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With 2000 sales over $2.5 billion and around 2300 employees, AVX Corp., based in Myrtle Beach, S.C., is one of the largest manufacturers of electronic ceramic components in the world. A subsidiary of Kyocera Group, the company manufactures products ranging from ceramic and tantalum capacitors, connectors, thick and thin film capacitors and resistors to ferrites and integrated passive components. Following is a behind-the-scenes look at the company and the electronic ceramics industry through the eyes of AVX’s chairman and CEO, Dick Rosen.
How long have you been with the company, and how has the industry changed in that time period?I started with the company in 1972, right after it was spun off from Aerovox, a New Bedford, Mass.-based manufacturer of power capacitors (mostly paper and films). Since then, both the industry and our business have grown tremendously. We made more money last quarter than we made all of last year, which was the best year we ever had. In ’72 we were somewhere around $20 million—in 2000 we should be somewhere in the range of $2.6 or 2.7 billion. The growth of people and the globalization of the industry have been the major drivers behind this success. For instance, we now have 6000 or 7000 people in the Czech Republic; to be honest, in 1972 we knew very little about Czechoslovakia, which was the Czech Republic at that time.
The technology has also changed tremendously. In 1972 we made disc capacitors and big molded radial devices for IBM and AT&T—and not very many of them. Today we make more than three billion capacitors a day all over the world, and each one of them is maybe one-thousandth the size of what we used to make. The technical evolution in the industry has been quite exciting.
What is AVX’s business philosophy, and how has this philosophy contributed to the company’s success?AVX has tried to work closely with its customers to develop both the standard products used in the industry as well as new and unique products that might help other products perform their functions better. Our parts do not perform an active function, like semiconductors, but are more enabling technologies. We support manufacturers of computers, cell phones, routers, etc. We’ve made parts that help computers run faster and that allow the telephone industry (essentially radio producers) to control frequencies better. We were the first company to put multiple chips in a single chip to allow other companies to make smaller and less expensive devices, and we’ve also pioneered many other unique solutions that have differentiated our company from others in the industry.
Additionally, we have always had a philosophy to invest in the future. Even when business wasn’t great and we weren’t making any money, we believed in the industry and invested in tomorrow, not just in today. And we continue to uphold that philosophy by investing as much as we can in R&D and by partnering with our customers to develop technologically advanced solutions.
What are some of the biggest challenges that AVX currently faces as an electronic ceramics manufacturer, and what steps has the company taken to face those challenges?There is constantly a drive to make parts smaller and less expensive. The dielectrics are getting much thinner, and the materials are changing from precious metals to nickel, copper and other materials. The challenge is a technical one as well as from a manufacturing standpoint—we have to continue finding ways to manufacture even thinner dielectrics, to find the materials and equipment necessary to accomplish our goals, and to put more into a smaller package. And, of course, it is a competitive industry, so price is always a challenge.
Our keys to facing these challenges have been some really good people who are committed and intelligent, and who have worked diligently to help us accomplish our goals. A willingness to spend money has also helped us get where we are. Additionally, our relationship with Kyocera has been helpful by giving us access to certain types of technology, as well as by helping us identify suppliers of equipment in Japan that we probably wouldn’t have had access to if we were just here on our own.
In a nutshell, commitment, diligence, resources and relationships have really been key.
What do you see as the biggest areas for potential market growth in the next several years for electronic ceramics?The medical electronics industry has a big potential for growth, but it’s a smaller business so people don’t tend to look at it. The major industries today are telecommunications, data processing, consumer electronics and automotive. And the one that looks short-term—say, within the next six months—to have the greatest upward potential may be the consumer business, but I’m not sure. It’s either the consumer business or telecommunications.
The consumer business is getting stronger with all the digital toys—the HDTVs, DVDs, etc. At one time these were very expensive and nobody was buying them, but now people are starting to buy them. So that has some pretty good upside potential. And there’s no question that the communications industry is going to grow substantially this year—probably not as much as it did last year, but the lowest estimates in the cell phone and related infrastructure businesses are probably 25 to 30%. Automotive also looks to be very strong, especially in Europe. And data processing seems like it will have some growth, though not as much as it has in the past.
Do you have any fears about the slowing U.S. economy and how it will affect AVX and the electronic ceramics markets in general?Well obviously it has to concern me, but I think you have to put it in perspective. I said before that AVX has always invested in the future. I have a responsibility to our shareholders, as do the other members of AVX’s management, to be concerned about today, but I think we try to grow the business with the assumption that the electronics industry is here to stay and is going to grow, and that we’re going to grow with it.
Do I have a short-term concern? Of course—everybody does. Our [country’s] new president said that he’s going to cut taxes and lower the interest rates because he’s concerned. But even in today’s ‘downbeat’ economy, there’s nobody who’s really saying that they won’t make more computers, more phones, more routers or more pacemakers than they did last year. So if you look behind the numbers and the short-term concerns, which could be one or two quarters, we believe the industry has an exciting future.
Do I think we could have some short-term reductions in this gigantic straight-up path we’ve had? I think for sure we will. But am I concerned about the long-term future of our industry? No.
We only grow because the industry we serve grows. We’re not the market makers—we’re the infrastructure servers. But we believe that the basic industry we serve—the electronics industry—has a bright and exciting future. And we believe that the products we supply are very well positioned to assist in the growth of this industry.