Endicott Interconnect Technologies, Inc. VP & GM PCB & Semiconductor Packaging Jim Fuller explains how Endicott Interconnect has managed to grow revenues by more than 69 percent year-on-year
By Emmet Cole
When IBM announced it would divest its microlectronics business in late 2001, a group of local investors came together to purchase the business to prevent the loss of numerous skilled engineering and professional jobs. The closure and loss of these jobs would have been a devastating blow to the local community.
The new management team put together a solid strategy to compete based upon technology, a vertically integrated business model and a plan to create a diversified base of business which they felt was necessary to achieve success.
“Its new owners and senior leadership team felt very strongly that Endicott Interconnect could remain competitive and maintain employment for the workforce in the upstate New York town of Endicott by developing new markets that IBM had chosen to ignore.
Under IBM’s corporate strategy, the Endicott division could not explore markets like medical, military and aerospace defense. Medical products typically contained too many litigation pitfalls, and IBM had already divested all of its military-related divisions years before.
But when area-investors completed the divestiture in November 2002, Endicott Interconnect found it was freed from IBM’s more cautious tether and immediately set their sights on those markets.
The company has quickly become a world-wide leader in electronic interconnect solutions and electro/mechanical equipment -- growing 69 percent to $369 million in revenues in 2007 alone -- with an intense focus on effective vertical integration, technology, and an unwavering devotion to customer service.
Effective Vertical Integration
An important portion of Endicott Interconnect’s business stems from its ongoing relationship with IBM in the computer/computer peripheral market, but the company’s forays into newer, previously ignored markets account for Endicott Interconnect’s phenomenal growth. In 2007 alone, Endicott Interconnect added nearly $200 million in contracts with the Department of Defense for products like organic semiconductor packaging and printed circuit boards.
But what really differentiates Endicott Interconnect from its competitors, Fuller says, is what the company calls “a vertical integration model”. While the products from some competitors will journey from place to place around the globe for each phase of development, Endicott Interconnect products almost always go from design to assembly in one location.
“Some of our competition can claim that they are organizationally vertically integrated, but they aren’t necessarily effectively vertically integrated,” Fuller says.
It all happens at a giant, 1.6 million square foot facility in Endicott, N.Y., a small town of 13,000 people three hours from Manhattan. Because Endicott Interconnect’s military, aerospace and medical products require perfect developmental execution, this approach allows for increased communication between the design, manufacturing and assembly teams.
“From a supply-chain perspective, that would traditionally be a multiple-company handoff,” Fuller says. “For some of these very mission-critical, low volume-type products, it’s a strong recipe for someone who has a very complicated product and wants to minimize the confusion and consternation within the supply chain.”
Endicott Interconnect has initiated a “floor space optimization” project to consolidate into a smaller area at the facility for better company-wide efficiencies. The implementation of SAP as its operating system replaces the cumbersome, more complex and customized legacy system.
Unprecedented technical capability
Around the time of Endicott Interconnect’s inception, the company’s top management was confident that a longer than anticipated incubation period for some of their design ins and products would validate the invested time. By the end of 2005 and throughout 2006 and 2007, Endicott Interconnect saw its patience pay off as its “unprecedented technical advantage” began to translate into profits.
“2007 was an excellent year,” Fuller says. “We saw very, very significant growth because those programs that we’ve been nurturing along in their incubation stage came to fruition.”
Dating back through its history with IBM, Endicott Interconnect engineers hold or co-hold more than a thousand patents, including 47 since the 2002 divestment, with 94 more active on file with the U.S. Patent and Trademark Office. Endicott Interconnect’s product quality rating is usually five to ten times better than its competition, says Fuller.
“The key things are quality, reliability and technical capability,” Fuller says. “So when you have a really, really challenging product that you don’t know how you’re going to build, we’re your guy.”
For Endicott Interconnect’s customers like IBM, Sun, Cadence, Cisco, Agilent, Boeing, Department of Defense, Northrop Grumman, and Raytheon, this means products like integrated circuit packages, high-layer count circuit boards with high density circuitry, and assembly solutions combining elements of silicon, packaging, design, printed circuit board fabrication and service.
“Even during our difficult early days, when we were trying to keep ourselves afloat as a new company, we still spent between four and five percent of our revenue on R&D,” Fuller says.
Focus on customer service
Effective supply chain models and cutting edge innovations won’t make much
difference if customers don’t get what they expect, says Fuller. So, to ensure reliability, Endicott Interconnect boasts a robust nation-wide customer support system, with nimble application engineering teams stationed around the country.
Mission-critical types of products demand this intense focus on customer service. “It’s not ‘send an order, and let me know when you’re going to deliver it’. There’s a tremendous amount of collaboration. There’s a tremendous amount of, ‘if this, then that. If I change the lines and spaces, then can I change the number of layers?’” Fuller says. “That kind of support is very important to the customer. Our expertise helps them end up with a better product than they thought they would have in the first place.”
Future challenges, future growth
The biggest challenge facing Endicott Interconnect, Fuller says, is finding ways to cut costs among its cutting edge technology. To achieve this, Endicott Interconnect has established limited assembly operations to China, but only in a way that supports - rather than replaces - what happens in New York.
“A lot of products are cost-sensitive, so we had the opportunity to put an assembly operation - not a fabrication or substrate - but purely what fits a very specific customer need,” Fuller says.
The company sees challenges in hiring and retaining top-level talent. By partnering with universities and industry, Endicott Interconnect is working to develop and entice the next generation of engineering and management talent.
Click here to view the corporate brochure on endicott interconnect