KCE Group: A Thailand-Based PCB Manufacturer with a Growing Global Footprint
Recently, while at electronica in Munich, Germany I met KCE America President Rick Rhodes, and Joe Yeo of KCE Group, whose responsibilities include NAFTA sales and marketing. Both are based in the U.S. and are responsible for sales within the states for this long-standing player in the PCB manufacturing industry that has its base in Thailand. They discuss the unique challenges and opportunities that come with the rigorous automotive market, and explain why they continue to enjoy explosive growth.
Judy Warner: Rick and Joe, it’s a delight to meet you both. Rick, can you tell us a little about KCE Group and what that encompasses?
Rhodes: KCE Electronics was established more than 30 years ago, in Bangkok, Thailand, as a printed circuit board manufacturer. KCE grew into the KCE Group, adding KCE America, KCE Singapore, KCE Europe, KCE Japan, and KCE Thailand, as well as Christian Enzmann, which is the distribution entity for KCE in Germany.
Warner: Okay, and your actual manufacturing facilities are all based in Thailand, correct?
Rhodes: We're all in Thailand. We operate four printed circuit board manufacturers and two laminate manufacturers in Thailand.
Warner: Do you have a specific market niche that you focus on?
Rhodes: Our niche has evolved into the automotive industry. Over 70% of the products that we build go into automotive electronics these days. It hasn't always been that way. We had a concentration on computer networking at one time for a number of years, back in the '90s. Also, we were quite big in set top boxes for televisions.
We developed our automotive electronics market and we found our niche. We're good at what we do. We are good at documentation, which automotive electronics demands, and we’ve found it's been a reasonably stable market for us to participate in.
Warner: These days it seems like there is so much electronics inside of cars, more than we could have imagined just 20 years ago. Joe, when you're putting electronics inside vehicles, I would imagine there are many thermal concerns for those boards to be able to handle engine heat. What things come into play for you as you address thermal concerns and manufacturing bare boards for that industry?
Joe Yeo: The laminates that we use are all pre-tested. We manufacture our own laminate and customers are comfortable using the same laminate that KCE manufactures. All the testing is done through the rigorous testing conditions of the automotive tier one suppliers. We either meet or exceed the expectation of their specs or certain specifications. It has been proven all these years that whatever KCE does, and the laminate we use, will all meet the requirements of the automobile industry.
Warner: What made you decide to go into developing your own laminates?
Yeo: I think the laminate is a very key component of PCB manufacturing. There are only a handful of guys in the world that manufacture their own laminates. Being one of the key components of PCB manufacturing, you want to be able to control that key ingredient.
Rhodes: Years ago, now, there was a laminate shortage and a shortage of resin in the industry for a time due to a fire in a major resin plant. It kind of spooked everybody in the business and I think it affected every printed circuit board manufacturer. This was back in the '90s. That's when we decided to embark on trying to understand laminate manufacturing and we hired some people from America to come over and help us. We started Thai Laminate Manufacturing at that point, which has grown since then.
We don't use exclusively our own laminate. We buy a lot of laminate on the open market from the traditional sources. But when we can, and when the customers allow us, we have equivalent laminates for almost every commercially available laminate on the market. Often because we own the facilities, we can provide that laminate at a lower price point than buying on the open market.
Warner: Other than thermal concerns, what are some things that are unique to the automotive printed circuit board these days?
Rhodes: There's testing and documentation, which I mentioned earlier. Documentation is enormous. There's ongoing reliability testing and you need to have the proper facility set up in real time. Our test chambers are full 24 hours a day—day in, day out. It's required by the automotive industry. The testing side and the lab support that you need all comes into play when you get into automotive electronics.
Warner: I met someone recently that was educating me a bit about this issue. They were talking about how on the automotive level things are almost traceable down to a chemical or cellular level, which I was very surprised to hear. Then, he explained the very tedious documentation required for full traceability. Is this what you are describing?
Rhodes: Absolutely. That's all part of the qualification process when you're qualifying for the tier one automotive electronics manufacturers. It's demanded. It's not something you can get around. It takes years to develop the discipline to get into this business successfully.
Warner: What compelled KCE to set up shop in Thailand?
Rhodes: Our founder, Bancha Ongkosit, is Thai, and he is a Thai national. He and his brother founded the company in 1983. His brother was educated in a U.S. university as an engineer and they started the company very small, almost like a garage operation. While a lot of the Taiwanese manufacturing has migrated to China, we've stayed in Thailand because that's where our financial support is. It's turned out to be a very good place for manufacturing.
Warner: Tell us about your manufacturing square footage, number of employees, and gross sales.
