IEC: Celebrating 50 Years in Business
I caught up with Shawn Stone of IEC recently, to discuss plating, laminates, printed electronics and IEC’s many strategic alliances, including their most recent agreement with ITEQ to distribute their copper-clad laminate line throughout North America. This alliance will give IEC, a company his father started more than 50 years ago, its first North American footprint.
Barry Matties: Shawn, lets provide a little background for our readers. I think IEC was started back in 1966, and it was your father who started it, right?
Shawn Stone: My father, Jim Stone, actually started in 1963, and then he incorporated the company in 1966. The first product line was Mica copper-clad laminate. Then Chemcut, and then the third product line that he picked up was Dynachem, which of course is Dow today. Chuck and I founded the U.S. company in 1998, and our first product line was Morton Electronic Materials.
Matties: In the 50 years of business, what's been the most surprising to you?
Stone: It's funny, but when I think back to when I started in '84, I worked in a circuit board shop and then I started working for IEC in '86; the trajectory of the business was like a rocket ship. We kind of kept pace with that, so now when I look back to the ‘80s and the ‘90s, it was almost easy in a way. There were different challenges, but nothing like the challenges that we've had in the last 12–15 years.
Matties: What are some of those challenges? What's the greatest challenge?
Stone: I think the morphing of the business when the majority of the business left to China. The actual circuit board manufacturing that left North America and went to Asia was the biggest impact. Then, of course, we had to readjust our business to reflect the new marketplace. That was a moving piece that was hard to understand at the time. I think I understand it now in hindsight, but I didn't really understand it all that well as it was happening.
Matties: That's a pretty common view, that the China migration was huge. Back in the ‘80s so many people were just making so much money and profit with 3000 shops in North America.
Stone: Those market conditions made a lot of us look smarter than we actually were. Up until about 2001 the industry was so robust, and the growth of our company was phenomenal.
Matties: What kind of growth are you seeing now?
Stone: We've seen some solid growth, but we've done it in a couple of different ways. One of the ways has been through acquisition, like when we bought Intermountain Circuit Supply in 2012. The other way is through distribution. Last year in 2015 we assumed the ITEQ copper-clad laminate line from a previous distributor. Those are a couple of ways that we've grown. My father did the heavy lifting in terms of getting the company going, and that to me is the hardest thing. To take the initial inertia that you have, and to take a company and grow it to the level that he grew it. We bought the company in ‘92, and we inherited a very solid foundation, if you will.
If we fast forward to now, presently the biggest thing for us was the acquisition of Intermountain Circuit Supply. That was certainly a big help. Being strong in our legacy territories has certainly helped us, and now moving forward with the ITEQ product line we actually, for the first time, have a North American footprint where we were granted exclusive rights to that product line for all of North America.
Matties: That’s a pretty crowded and competitive space though, isn't it?
Stone: Yes, it is.
Matties: Because there is obviously well established competition and a lot of money in this market space. What's your strategy to carry that forward and to really capture market share?
Stone: We're trying to win one customer at a time, and our role in this is that it's incumbent upon us and our duty to help keep our customers in business, and it's a synergistic thing. We have to give them the best possible quality at the most competitive price with the technical service and support to back that up, along with efficient supply chain management. Historically, the technical service and support piece has been the strength of our company versus other distributors, and I can give you an example if we look at the job that we've done with PTH chemistry. We have over 30 electroless lines in North America, and we have people that work with us that came from Legacy Shipley.
Chuck's mantra is that service and technical support equal sales. It's not the other way around. Service and tech support first, and that will bring in the sales.
Matties: I would even back up one step and say it is relationships first.
Stone: Relationship management is critical of course, but you have to have the product line and you have to have the ability to service it, and nobody else in North America can provide that level of technical support and service. We're using the same model that we used to capture PTH and dryfilm share in order to capture laminate market share.
Matties: To say nobody else can do that is a pretty bold statement. I know what you mean, that you're creating something, but you have formidable competitors out there as well.
Stone: We do, but I think if you look at the way we can technically service and support our customers, it's unique. We've really carved out a nice niche for ourselves.
Matties: The thing that really stuck in my mind about your approach is that you're focusing on one customer at a time.
Stone: That's how we're going to win, because you're right, we do have formidable competitors, and we don't take them for granted.
Matties: With laminate obviously that's a major win if you land those accounts. How long of a cycle do you think it takes to bring a new customer on for that product line?
Stone: That's a very good question. Surprisingly enough I think that you have to be very patient, more patient than we all like to be in this industry. The sales cycle can vary from 3 months to 12 months or longer, depending on how motivated the customer is. We just feel that in ITEQ's case they're manufacturing a superior product which is a huge advantage in this market.
Matties: I see that they have something like $100 million in capital, a couple of thousand employees, and five manufacturing facilities. It's not a lightweight competitor by any means.
Stone: They're fourth or fifth in terms of worldwide share and growing. We're really happy and proud to be lined up with ITEQ.
