Lower-skilled production moves overseas to cut costs
Monday, August 23, 2004
Sanmina-SCI's completion of 2,500 complex processors for a U.S. Army helicopter program last week provided both a nod to the company's longtime role in Huntsville and a glimpse of its future.
A few years ago SCI Systems Inc. was Huntsville's largest private employer with more than 5,000 workers. The contract manufacturer of electronics employs about half that number locally today.
Sanmina-SCI has closed and is selling a number of its area plants and concentrating work in its south Huntsville facility, which received a $10 million upgrade over the past year.
The company was formed in December 2001 after San Jose, Calif.-based Sanmina acquired Huntsville's SCI Systems. It reported more than $10 billion in sales last year.
Company officials in town last week for the helicopter ceremony said work here will focus on more complex manufacturing and design efforts, while higher-volume, lower-skilled work is headed overseas.
"There's been a lot of talk about moving work offshore," Sanmina-SCI President Randy Furr said during an interview last week. "But we have a substantial investment in the Huntsville area. We've continued to invest in technical resources here. The Apache processors were designed and manufactured here, and we have no intention of changing that.
"This is a good example of the right skill sets delivering the right product."
Sanmina-SCI said last month it will spend $100 million for restructuring to reduce manufacturing in higher-cost areas such as North America, including Huntsville, and move it to Asia and Central Europe.
Company officials say customer demand is the reason they are moving more high-volume manufacturing work into lower-cost regions.
It will likely mean fewer manufacturing jobs in Huntsville, but officials said new jobs will open demanding higher skills.
Taking the long view, it's another sharp turn in SCI's history.
More than 40 years ago, SCI began by doing work for the space program, then it moved into defense systems and later evolved into a contract manufacturer.
The Huntsville-based firm grew into a multibillion-dollar global leader by manufacturing electronics products at a low cost.
But today the economics of volume manufacturing point to the work being done in Asia and Central Europe, according to Sanmina-SCI officials.
So Sanmina-SCI has to find a way to do better, brainier work in Huntsville.
"We have to do the best we can to protect jobs," Furr said. "That will mean additional training for some workers and a change in the mixture of work done in Huntsville. You'll see the large-volume PCs move out, but hopefully other high-end work will come in.
"There will be more hiring in the professional and technical areas."
Gene Sapp, who was chief executive of SCI at the time of the Sanmina merger, suggested turning back to more technical work should serve Huntsville well. After the Longbow Apache celebration last week at the company's large plant in south Huntsville, Sapp said the defense and aerospace business is poised to grow after years of languishing. It was a viable business, Sapp said, but didn't grow.
Sanmina-SCI officials plan to aggressively pursue more defense and aerospace work.
"If there is a long-term future here for manufacturing and jobs in Huntsville, it's got to come from this kind of business," Sapp said. "We're fortunate to have it here. The big hope for this facility is to fill it with this kind of work.
"During the merger discussions, Sanmina was very interested in building a fire under this business."
The company recently won a major contract to help develop a common design framework for the Longbow Apache Manned/Unmanned aircraft interface for Boeing Co.
The contract will involve nearly 100 people working on the design phase in the Huntsville area, said Jason Chamberlain, Sanmina-SCI's senior vice president for defense and aerospace systems.
Chamberlain said the contract and related work will mean the company will add technical jobs.
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