EMSNOW’s Icons of Industry: Jure Sola

downloadSanmina has been a top tier EMS for many years regularly appearing near the top of EMS industry rankings.  These accolades are mostly attributable to Jure Sola, the founder who helped establish and shape the company, and who still does so today.  Mr. Sola was known as a demanding and at times tough boss, who could defy conventional wisdom. His strategic vision was in retrospect quite prescient and his two acquisitions – Hadco in 2000 and then that of the larger SCI Systems Corp. in 2001– positioned Sanmina favorably during the tumultuous early years of the 21st century.

Born in Croatia, Sola came to the United States as a 17-year-old in 1968. After receiving an engineering degree from San Jose State University, he joined the management of the electronic manufacturing company Lika, producing electronic transducers and control instruments for factory automation. In 1980 he cofounded Sanmina with a fellow Croatian, Milan Mandarić ,and began serving the company in various management capacities. Sola became chairman and president of Sanmina in 1991.

Sanmina was founded as a printed circuit board manufacturer. During the 1980s, it expanded into manufacturing backplanes and subassemblies for the telecommunications industry. During the 1990s, the company grew by producing complete products for major OEM companies and completing a number of acquisitions. The company completed an initial public offering on NASDAQ in 1993.

Sola commented at the time that he wanted to avoid consumer products and focus on high-end products, including telecommunications, medical technology and high-end computing. “We go after products that are more difficult to manufacture internally,” he is quoted as saying in 1998.

Sanmina was able to maintain high operating margins relative to its competitors; according to one source Sola kept that number steady at 15% throughout his tenure. He claimed at the time in an interview that his success was due to the niches they chose, good management and closely watching costs. His tough management practices were well-known at the time. Pamela Gordon, President and CEO of Technology Forecasters, a research firm focused on EMS, commented, “I never met him personally but heard that he was quite demanding and tough-minded when running Sanmina. I have always been impressed with Sola’s decisions to (1) have Sanmina acquire SCI, which at the time was the biggest deal in the EMS industry, and (2) continue fabricating bare PCBs even when most North American-based companies discontinued PCB fab — turning away from this type of vertical integration.”

 

Acquisitions Strategy

Although Sanmina acquired a number of companies before and after the merger with SCI Systems Corp., that move was the largest ever in the EMS industry at the time. SCI was a larger company, and a pioneer in strategies like vertical integration, and high volume manufacturing; however 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 had worked to broaden its customer base, and improved efficiencies but ultimately decided to exit the industry. See EMSNOW’s Icon Olin King.

Sanmina and Sola’s rationale for acquiring SCI was to diversify its revenue stream, a strategy that in subsequent years gained traction in the EMS industry. Sanmina’s dependence on the telecommunications industry, whose strength had slackened in the late 90s, led Sola to the conclusion that his company needed a broader group of customers. Some expressed doubt that he could successfully merge the two businesses, with their different strategic operating systems. But according to reports from the time, the merger saved the new Sanmina-SCI about $150–200 million annually through combined operational efficiencies and the internal sourcing of components. The new company operated manufacturing facilities in 23 countries and had annual revenue in the $12 billion range. This added muscle allowed Sola to turn his attention to Asia, winning business in Japan, and taking advantage of low-cost labor in China for manufacturing.

Another acquisition occurred in April of 2000 and may have been a contributing factor in the success of the combined company: that of Hadco, a PCB manufacturing company. According to a statement issued by the company at the time, the Hadco acquisition was expected to enable Sanmina to meet “increasing customer demands for higher layer count, and higher density.”

“The combination of our two companies enhances our ability to meet the increasing demands by our telecommunications customers for advanced optical networking technology,” said Jure Sola, at the time. “We believe this merger firmly establishes Sanmina as the global leader in printed-circuit-board fabrication technology.”

Many thought that this acquisition was counterintuitive to the prevailing wisdom of the day. It proved to be quite prescient in that it provided for diversification of the company’s EMS revenue base, and also established Sanmina as a key supplier to many of its EMS competitors.

Jure Sola continues to serve Sanmina as its Executive Chairman.

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