using shenzhen as a base to produce in china through hong kong
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Jim Haynes, Chief Operations Officer Alan Hughes, Management Planning Bookham Technology Plc. Using Shenzhen as a base to produce in China through Hong Kong. Bookham: Key Facts. Global supplier of optical components for telecoms & industrial applications Annual revenues >$200M p.a. - PowerPoint PPT PresentationTRANSCRIPT
Bookham Confidential
Using Shenzhen as a base to produce in China through Hong Kong
Jim Haynes, Chief Operations OfficerAlan Hughes, Management Planning
Bookham Technology Plc.
Bookham Confidential
Bookham: Key Facts
Global supplier of optical components for telecoms & industrial applications
Annual revenues >$200M p.a.
C. 2,000 employees world-wide
Founded in 1988 – the Silicon Optical Chip company
1998: Intel and Cisco invest; first commercial products (transceivers)
April 2000: IPO, started trading on Nasdaq and London Stock Exchange
2002: acquisition & consolidation strategy to achieve volume manufacturing scale and reduced cost
– acquisition of Marconi and Nortel optical components divisions
2002 onwards: driving consolidation & cost reduction
Number 2 position worldwide in telecom optical components
Bookham Confidential
Bookham Worldwide:
Ottawa (Canada)• R&D: Discrete Laser &
Receiver; Sub-Systems
UKPaignton
• Discrete Lasers & Receivers, Modules, and Amplifiers R&D
• Assembly & TestCaswell
• Discrete Laser & Receiver R&D• InP wafer fab
Zurich (Switzerland)• Laser pump chips R&D• Laser pump chip wafer fab
Santa Rosa (Ca)• Thin-Film Filter
R&D & Manufacture
Shenzhen (China)•Assembly and test•Customer Applications Lab
Hong Kong•Sales Office
San Jose (Ca)• Headquarters• SFP, XFP Opto-electronic Modules: R&D &
Manufacture• New Focus Opto Test & Measurement
Components: R&D & Manufacture
16 hours time-zone span
8 am 4 pm 12 midnight
Bookham Confidential
World Wide Optical Transport
$0
$5,000
$10,000
$15,000
$20,000
$25,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Optical Switch
SONET/SDH-Multiservice
SONET/SDH-ADM
DWDM Metro
DWDM LH Terrestrial
Telecom Market boom & bust- drive for lower operating costs
• Telecom market peak c.$23bn in 2000• Major downturn 2001-2002• Optical component manufacturers world-wide
driven into big operating losses• Bookham applying an acquisition and consolidation
strategy to achieve volume manufacturing scale, and reduce cost.
• Strategic Operations model redefined:• wafer fabs consolidated into Europe• High labour content Assembly & Test move
to low-cost Far-East location
Bookham Confidential
Shenzhen / Hong Kong decision
Search for suitable locations narrowed to Malaysia or China
Final decision to move to China
Key factors in our decision were: Access to skilled and well-educated workforce Good infrastructure to support high-tech manufacturing operation Good logistics to avoid shipping delays in- and out-bound Acceptable environment for ex-pat secondees to live and work Ability to move fast to get the new factory up and running Good access for all our Far East customers, and especially China Existing sales office in Hong Kong
– 8 years experience of working in the region
Bookham Confidential
Shenzhen / Hong Kong
Operating Model
• Bookham Shenzhen manufacturing: State-of-the-art facility in Shenzhen Free Trade Zone
- Balance between availability of skills and lowest labour cost
• Hong-Kong sales office & logistics
- Bookham ship all Shenzhen products through Hong Kong Warehouse
- Global Logistics Centre- Efficient travel infrastructure - Major Customers have warehouse and
finance infrastructure in Hong Kong- Chinese customers handle local import
from Shenzhen Free Trade Zone via Hong Kong
Bookham Confidential
Shenzhen Facility
Being established as Bookham’s low-cost volume manufacturing plant
Acquired by Bookham Q1 2004
• 247k sq ft manufacturing & office space
• 70k sq ft clean-room• 40k sq ft labs etc
• US$20M invested in facility upgrades by previous owners
Bookham Confidential
Facility Start-up Preparation
– Engaged HK based consultants to prepare for business licence– Hired key management positions in preparation for start-up– Product transfer management process defined
Transfer Methodology– Transfer “as-is”: replicate in China what we have in UK– Transfer of simple products first (“Phase 1”)
• Establish basic skills, pipe-clean logistics
– Progression to more complex products later (“Phase 2”)– ‘Push-pull’ team approach with accountability shared between UK & China– Fast transfer of capacity from UK to China – avoid expensive duplication– Involve customers: share the plan, encourage customer visits & audits of
new facility
Bookham Confidential
Success of Shenzhen
Staff of >700 recruited & trained over 1.5yrs
Revenue growth to $30M /qtr (Q4’05)
Beating plan: better yields & productivity = even lower costs than target
Shenzhen Revenue
0
5
10
15
20
25
30
35
Q2-2004 Q3-2004 Q4-2004 Q1-2005 Q2-2005 Q3-2005 Q4-2005
$M
Products fully Qualified to relevant international standards
BSI/ISO Approval: ISO/TL9000 awarded January 2005
Customer delivery and product quality standards maintained throughout aggressive growth
Phase 1 Phase 2
Bookham Confidential
Keys to our success
Intensive preparation and planning, working closely with the Hong Kong and Shenzhen authorities, and with local people experienced in setting up this kind operation
Recruitment of a strong local management team up front Driving the plan through, despite inevitable skepticism
amongst western management team “Transfer as-is” strategy: get it working then improve later if
necessary Involve the customers up-front, sell the advantages, and
demonstrate that the supply risk to them is understood and being tightly controlled
Strong local infrastructure and logistics, with proven gateway to our world-wide customer-base through Hong Kong.