A New Facility in India for PCB Fabricator ACI
I met with Raj Dhanani and Bryan Ricke of Advanced Circuitry International to discuss their growing footprint in India, recent investments in their U.S. facility, and the future of the RF and antenna markets.
Barry Matties: Raj, can you tell a little about ACI and your position there?
Raj Dhanani: Yes, ACI is specialized in RF and microwave circuitry. That's what we've been doing for the last 22+ years, making a lot of the circuit boards out of the RF and microwave materials. I'm the global director of sales and marketing.
Matties: I had a chance to stop by yesterday and chat with you a bit. It was very interesting for many reasons, but one thing that you guys are doing is growing. You have facilities in multiple locations around the world. Can you tell me about your footprint?
Dhanani: We started in 1992 in Atlanta, Georgia. Since then we opened up a facility in early 2000 in Brazil. Just a couple years ago we opened a facility in India to cover a lot of the Asian market. We also just extended another facility here in Atlanta, Georgia, to promote ‘Made in USA’ and support many of our key customers here in the U.S.
Matties: When you make a move to Brazil, that's really specific to a market, I would think. The automotive market, probably.
Dhanani: It's an automotive market as well as an RF market. Being in RF is important as you see all the cellphone and wireless industries expanding and building this infrastructure globally. As our key Tier 1 customers started moving to some of those regions of the world we kind of followed them over there as their key supplier.
Matties: And India, that's pretty interesting because you're early to the game there, I think. I know I talked yesterday about how the associations are always saying, "It's time," but it still feels like we're 10 years away from seeing a real gain in market share there.
Dhanani: Yes, if you want to look at India, let us look at China 10 or 15 years ago. We all remember when they were getting started, and right now you fast forward another 10 or 15 years and they're really getting the big share of the market, mainly in the circuit board industries. Maybe not on basic, standard FR-4 boards, but still in the high-tech side.
Matties: The high-tech side has really engaged in the last five years or so, too.
Dhanani: Correct, and that's what we're saying in India. We've been thinking about going to Asia for a little while. We finally started the facility in India just because we know that we may have some kind of leverage as we grow over there. When we started we thought we were a little too late because all the infrastructure was being built over there locally and what not. Now we're there and of course the demand is there, but a lot of the raw materials, whether it is a chemical or the basic materials to make the circuit boards, is still being imported to India right now.
Matties: I would think the supply chain is limited and the shipment costs play a factor in your ultimate pricing.
Dhanani: It sure does. That's what we are facing right now, but just like anything else, when China started they had the same issues, everything was coming from Europe or the United States. I think as the business grows in India, some of those key suppliers will put up a facility or some bonded warehouses over there to keep the material available.
Matties: How many shops are currently in India? Are you familiar?
Dhanani: In India, I would say there's about eight or 10 shops that are good-sized shops, but in RF it's only about three or four. We call it the Jagat RF Solutions, it's a part of the ACI Group in India, and is one of the state-of-the-art facilities for the wireless infrastructure there.
Matties: Are you looking at customer bases that are there or global customers coming to you and saying they want their boards built in India?
Dhanani: It's both. Definitely we have our key customers over there in India, but this industry is growing also in Africa and in certain parts of the Middle East, and they don't have the supply base over there. I think as the wireless market grows in that part of the world, we will be supplying a lot of the PCBs out of India.
Matties: You're really in a prime position. You have India domestic market share, some global, and you're there years before the competition and you're building relationships.
Dhanani: It definitely put us in a little bit better position, because if you take the first risk you may have a little bit of leverage over there.
Matties: How many employees do you have in India?
Dhanani: In India, we currently have about 80 or 85 employees right now.
Matties: All right, so it's a nice size crew.
Dhanani: It's a nice size, but at the same time, we've only done the first phase of our facility there. By the time we get done with the second and third phases, we're going to have close to about 140,000 square feet and up to 350 to 400 employees.