Rhodes: We manufacture today about 2,800,000 square feet of printed circuit boards per month presently but we can easily add an additional 1,000,000 square feet per month without new construction. We are in phase 2 of a 3-phase development at our newest facility outside of Bangkok. We have over a million square feet of manufacturing floor space. With four factories we're at about 4,000 people in Thailand to support manufacturing. Then we have on average 25−26 people in each of our distribution sites, including KCE America, KCE Europe Enzmann here in Germany, KCE Japan, KCE Thailand for local sales in Thailand, and KCE Singapore, which covers Asia, excluding Japan and Thailand.
The support goes beyond just sales. We offer design for manufacturability assistance with CAD/CAM systems in our offices. We assist our customers with their designs but we do not design from the ground up, only for manufacturability. We have full accounting departments, full logistics departments, and we specialize in setting up vendor manage inventory programs, customer manage inventory programs, these kind of things. They are very big in demand within our customer base.
Warner: You’re using direct sales people exclusively rather than independent reps. What made you decide to go that direction since you're so broadly spread across the globe?
Yeo: I think for the most part the direct sales person is key to the KCE organization. We believe that as a direct individual you are able to transmit the right information to the customer. There’s a lot of real time updates where the factory comes to us. We feel that as far as that is concerned, that is the best way to transfer this information to our customers. The preference is more direct.
Warner: It seems like the focus would be better since you have the full time and attention of that sales person, as opposed to time spent by reps on other lines they carry.
Yeo: It's not a matter of whether the reps are good or not. We think that there are a lot of good reps out there. Now, we just prefer this direct sales approach.
Rhodes: That's been the way so far. It may not be the way as we grow in the future. We're trying to build a one billion-dollar plus printed circuit board organization and to get there is going to take a lot of sales resources, so who knows. We're not opposed to using reps, but just in the current organization right now we're all direct sales.
Warner: Well, it seems to be the trend in the industry these days, even just inside the United States. When we talk to many organizations, they generally seem to prefer the full attention of their direct sales people. You mentioned you did some investment into your facility recently. Tell us more about that.
Rhodes: We built a new factory in Lat Krabang, which is where the international airport is in Bangkok. We're only about 15 minutes away from the international airport. It's where our company started, in the Lat Krabang Industrial Estate. We built a new facility virtually across the road from the old, existing facility. It's a much more modern facility. It's all brand new equipment. We've increased the panel sizes. We've added new processes. The last facility we built before this was KCE Technology in Ayutthaya, which is north of Bangkok. That facility is 14 years old now. It was time to build a new facility, and there are plans on the horizon to build yet another facility as we go forward. We're in the planning stages now, but probably in the next couple of years.
Like I said, we have a young, smart, and aggressive CEO. His whole push is on efficiency and expansion. He wants to grow the company. He's a young man, and wants to really grow this company.
Warner: In light of chasing that aggressive growth, what are the primary challenges that you see in the marketplace for OEMs right now?
Rhodes: The customers are demanding faster and faster turnaround times, both for sample production and regular production. They want shorter cycle times, quicker turnaround times. They want full support, logistic support, able to manage the inventory programs. Our inventory that we build is all custom inventory. If we build something for customer A, and customer A decides not to buy it, there's no other customer that we can sell those products to. They're fully custom and we’re a custom manufacturer. The customer wants full flexibility. They don't want to buy that product until it hits their production floor, but they want to know that it's there and it's next door. They want to have it right there, so when they need it, it's JIT.
It's a challenge for us. We've got to get this stuff from Thailand to a location next to where our customers are building their product, and be able to make sure that that product is replenished when the customer needs it.
Warner: Joe, I assume that, like most manufacturers, you experience a lot of cost pressure from your customers?
Yeo: Oh, the pressure is always there. Because our customers, many Tier 1 automotive suppliers, they are all under the same pressure by the car manufacturers. The pressure goes downwards from them and to us, and then from us to our suppliers. The cost pressure is always there. We have been in this business for so long, we know how to deal with the cost pressure. We know how to manage it. That's all that matters because everybody else in this industry must go through the same pressure.
Warner: It seems like these days, at least in the bare board industry, more is being demanded, but the drive to cut cost continues to increase as well.
Rhodes: Yes. That’s always going to be the case.
Warner: That tension between “give us more and charge us less.” How does KCE manage that? Is it by increased process controls or automation?
Yeo: Absolutely. Not only the processes, but you must have good suppliers, high yields, all the above.
Rhodes: Yes, and you have to continually invest in automation. It's the only way it's going to happen. We're not ever going to eliminate people from our factories. Automation is not just a money saver. It lends itself to process control. It’s much easier to control the process through machines than it is with people. We never stop learning that. It's just ongoing all the time.
Warner: We're on day one of this show, which isn't always the busiest day, but how's the show been for you so far?
Rhodes: It's been a very good first day. We have two meeting rooms here and they've been busy all day. That's good for us. That means we have customers in the meeting rooms. Tomorrow we expect it to be even busier. So far, so good.
Warner: Well, I want to thank you both for taking time to talk to us. Good luck with the rest of your show.