EMSNOW Icons of Industry: Olin King and SCI

EMSNOW Icons of Industry: Olin King and SCI

We bring you our first Icon in a series of articles entitled ‘EMSNOW’s Icons of Industry’ where we look back at the history of the EMS industry and tell the stories of those key individuals with the vision and determination to bring this new business model into reality. Find more background here. 

downloadOlin King was born in Georgia and moved to Huntsville AL in 1957. He came from six generations of Methodist ministers, but decided to study physics and engineering. He supposedly was the first member of his family to venture outside of Georgia for more than 48 hours. Olin King started his career as an engineer working with Werner Von Braun on the nation’s first satellite program

SCI (Space Craft Inc.) began as a partnership between Olin King and a handful of investors with a total of $21,000 in King’s garage in Huntsville in 1961. At first, virtually all the company’s work came from NASA. The company was vertically integrated, having acquired plastic molding and metal stamping capabilities. The company earned its first private contact with IBM in 1976.

“They came to us with a box of 150 parts and some drawings and asked us to build it,” King said in an interview from 2005. “So we did. Then they brought 500 more and we built that, but they still wouldn’t tell us what it was. Then they asked for 1,000 more, and we said OK, but here are some things we did to improve it. That turned into the IBM PC1.”

It might not have been that easy. When King was getting started the outsource model was not obvious. “I’ve been thrown out of a lot of places,” King recalled in an article from 2005. “It was not socially acceptable to tell a manufacturer to give up his manufacturing.” Then IBM Corp. finally agreed to let SCI build computer subassemblies. That big break led to other lucrative contracts, enabling SCI to be the first CEM to stretch its manufacturing capabilities to such places as Guadalajara, Mexico; Scotland; Singapore; and the Middle East, according to an EETimes piece written when King retired.

Accepting the Alabama Business Hall of Fame Award in 2000, he said, “I’ve never been a money grubber or a mercenary. I’ve always seen my primary function in the community as creating jobs.” He was a generous contributor to University of Alabama, Huntsville, and a campus building bears his name.

According to an oft-quoted WSJ article written in 1987, Olin King was a fierce competitor and employer, as were many of the founders of the industry. Hank Gilman, author of the 1987 WSJ article, described the model accurately: “Subcontracting, one of the most volatile parts of the electronics industry, is a rugged cutthroat business in which companies’ fortunes rest on paper-thin profit margins and the success of their customers’ products.”

Olin King made other key strategic decisions that led to growth: he made sure his factories were equipped with advanced manufacturing technologies like surface mount (SMT) and he expanded his operations into global regions to be closer to markets served by his customers. By being at the forefront of the shift to SMT to make electronics smaller and cheaper, he virtually financed his customer’s ability to stay competitive.

He was not a hero to everyone, of course. According to the Alabama Encyclopedia he had a run in with an LA Times Journalist, Barry Siegel, who pointed out that SCI at that time (1983) had only brought about 400 jobs to Arab, Alabama, mostly very low-waged positions to women that had been seamstresses or chicken farmers. He responded back vigorously, calling Siegel a New York liberal with the wrong idea about things, but did admit to choosing Arab because of its non-unionized workers.

SCI was vertically integrated and eventually began to design and build products of its own to allow companies like Kodak to ‘house brand’ consumer electronics. These contracts carried higher margins and balanced the lower margin EMS sector of its business. In addition, SCI continued to fulfill government contracts. SCI continued to grow throughout the 1980s and reached the $1 billion annual sales marker in 1990 and grew to over $10 billion by 2000. But ultimately, the low margin EMS business eventually led to its downfall.

The recession in the mid-90s brought volatility, and customers began to aggressively push for lower prices, and threatened to change suppliers, which was possible as by this time SCI had a growing list of new competitors. SCI worked to broaden its customer base, and improved efficiencies but ultimately decided to exit the industry by selling itself to a smaller competitor, Sanmina.

NEXT UP: Manfred Zollner

 

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