Matties: You have real vision there and serious investment, too.
Matties: How's the government been and the business conditions in that regard, with regulations and so on?
Dhanani: I'm glad you asked me that question because that's what everybody's worrying about. When we went to India, even though I was born in India, I had the same worry. You hear about all this and how doing business in a third-world country is not easy. Of course, when we went there, we had our challenges, don't get me wrong, but the good thing is our facility is located inside what’s called the "Special Economic Zone" for electronics, it's called SEZ Electronic Zoning. Basically it’s the zoning that the government created, just like what China did 10 or 15 years ago, to bring in a lot of foreign investment and foreign companies, a lot of which are high-tech companies like ACI. They really want us over there. It kind of made life a little easier for us rather than a lot of the other companies which were just "me too" companies.
Matties: The typical view for India from an American's point of view is what we hear in the media, not a lot of people travel there. They don't have the first-hand knowledge, but we hear about building collapses, corruption, and all other sorts of atrocities that, quite honestly, are scary for people.
Dhanani: It's somewhat scary, but it's changing. India has come a long way. We have a new prime minister, Narendra Modi, and he really wants to change what's going on in India right now. He wants to have a lot of foreign companies coming in there, not just from the business perspective but the local domestic as well. He is prime minister and a lot of the people know that he wants to get the corruption out of there. Right now, that's probably a little bit too much because it's not easy to do in a third-world country.
Matties: Because it reaches all the way to the lowest of levels, and when you're down in the lowest of levels, it hard to root that out.
Dhanani: Absolutely. It's hard to root that out, but it's changing and it's changing rapidly.
Matties: The culture is changing?
Dhanani: Yes, and I see that firsthand. We remember when anything and everything you needed to do in India you had to...
Matties: Grease a palm?
Dhanani: Yep. Now that's not the case. Not all the way, in certain areas, yes, it's going to be there no matter what.
Matties: That's interesting and a great insight. Thank you for sharing that. Let's talk a little bit about your investment in America. There aren’t many people setting up new facilities in America these days. You already had a facility for many years. You started in Duluth, Georgia?
Dhanani: Yes, Duluth. What we're basically doing is a lot of the high-tech parts. We're in RF and microwave, and they're coming back. Some of them are not only coming back, but we're trying to keep it here in the U.S. Because of all the competition and the pricing pressures and everything, some of those things are going abroad and to Asia, but by having the big investment that ACI is trying to do, and is doing right now, we're basically trying to keep the work here in the good ol’ USA. For me personally, I'd rather not go to work anywhere else except here in America.
Matties: But you have your facilities in India, you're set up in Brazil and you're serving those markets. There's, what, 1.3 billion people in India? It's a growing market. Here in the U.S., how much investment did you put into the facility?
Dhanani: We put more than $5 million and, again, we tried to do a lot more semi-automation and automation. One of the things we did in this factory is most of the equipment is brand new equipment that was custom designed the way we wanted. A lot of this IS equipment was made in Italy the way we wanted because with RF boards it's all about consistency. It's not about how fast you can build, how good you can build, and it's not about plus or minus 1-mil or 2-mil circuitries and stuff like that. It's about how much consistency you can have. Every time you do it, it's going to need consistency, that's how all those antennas are going to perform better.
Matties: What was the greatest challenge in setting up a new facility?
Dhanani: I would say the greatest challenge was the timing. We tried to do something real quick, very fast because we had so many orders last year and so much work, and if you don't capitalize on that right now, it's going to go abroad. If you don't do it right now, and right there, right then, then we may lose some of those orders. We didn't want to give them that opportunity.
Matties: In terms of volume going through that facility, is this still considered for low volume or are you looking at producing a higher volume through the new facility?
Dhanani: We are looking for medium to high, I would say.
Matties: There's not a lot of that left in the U.S., so this might be the beginning of a trend of some volume production coming back.
Bryan Ricke: We hope so.
