Electronics firm carves out niche in slumping market

The slump in the semiconductor and electronics sector worldwide is proving to be a boon to a local company as global players turn to outsourcing.

Cirtek Electronics Corp., a subcontractor involved in outsourced semiconductor assembly and test (OSAT), said it has bagged a 100 million pieces a year contract with Fagor Electronica, a company based in Spain.

Antonio Callueng, senior director for sales and marketing of the Laguna-based company, said for this year alone, Cirtek expects to acquire four entirely new big first-tier customers.

Callueng expects that in two years, new business will generate an additional $11.8 million for Cirtek. In 2010, Cirtek did about $34 million worth of business and expects this to grow to $40 million this year.

“Our strategy is to strengthen the captive line development, get equipment from other sites and consolidate them into our operations. The carrot is our space so (our clients) will close down their sites and outsource those operations with Cirtek,” Callueng said.

He said global companies are outsourcing to OSAT firms like Cirtek so they can concentrate and leverage on their production of high-end semiconductor products.

“They used to have these assets and factories in other countries. During a downturn, they have a problem gearing them up so they’d rather outsource,” Callueng said.

According to Callueng, Fagor Electronica is Spain’s largest electronics group and employs about 78,000 people around the world.

Callueng said the contract with Fagor Electronica will allow Cirtek to showcase its copper wire bonding technology as a more cost-efficient alternative to gold wire bonding.

Wire bonding is the primary method of making interconnections between an integrated circuit and a metal lead frame or printed circuit board during semiconductor assembly packaging.

Cirtek’s contract with Fagor Electronica covers Fagor’s Thyristor devices for a minimum volume shipment of 100 million pieces a year.

The Thyristor device that Cirtek will build goes into high-voltage motor devices intended for consumer and home applications such as systems for reception processing and distribution of digital and analog TV.

The device is also used in security, communications and comfort for automation of the home, global system for remote control and management as well as internet and intranet management of fleet system.

Callueng said the new business engagement will allow Fagor to increase its market share and win more customers because of Cirtek’s continuing innovations in the use of copper wire for customer specific applications.

Callueng said the four new customers will require a combination of gold and copper wire bonding and will generate an additional $7 million for the firm.

One of the four customers will require 400 million units a year for Phase One or an additional $2.2 million, with revenue later rising to $4 million to $6 million a year.

The three others will generate $2 million to $3 million.

Anthony Albert Buyawe, chief finance officer of Cirtek, said the company is confident it would be able to buck the slump in demand for electronics.

Cirtek is also braving the equities market as it plans to go public by the fourth quarter.

“Our end applications are quite varied – from power management, automotive to defense to consumer electronics. In general, our factory is still operating 90 percent of its capacity. We have not cut down (operations) and we have been receiving orders,” Buyawe said.

Unlike other OSATs that rely on one or two customers only, Cirtek has about 40 base customers. The top 10 customers account for 60 percent of Cirtek revenues.

“If you are a long-term investor, you are not going to look at what is happening now,” Callueng said.

Buyawe said, “Going public is a preferred option as we are targeting top-tier customers which prefer to deal with a publicly-listed company for transparency and corporate governance.”