GRAND RAPIDS — One West Michigan electronics manufacturer plans to leverage a recent deal in Europe to further capitalize on the growing electronics manufacturing market.
Firstronic LLC of Grand Rapids in April inked a joint venture with Lacroix Group, a manufacturer of electronic components and connective technology based in Saint Herblain, France.
The new joint venture marks the next step in Firstronic’s larger strategy to increase its international production footprint for its printed circuit boards.
“The limitations on our growth in that market have been based on our ability to produce there,” said CEO John Sammut.
Prior to the joint venture, Firstronic manufactured a limited number of products for the European market, but the new joint venture will allow the company to use Lacroix’s capacity to significantly increase production.
“The joint venture with Lacroix is basically going to enable us to support customers that want localization in Europe,” Sammut said.
Lacroix currently operates manufacturing centers in Poland and Tunisia.
The joint venture allows Lacroix to use Firstronic’s Mexico production facility in Juarez to expand into the North American market.
“It will help accelerate Lacroix’s international development outside Europe,” said Vincent Bedouin, chairman of the Lacroix Group. “Firstronic is a concrete response to the requirements expressed by our strategic customers.”
Lacroix purchased a minority equity stake in Firstronic in addition to the partnership, Sammut said, declining to disclose the specifics of the transaction.
“They felt strongly that they needed to be able to assure their customers that it’s not just a short-term convenient relationship, it’s a longer-term relationship that they have a vested interest in,” he said.
So far, the joint venture has already paid off for Firstronic. The company currently is quoting a project to produce components for a Lacroix customer at the Firstronic facility in Mexico. The contract could result in a 20-percent increase in revenue, Sammut said.
Firstronic currently generates roughly $145 million in annual sales and employs 450 workers across its entire operation. Roughly 200 of those employees work in Grand Rapids.
The company expects to hire an additional 150 workers over the next year as demand for its products continues to rise.
Overall, Firstronic is seeing the majority of its growth from customers that are adding more electronic capabilities into their products.
“That’s driving a lot of growth for us right now,” Sammut said. “You take a product that was mechanically connected to other things and now it is a smart product that allows it to communicate with other systems and devices.”
Globally, the printed circuit board market is expected to reach $73.8 billion by 2021, up from $61.5 billion in 2015, according to a report by BCC Research LLC, a market research firm based in Wellesley, Mass.
In addition to manufacturing circuit boards, Firstronic offers product assembly services.
The company also operates a joint venture with Maxway Technology Co. Ltd., an electronics manufacturer based in Shenzhen, China.
While growth in the electronics manufacturing industry has led to increased sales for Firstronic, it’s also put significant pressure on the global supply chain.
As the industry has grown, suppliers of microchips and other components used in circuit boards and other electronics have experienced shortages, causing extended lead times for companies such as Firstronic. Where lead times for these materials typically range from four weeks to 10 weeks, electronics manufacturers now face lead times of as much as 32 weeks, Sammut said.
“The root cause is that simultaneous increase in demand in multiple regions at the same time — it’s pretty rare,” he said. “Typically in our industry, if you have an increase in demand in Asia, it’s lower in Europe and then higher in North America. Each region is at an all-time-high in electronic (manufacturing) demand at the same time.”
Sammut noted the shortage of electronic components stemmed from suppliers being wary of adding new capacity following the 2008 financial crisis.
“These component manufacturers sort of got burned in 2008 with excess capacity with the market downturn (and) there was a lot of consolidation,” Sammut said. “They were very reluctant to add capacity until they could be very confident that the demand was sustained and not a short-term blip.”
Now that suppliers understand the demand for their components likely will be sustained over the long term, they’re beginning to add capacity, Sammut said. However, that process can often take a year to complete.
For its part, Firstronic has relied heavily on its relationships with its component suppliers to work around the shortage.
“If you had more demand from your customer right now, it would take you months to increase your pipeline of material and they don’t see that changing, probably for another nine months to a year,” Sammut said.
Made in Michigan: Grand Rapids-based Firstronic LLC aims to expand production for its printed circuit board products in the European market through a recent joint venture with Lacroix Group of Saint Herblain, France. Firstronic also plans to grow revenues by manufacturing components for Lacroix’s customers at its manufacturing facility in Juarez, Mexico. The company generates annual sales of approximately $145 million and employs 450 workers across its operation.