Dhanani: That's exactly it, we hope so. It's coming back. A lot of the OEMs who have facilities here in the U.S., but also in North America, in Mexico and South America, are trying to keep all the manufacturing here in North America basically.
Matties: From a buyer's perspective, what is it that they should understand about circuit board fabricators when they're looking at making a choice of a fabricator and a selection for a long-term supplier?
Dhanani: Especially for the buyers, I remember a few years back they were investing a lot of money and energy in approving the new vendors. Because of the economy and because of the competition, they were getting out of business. I mean, they were in the business and were doing well for a couple of years, but the next thing they know they cannot survive. Back then, the pricing wasn't the only thing, you didn’t know if your suppliers were going to be in business in the future. Now it's not that big of a deal if they're going to be in business, but how open are they to keeping up with the latest and greatest technology? Because we can have the very good drilling machines and very good plating lines, but it's only good for what we do today. Are we keeping up with them for the future technology? That is the main thing. So I would say if they're partnering with a company like ACI, that we will not only have what we can do today, but we're going to continue to grow with what we can do tomorrow.
Matties: You're obviously looking forward with vision, there's no doubt about that, just seeing what you're doing in India and other things. How many employees worldwide do you have?
Dhanani: Worldwide we've got a little bit over 250 employees.
Matties: What sort of revenue do you guys do?
Dhanani: About $17 to 18 million.
Matties: Is this a privately owned company?
Dhanani: Yes it is.
Matties: How are you funding all your growth?
Dhanani: Most of it is self-funded. Of course, we’ve got very good credit and that kind of helps in getting some money from the bank.
Matties: Are you taking on new partners or anything like that?
Dhanani: No, not at all. Not yet.
Matties: So that could be part of the plan?
Dhanani: It could be a part of it, because I've talked to a few other people and also my nephew Hari is doing a Master’s in Business, and he wants to see, "Hey, how can we grow this business to the next level?" To make it to that level you're going to need a lot of funding and you can open up those possibilities in future.
Matties: What does the next level look like? Some assembly and box build or are you already offering that sort of service?
Dhanani: We are offering some assemblies. Basically these are hand-soldered assemblies; with a lot of the antennas you cannot utilize surface mount techniques because there are no components. Basically what we do is board-to-board assemblies, and that assembly has to be done really well, and with the solder flow done based on J standard. If it's not done right, then you're going to have a lot of issues on the performance, with PIM being the main issue. We're already providing those kinds of services here in the U.S.
Matties: What do we see for future growth? What sort of direction do you go?
Dhanani: Right now we still have a lot to grow in the market we are in. As you can see, these boards that we are building continue to get more and more condensed, so by moving some of the high volume work to the new factory, our other factory will have available empty space where we're going to keep continuing to expand that market and do a lot of the high-tech stuff that's coming in the future.
Matties: Bryan, what’s your position at ACI?
Ricke: I'm director of sales and business development. Both Raj and I have been in this business a long time. I've been in the business since ‘76, in multiple technologies. I'm a technologist as well as a sales guy. I like to take a look at what we can do here going forward with this technology. I think we have a long way to go. These antenna PCBs are getting more sophisticated. Right now they're basically double-sided, not plated through. There's some plated-through technology, but, believe it or not, all these guys are starting to develop multi-layer structures to support the advent of 5G. Our job is to take a look at that and make sure we have the right technology.
Matties: How challenging is that?
Ricke: It's very challenging to put multi-layers in, especially in North America, where the Chinese are already quite good at it. That's going to be a challenge for us.
Matties: Is this a case where we're going to copy the Chinese?
Ricke: Maybe so. How do you like that? You know what, again, the Chinese are very automated, and they must become automated. Our vision here is going semi-automated and then try for fully automated as much as we can. We're going to have to bring that over to our multi-layer side because our customers are demanding that. We're talking about massive MIMO antennas, we're talking about phased array antennas, and everything is getting very sophisticated.
