UKTI Asia Case Study: STI Powering Ahead in the Philippines
This article was written and produced on behalf of STI by the UK Trade and Investment as part of their “Asia Showcase” –
Simon Best, Group Managing Director of STI International, tells the story of how this Hampshire-based contract electronics manufacturer has gained a foothold in Asia and established a manufacturing plant in the Philippines.
Surface Technology International (STI) manufactures state-of-the-art electronics for many of the world’s leading companies – in the defence, aerospace, automotive, telecoms, medical, satellite, energy and commercial sectors. We have over 25 years of experience in the industry with 450 skilled employees working in our UK manufacturing base in Hook, Hampshire which is now mirrored in our facility in Cebu, Philippines.
With extensive certifications including AS9100 Rev C, we offer a complete set of electronics manufacturing services including Design, Final Assembly, Test and Integration of PCBs and can provide full Lifecycle Support, including spares, repairs and long-term obsolescence management.
Our story in Asia started about five years ago, when we established small offices in Hong Kong and China to support the purchase and procurement of electronic components across the region. While there was a natural gravitation to the Far East for lower costs, we were keen to enhance and incorporate the increased skill set and competitiveness available in the region to strengthen our UK operation and our global growth potential. We wanted to offer our customers around the world the best electronic expertise tapped from both the UK and Asia.
We are lucky to enjoy a significant profile within the aerospace and defence industry, so in response to their lead, it was imperative that we expanded into emerging markets to offer our customers the alternative procurement and production which Asia can offer.
Consequently, we decided to strengthen our foothold in Asia by looking for a manufacturing base in the region. Through our contacts, we found a potential partner who already had a factory in Cebu, the second city in the Philippines outside the Metro Manila area. We initially explored the opportunities of a joint venture with them; however, our due diligence soon uncovered significant issues that led us to change direction and opt for a buy-out instead. In 2010, we bought a 75% stake in the operation which has subsequently been increased to 90%.
The Cebu facility complements our UK offering by catering for clients in the industrial and automotive sectors who build higher volume and lower mix products. The Cebu site is located in an economic zone set up specifically for foreign investment and is administered by the Philippines Economic Zone Authority (PEZA). Locating here offers key benefits such as reduced red tape, lower import and export restrictions and low corporate tax rates with businesses there actively encouraged by the Philippines Government to grow and create local jobs. The PEZA people could not have been more helpful and accessible.
The facility, a 14,000-sq.ft base which employs over 200 staff, takes the lead from our UK operations in terms of its quality management processes and output quality benchmarks. We have spent a lot of time and investment in increasing productivity, staff training and retention, as well as securing important industry accreditations. Via video conferencing and webcams there is daily communication and regular sharing of best practices between our UK and Filipino operations to ensure we run a seamless operation.
In January 2013, we were delighted to hear that we had received the Aerospace standard AS9100 Rev C certification in Cebu – the first Contract Electronics Manufacturer to get this approval in the Philippines. We are pursuing further accreditations this year.
To support the output from our Philippines base, we also have offices in Hong Kong, Korea and China. Supply chain management is key in Asia and we are dedicated to negotiating lower costs for the UK, sourced through our Asian suppliers. Across Asia we have established customers within the aerospace and automotive industries and last year we took part in PSECE 2012 (Philippines Semiconductor and Electronics Convention) to showcase our products to new and existing customers.
Our move into the Philippines has definitely been a very positive experience for all employees of STI as well as our customers. It has created new opportunities to share business best practices between the two manufacturing platforms. Equally, some of the practices established in the factory in Cebu have now been introduced in the UK. The key market and customer opportunity comes from each facility having their unique strengths: we can offer our customers a wider spectrum of manufacturing capabilities along with competitive pricing and good lead times.
The Philippines is one of the most rewarding countries in Asia in which to do business: the people are highly educated, incredibly diligent and quick learners with the added advantage of English being widely spoken. The Government is very supportive of inward investment – with the highest birth rate in Asia, creating jobs is a priority and there are beneficial tax rates to hire Filipinos and enhance the local workforce. You just need to be mindful of the obstacles – every emerging market has its bureaucratic rules and regulations, as well as the potential for corruption. To ensure you navigate these successfully we recommend everyone seeks expert advice and takes the time to get things right.
We benefitted greatly from the support that UK Trade & Investment has given us both in the UK and in the Philippines. The UKTI staff in Manila, in particular Director of Trade & Investment Derek Page, have guided and supported us throughout our journey there, providing us with invaluable contacts, insight and advice as well as championing us whenever they can. At the end of 2012, we were privileged to host the British Ambassador to the Philippines, Mr Stephen Lillie, at our plant in Cebu where he saw for himself the work we are doing there.
We are committed long-term to the Philippines and put a great amount of investment and energy into the market as well as the workforce. We have an extensive training programme in place for both our UK and Philippine operators, and we have established an exchange programme for visits to build technical knowledge and cultural understanding for both sides of our world.
It is important for me to visit Cebu regularly and remain visible to the team so I go about six times a year to see how the factory is running and what we can improve. I am always made to feel very welcome and at home in the Philippines. We have found it to be very safe and fun – some of our UK managers have brought their families with them on longer trips to combine business and leisure – Cebu itself is on the sea and hosts some good tourist hotels. I would encourage other UK companies to look to the Philippines for growth: it is a country still emerging within Asia but offers many opportunities – top class talent, highly-motivated employees, expanding population and competitive infrastructure. The Government is ambitious to compete amongst the Asian tigers.
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