Deal focus: Platinum to power PCI’s tech dreams

For decades the electronics manufacturing industry has been synonymous with China and its apparently bottomless pool of cheap labor. But with labor costs there rising ever higher, producers that can draw on other markets are in increasing demand.

PCI, a provider of printed circuit board assembly (PCBA) services, was an early mover, having relocated its manufacturing operations from Silicon Valley to Indonesia in the early 1990s. The company’s head start in the market has made it an attractive takeover target twice over: first for Singaporean conglomerate Chuan Hup Holdings in 2011, and now for Platinum Equity, which recently bought Chuan Hup’s 77% stake for S$203 million ($150 million).

“Today the fully-loaded cost of an employee in Indonesia is more affordable than in China,” says Soo Jin Goh, a principal with Platinum based in Singapore. “PCI obviously understands the way Indonesia works, and they have a long history with the government and the workers there. It has turned out to be a very opportune time for us to invest in this company.”

Beyond the purely economic argument, Platinum was impressed with the reputation PCI had gained since its founding in 1972 as a skilled player in the difficult high-mix, low-volume segment of the PCBA market. Products are highly specialized and assembly lines have to be retooled quickly to meet customer demand – often within hours or minutes.

Despite these challenges, PCI has built up a profitable business as a supplier to clients across a range of industries, including mobile communications, medical, and automotive. The company has engineering and design centers in Singapore, Indonesia, and the Philippines, through which it aims to keep its capabilities on the cutting edge.

“Success in this market is not just a function of how much capex you are able to put into play to expand capacity – it depends on your design abilities and your ability to provide solutions to your customers, as well as the stickiness that you have in your customer relationships,” Goh says. “PCI came up very strongly in these areas.”

While in some ways PCI fits with Platinum’s previous acquisitions in Asia’s electronics space – the firm’s portfolio includes Singapore-based electronics component maker Fischer Tech and several Chinese manufacturers – the PCBA market represents fresh ground for the investor. The plan is to preserve the company’s proven core strengths while helping to catalyze its next stage of growth through Platinum’s worldwide network and financial resources.

“This is definitely not the last PCBA investment for us – our objective is to build a platform through bolt-on acquisitions, as we have with our earlier investments,” says Goh. “When we build companies, we look for opportunities to add customers, competency, and capacity, and one of the benefits of a global platform like ours is that there are many relationships we can leverage.”   

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• Topics
• Southeast Asia
• Industrials
• Buyouts
• Singapore
• Platinum Equity
• manufacturing