Matties: The whole spectrum. In your many years of being in this industry, what's the greatest surprise that has come along?
Ricke: I’ll tell you what, believe it or not, I started off making materials at a company called Sheldahl in Northfield, Minnesota.
Matties: I know Sheldahl. They were doing a lot of reel-to-reel stuff too.
Ricke: Yes, absolutely. We were the biggest flex company in the world.
Matties: I was a shareholder—sadly so.
Ricke: That is sad if you were a shareholder at that time because they never made any money in flex. With that said, flex was going to become the big to-do. It never did, it just didn't. I was there 10 years almost, but it was in materials and material technology where I saw incredible advances. I think that has helped all of us out tremendously over the years. I've seen a lot of that happen, and, of course, the computerization and all the software. Look at what it cost to tool a job years ago. I remember building all of our artworks on a camera back and nobody had a computer. It's nuts. You look at the evolution of computerization in this business and it’s really been a big deal.
Matties: Was it a surprise for you when the business went to China?
Ricke: To a point, yes, but not really. I had experienced that with Japan when I was at Sheldahl. That's why Sheldahl had such a tough time. The Japanese came in with incredible quality systems and technology and wiped out everybody. We got wiped out. To see the Chinese rise again, you saw the same thing happen. What's really interesting about the RF business, being a flex guy, is that when I was doing flex for a lot of different companies—I worked for many of them—it was a big buzz word. You finally had the Internet and people would put in "flex circuits."
Well, 90% of them had no idea how to make one, but they would try. They were board guys and they went broke. They went crazy. The owner would be jumping around going, "The scrap rate! Look at this stuff, it's $50 a foot and you threw out garbage cans full of it." The RF business is really interesting because the materials are ultra-expensive, and it poses a really big challenge in having a high quality level and very low scrap rate. If you have high scrap, you're in big trouble in this business.
In a normal board, let's say it's 20–25% of the selling cost. When you're talking RF products, you're talking stuff that eclipses 40–50% of the selling price of the product, which makes a very big challenge out of it. What's very interesting about RF and antennas, when you look at it, it looks really simple. It's like, "Oh, we can make that. Anybody can make that simple, double-sided, not plated-through.” Well have at it. You have at it and make that profitably. “RF” is now the new buzz word like flex was years ago.
I think the other thing I'd like to point out, Barry, is that we make all the long antennas. We make antennas that are up to 10 feet in length on Teflon™ substrates for lots of applications, but mainly medical. That's a really big niche market for us.
Matties: There's not many people doing that.
Ricke: No, not at all. Now we don't do multilayers, but that’s also part of the vision that I have. Taking all the technology we have to image and plate through all these really large structures, and see that go to multilayer technology because we have X amount inquiries every month, "Where's the multilayers? You guys build big, long stuff, why can't you guys build us a multilayer that's eight feet long?" That's something that will come down the line.
Matties: That's a special press.
Ricke: Very. Well, we would probably go autoclave with something that monstrous, but again, we have all the rest of the infrastructure here, but we don't have the way to put it together yet.
Dhanani: The bonding.
Ricke: It's been a very interesting ride. I'm getting more towards the end of the line, but these guys are really young. That's the other thing, it's hard to bring young people into this business and get them enthused. I had an opportunity to go through the wonderful rocket ship part of the business.
Matties: With what you guys are doing, and the new thinking of supply chains, we may see another rocket ship taking off now.
Ricke: We hope so.
Matties: There's a new generation of technology.
Dhanani: That is the reason, as you can see, you know the challenges and having the new factory in the U.S., because we know that something is going to be coming, and what we like to do is stay ready.
Matties: That's what caught my attention yesterday is how ready you guys are. You know something that maybe the others don't and congratulations.
Ricke: We hope we do.
Matties: I appreciate you spending time with us today.
Ricke: We really enjoyed it.
Matties: Thank you.