Matties: One of the things that we like to do at I-Connect007 is conduct surveys regarding the process, generally speaking. One area that constantly comes under evaluation is plating, and we hear a lot about the challenges in plating as one of the largest areas with the most room for error, if you will, in the manufacturing process. Obviously this is a big area in your business. What do you see in the plating departments? Why is it such a challenge for people?
Stone: There are so many different dynamics in the process chemistries within the shops. The technology is ramping up, the geometries continue to shrink, and there are physical limitations both mechanically and chemical. For the foreseeable future this will continue to be arguably the most difficult area in a board shop to manage.
Matties: When you look at manufacturing from a systems-based point of view, plating is the area that we hear so much concern over, and that leads me to 3D printing or printed electronics. What do you see in the future? It looks like that's a viable path for people to lay traces down.
Stone: I think you're right. That's something that we're following closely. We've got our hands full for the next two to three years with ITEQ and other projects we are working on. Yes, we're watching the printed electronics market closely, some of our existing suppliers are in that business, and obviously we’re watching what our competitors are doing.
Future wise we're bringing on a line of liquid photoimageable solder mask from China from a company called ABQ. We've been given exclusive rights to sell that product line in North America, so that will be another important piece for us in terms of growing our business. So these kinds of strategic alliances are key for us. Another example is we worked out arrangements with ECEMS and Tritek. They're both fellow Dow distributors, and they're working with us in the Midwest, East Coast and southern California where we don't currently have a footprint.
Our business platform, Barry, moving forward, is going to be a hybrid of things. It could be nationwide distribution. It could be regional distribution. It could be a combination of both, with key strategic alliances.
Matties: Correct me if I'm wrong, but you've only recently become national here in the U.S. You've always been a regional distributor, right?
Stone: Yes, when we were granted the ITEQ line in May 2015, that was our first foray into having a national footprint.
Matties: How is that national coverage working out for you?
Stone: We're actually delighted with our progress so far. Twice as long for half as much is the saying, so we've got a long way to go, but we're very happy with the level of progress so far.
Matties: What market specifically are you going after with this laminate line?
Stone: It's going to be more in terms of the high-end multilayer market. The higher layer count boards are ITEQ's sweet spot as well, and this is where their superior quality will pay dividends for our customers.
Matties: Well, for 50 years on you guys look strong and it sounds like you're making a lot of the right moves. I think you're right that it's a hybrid of a lot of different things with the way that the market is moving so quickly these days. I look at these 3D printers and printed electronics and I just think that 10+ years from now they’re really going to be a viable option for at least solid rapid prototypes.
Stone: You're exactly right. We're going to have to continue to adapt our business accordingly, but at this time I don't know if anyone knows exactly what that means. We've tried to see out 10 years, Barry, and I can probably see out, I was going to say three months, but probably three years is where I think our visibility is half decent.
Matties: It's a testament that you're still here 50 years out, so you guys certainly have adapted along the way, and that's what smart companies have to do. You can't rest on what you know.
Stone: We're doing a lot of work in terms of how we market ourselves, in terms of upgrading our website, social media, and of course working with I-Connect007. The other thing I failed to mention was we've done a lot of work on the supply chain and logistics end of our business. We brought a young lady in from a large Asian-based electronics manufacturing company. She's a specialist in logistics and supply chain management, has done an incredible job organizing and moving products across 100 plus board shops in North America spread across 6000 kilometers.
We've upgraded our ERP software, and made it cloud-based. IEC used to muscle product around, and now we're trying to finesse it and use data, analytics and science as opposed to art, which is how we moved it around historically.Matties: As we look at the accessibility to data today, it's more than it's ever been, and everyone has access to it. That's just more signs of how you guys are smartly adapting to the environment in which you're operating. Good for you.
Stone: Thank you, Barry.
Matties: Is there anything that we haven't talked about that you think we should be discussing?
Stone: Just to conclude, obviously we're very proud of the history of the company and that we've been able to survive and thrive in a very tough environment here in North American circuit board manufacturing. Presently the company is doing very well, and the future is going to be more of bringing on new product lines, making strategic acquisitions, having a national footprint, working with other distribution companies to form strategic alliances, and the most important piece is that we continue to bring on qualified people that are going to add value for our customers.
Again, it's incumbent upon us and our duty to help keep our customers competitive and thriving.
Matties: That's a great point. One of the things that I saw was the shift from technical support from the OEM suppliers of the products to the distributors, especially in America as the factories went to China. It sounds like you've put together a really strong team of technical people in your organization and that certainly gives you a huge advantage.
Stone: We were always so focused on being a sales and service organization, and now we've morphed into a service, sales, and supply chain organization. Our supply partners like Dow, Eternal, Kodak and ITEQ want to know that you're able to technically support their products, and deliver it to our mutual customers in a just-in-time fashion.
Matties: You have to be sharp at what you do, you have to be good at what you do, and you have to have the right product mix for the market, and the price competitiveness has never been greater I don't think either.
Stone: If you look at the cost of electronic goods, it’s constantly spiraling down, and it's the same for materials.
Matties: It puts a lot of pressure on your pricing. There's no doubt about it.
Stone: Yes that’s the constant battle we all face.
Matties: Shawn, it was great talking with you today.
Stone: Thanks, Barry. Take care.