EMS@C-LEVEL
As Forbes, Entrepreneur, Fast Company and SCOOP writer, Philip Stoten, continues to talk to EMS (Electronic Manufacturing Services) executives he learns more about their individual and collective experiences and their expectations for their own businesses and for the entire electronic manufacturing industry.
EMS@C-LEVEL
From Global to Regional Manufacturing, in conversation with GPV CEO Bo Lybæk
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Is the era of globalization in manufacturing coming to an end? In this episode, we sit down with Bo Lybæk, President & CEO of GPV to uncover the shift from global to regional manufacturing. We unpack the driving forces behind this change, from ESG sustainability efforts to the geopolitical tensions between the US and China. Bo provides insights into the ripple effects on the supply chain, logistics, and customer demands, explaining why American companies are increasingly eyeing Mexico as a manufacturing hub. We also discuss the post-pandemic order rebalancing, noting trends in sectors like building technology and the semiconductor industry, and how evolving inventory management practices are reshaping sales performance and cash flow.
We also explore GPVs expanding in Sri Lanka, Mexico and Slovakia and break down the strategic factors influencing these decisions, including trade, tariffs, inflation, and freight costs. We explore China's changing role from a manufacturing giant to a significant market and consider India's potential future impact. Bo highlights the critical need for attracting and training young talent to sustain the industry's growth and innovation in both engineering and operator positions. Finally Bo shares some inspiring ESG initiatives from Denmark, Sri Lanka, and Mexico that are making a real difference in local communities. Tune in to understand how maintaining an orderly approach to business and operations as well as open communication is driving growth and meeting evolving customer needs.
Learn more about GPV at https://gpv-group.com
EMS@C-Level is hosted by global inspection leaders Koh Young (https://www.kohyoung.com) and Global Electronics Association (https://www.electronics.org)
You can see video versions of all of the EMS@C-Level pods on our YouTube playlist.
Globalization vs Regionalization in Manufacturing
Speaker 1Hello , I'm Philip Stoughton , from my House to Yours . Welcome to EMS at Sea Level . I'm talking to Beau from GPV . Beau , I wanted to start with some of the comments in the last quarter's results . You talked about a shift from a kind of a perhaps a more globalized model to more of a region by region model . Can you elaborate about what you mean by that and what that means in terms of balancing the footprint that you have with this more regional demand ?
Speaker 2I think in most of my professional lifetime we have gone towards a more and more total globalised business situation and I think we in the last period here have seen some different developments . There has been some . They have decided to take a more regional to region look , or region by region look , because of maybe some ESG sustainability reasons , us and China , leading to a different kind of globalization which is maybe in some clusters in the world . And if we are then going back to what I started , saying , that I've seen this total globalization improving , then of course we can all mention areas where it has not been the case , where it has not been the case . So of course , we are used to also deal with pockets of other regimes , other rules and regulations . So I'm also sure that we'll be able to deal with this . We just have to be open-minded and think different and look for solutions .
Speaker 1Yeah , it's kind of it feels like the old way of thinking was chasing low-cost labor around the world and the new way of thinking is well , where is it logical , where is it strategic ? Where is it secure and perhaps more sensible and probably more sustainable to manufacture close to the consumer ? So I think there's a kind of a I don't know . I feel there's a value in that changing mindset . Are there particular regions ?
Speaker 2At least , I think that over the years you have developed a clear roadmap where it is not , as you say , it's not just the low cost or the low labor cost , but it is also other factors . So where do you have your oil supply chain , how do you have to transport materials , where do you maybe ship them out again to your customers , etc . So I think there's more intelligence in how you set up your supply chain and , of course , on the back of the pandemic , also the supply chain resilience .
Speaker 1Yeah , and I think there's all kinds of geopolitical things . You mentioned the US and China . That seems to be accelerating again . We've seen this incredibly high tariffs on electric vehicles from China coming into the US , so there's obviously a bit of a mind shift there . Is that one of the geopolitical impacts that you think is really pushing that region by region approach ?
Speaker 2At least in some isolated areas . So we have seen over the last years a clear interest from American customers , but also other customers manufacturing in the US or depending on the US , that they move out of China to either Southeast Asia or to Americas and in our case to Mexico . So we have , and I can say that after a somewhat hard start in Mexico , we are having for the last two years a pipeline which has never been stronger for Mexico .
Speaker 1We have high expectations .
Speaker 1Yeah , I think Mexico is one of those regions that's really benefited . They've got their election out of the way , so they're moving past that . We seem to have elections in so many parts of the world at the moment that are kind of causing a little bit of indecision , so hopefully that'll move up . I wanted just to switch to market sectors , the end markets . We've clearly seen a bit of softening of demand generally this year . One of the areas that seems to be stuttering in certain regions is EVs . What have you seen in the different sectors you operate in ? What are the big differences ?
Speaker 2I think that we are still seeing and now talking general we're still seeing a rebalancing of the orders coming from this situation where it was really long horizons in the forecast , down to a much more normalized situation , because the supply chain issues has , to a great degree at least , been resolved .
