants to change the misconception in Scandinavia that suppliers in South East Asia are only good for large series and that sourcing in South East Asia is asking for trouble.
In 1998 Mr. J๘rgen Sylvest Jensen was the owner of SJ-Elektronik in Sonderborg in the South of Denmark. That year, he was awarded Entrepreneur of the Year. Shortly after, he left Denmark to become a sourcing agent for Danish electronic companies supplying components from Singapore, Taiwan, Hongkong, China and the Philippines.
Today, he has his own company SJ Components Phil., Co. Ltd. in Manila as well as another company SJ Components Asia ApS back in Sonderborg in Denmark.
“I have just delivered an order of 1000 print plates for a Danish Electronics company,” Mr. Sylvest Jensen told the Danish daily ErhversBladet in November.
“After the delivery, the management of the Danish company had a meeting with the Quality Manager of our supplier who explained how they could improve the profitability of their product if they made a few improvements in their design. The first five plates with the new design were send by airmail to Denmark within two days,” Mr. Sylvest Jensen said to prove his point that suppliers in South East Asia are largely underestimated by Scandinavian electronics companies.
SJC has close contacts with about 30 different suppliers in South East Asia enabling him to deliver a wide range of products. It is his estimate, that depending on type of component and the level of manual work, Scandinavian electronics manufacturers could save between 10 and 30 percent by sourcing components in South East Asia – after adding air freight. If the production can be managed well enough for delivery by ship, the savings are obviously that much higher.
Apart from the cost saving, Mr. Jensen claims that the South East Asian suppliers also beat Danish suppliers on quality, logistics, flexibility and minimum orders. As far as small series are concerned, orders down to 500 units are competitive, he told the paper, adding that the key is an intimate knowledge of the Asian business culture. Describing in general terms the state of the industry in South East Asia, Mr. Jensen says Singapore is the Silicon Valley of the components industry.
Manufacturers in China are well-known for cheap high volume production but they are difficult to work with because of language barriers and logistic reasons and dealing with a Hong Kong office is often the best solution. Taiwan has good overall suppliers. The industry in Thailand suffers from outdated machinery and lack of an electronics culture. The Philippines are thriving on favourable tax and duty conditions and powered by American and Japanese capital.
As an example of the flexibility in South East Asia, J๘rgen Sylvest Jensen points to the company Vista / Speedy Tech which offers low volume production from its factory in Manila and production of larger series from a factory in Shenzhen in China. Large series may be 50,000 units per year and the 3000 workers there have no problem turning out one million of any component per month.
“Forget about the distance. With phones, faxes, email and a web camera it doesn’t matter,” Mr. Jensen is quoted by the paper.
“When I was a manufacturer in Denmark I had hardly time to visit my clients once a year. Now, I can bring members of the management from Vista / Speedy Tech to Denmark to see our customers two or three times per year.”
The lower wages in Asia is obviously an important factor in the competitiveness of the manufacturers. When Mr. Jensen employed an electronics engineer for the equivalent of 4500 Danish kroner per month, he could hardly conceal his pleasure. But this is only one factor.
“The manufacturers in Asia are more competent, deliver higher quality and have a better control over the whole process of production, follow up and logistics. They are not only cheaper because of lower workers wages but also because of their higher output. It means something if your machines work 95 percent of the time on three shifts per day.”
Mr. J๘rgen Sylvest Jensen adds that he does not predict an end to Danish suppliers to the electronics industry as they have a certain market. But he does see a rather limited growth potential.
“The growth in the use of electronics in general will be enough to maintain their existence. But more and more production will move to South East Asia,” he says, adding that East European competitors are no match in skills.
The way he sees it, Danish components manufacturers have three options. Produce very small series, enter strategic alliances with major electronics producers or go for clients who are not much concerned with the price of the components. Apart from that, the future is South East Asia, he says.