Is it feasible? Let’s first start by looking at the options available for managing a Semiconductor subcontractor. Companies outsourcing the assembly, test, and finish processes in Asia can choose (1) to employ an ex-patriot at the supplier’s site, (2) build and manage their own factory in Asia, (3) rely on the subcontractor to provide the management service or, (4) choose an outsource management company.
The function of management, in and of itself, is to provide the Company a means to effectively and efficiently build, test and delivery product to their end customer. The specific roles of this management position are to insure their product is given the appropriate attention at the subcontractor’s site in getting it loaded in a timely fashion, insure die and raw materials are available, and insuring manufacturing executes to given specifications. When these tasks encounter problems, management steps in to resolve the issues. Additional responsibilities might also include the negotiation for lower pricing, overseeing new processes, monitoring the performance of product and package qualifications, the introduction of new subcontractors to handle capacity and or package mix, to name a few.
From above, the first option is to employ an ex-patriot at the supplier’s site, and many Companies follow this strategy. This benefits the Company by having their own employee on-site in Asia and has worked well for a lot of Companies over the years. However, there are downsides to this approach. Perhaps the most apparent is the associated costs in keeping an ex-patriot in Asia. Along with the employee’s basic salary and benefits package there are additional costs in travel, work permits, car and driver, housing, international schooling for youngsters, moving expenses, etc.
The second scenario entails the Company building and managing their own facility in Asia. This approach has been the standard for larger Semiconductor manufacturers since the 1960’s and to date, newer Companies have followed suit. It should be noted; most recent surveys conducted in the Semiconductor industry show a decline in this direction. The driving force for this swing in thinking is based on unutilized capacity when there is a downturn in the economy. Thus, today, most companies favor using subcontract manufacturers.
Third, there is the option of working directly with the subcontractor without the Company’s on-site management support. This puts the onus of burden on the subcontractor. If this situation suits the Company, and performance levels are being achieved by the subcontractor, there is no reason to change.
This brings us to outsourcing the management of the Company’s subcontractor to a third party. An experienced and cost effective outsource management company is capable of managing the Company’s subcontractor as well as the Company’s ex-pat employee and will be able to do so at much less the cost, and in many cases more efficiently than the ex-pat. The most predominate reasons for making this statement are familiarity with the assembly and test processes, the experience of living in Asia and in understanding the various cultures and language barriers, and in the knowledge and relationships with the subcontractors operating in Asia.
If due diligence is applied in the selection process of an outsource management company the results can be outstanding. That is to say, take the same steps as you would in hiring a company employee. Will the outsource management company meet the Company’s needs, do they have experience in dealing in Asia, dealing with subcontractors, can they effectively represent the Company, are they reputable, are they a lower cost solution? If the outsource management company is carefully screened in advance, this can become an extremely valuable asset to a Company – it is certainly a feasible cost effective solution.
For additional information on outsourcing manufacturing in Asia, visit our website at www.semiconoutsourcemgmtco.com.
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