Speaker 2We started to see last year a certain softening in what we call building tech , so it is products going into all kinds of smart buildings , and we don't see that that has recovered yet . We see some signs of recovery , but not too many . Then we are quite exposed to the Semicon industry not that we're delivering directly to the Semicon industry , but to suppliers of equipment for the Semicon industry and there we are seeing a more clear bounce back after a period where it has also been a little bit more difficult . But in general we actually see this market rebalancing as the biggest change , because if you look at our performance after Q1 , this year compared to the same quarter last year , there is a clear decline in our sales . But we also have to say that we had a huge backlog situation in some sites that we acquired and we have been benefiting well from that situation in 2023 . But when you have executed that , then of course it does not come back .
Speaker 1Yeah , and that's an inventory bubble that's worked its way through you post pandemic and is now with with a lot of your customers and they've got to burn through that inventory . Um , the positive about you having that inventory off of your books is it improves your cash flow and , um , you know , it allows you to reduce that stock and work in progress . So there's um , there's some
Global Expansion Strategy and Workforce Talent
Speaker 1value there . You You've expanded or you've got expansions underway in both Mexico and Slovakia . You mentioned Mexico already and to me that makes perfect sense in terms of supporting the US market and less concerns about tariffs and trade issues there . So that seems a very pragmatic approach . What about Slovakia ? Tell me about the thinking behind that and where that process is .
Speaker 2Let me allow to start in a little bit of a different place . So I would like to start in Southeast Asia , because we have also done significant expansion both in Thailand and in Sri Lanka , and they are now behind us and we are utilizing these expansions and I think it has been important for us to further strengthen our Southeast Asian setup . We have a very strong setup there already , I would say , in Southeast Asia and in China . So we are happy and satisfied that we have done that , because we see this move into Southeast Asia and I think both China and Southeast Asia they are quite competitive .
Speaker 2After the pandemic They've not seen the same inflation rates , they've not seen the same energy price increases and I think we can still say that the freight rates have been going down , even though we've seen some bubbles up again , but in general they have gone down . So it is an important region for us . Mexico we have talked about . So it is an important region for us , mexico we have talked about . I think that's a clear take that there is a lot of manufacturing capacity as such , in general , it was the only place where the former GPVE , or the old GPVE , and the former Enix had an overlap . Both companies had too little space in Slovakia . We also have a very large site in Estonia , but in Slovakia we were lacking space . So that has been the driver to take this relatively fast decision .
Speaker 2Right now . It's nearly accurately one year ago since we signed the contract to take this move establishing a site , and it is in between the two sites that we already have , and I was happy to be there last week to see how far have we come , and it was together with the customer and I think both I and the customer said wow , this looks really good . And we are in full process of have start up with the first customers and getting the final approval from authorities so that we can have SOP of production here before the summer the main European summer vacation period breaks out . So it is to support these three regions . We have a clear wish to have in our small company we call it the mega sites in China , in Southeast Asia best cost Europe and in Americas , and they should all be aiming to do more than in Danish kroner . 1 billion DKK is around 150 million euro . Sales in volume .
Speaker 1Yeah , I think it's really important . I think what's interesting , bo , when I think about leadership of an EMS company balancing and managing the footprint is such a critical part of it . Now you have to be , you have to have a clear vision of where you're going with that footprint , but you still have to be agile and be able to adjust that footprint to cope with the disruptions that come your way , whether they be geopolitical or supply chain or other things . We heard a lot about Vietnam and recently we've heard the Vietnam government have been asking Foxconn to reduce their power usage , which presents a huge challenge to the electronic manufacturing industry . So thinking long and hard about where the next factory expansion is must occupy a lot of your time .
Speaker 2Yeah , and by all means , we are a little bit smaller than Foxconn . So we are , and we think are , I guess , completely different . Yes , completely different . We are not just seeking for the absolute lowest manufacturing cost , because we also believe that having a well-working organization is also in our situation , in this high-mix , very complex environment that we are in , that plays a huge role , even though we of course understand that , and that is also why we're doing the expenses that we are in these low cost areas . That's because that is also helping us to be a good and relevant supplier to our customers .
Speaker 2And I think we are quite well positioned and if we are successful and it seems if we are successful , and it seems that we are because of the pipeline that we have in Mexico , that we can also ramp that up to be , in our terminology , a big site . And we're using Sri Lanka to try to see if we can have some trials into India , because we have to face the music that that is maybe an area which could become uh interesting . But right now we also uh clear in our voice that we are not uh seeing that we should have a green pill in india to today or tomorrow yeah , no , I mean , I'm inclined to agree with you and you know I think it's fascinating .
Speaker 1But when you look at the the last 20 years and the trend with respect to China , we now see China much more less as the factory of the world and more as a market of its own , and having manufacturing in China for China has become important , and in 10 years I suspect that will be the case in India as the Indian middle class grows and we see more consumption there . So there'll be an increase in demand . But there's no doubt it is one of the winners , as people move some of their business out of China .
Speaker 2You mentioned that the China is , for us , fast going into China for China . We have two sites in China , fantastic sites , really capable of doing super products to our customers . But fast moving into China for China .
Speaker 1Yeah , and it makes sense , doesn't it ? You mentioned that component shortages are all but over , but we hear more and more about talent shortages . When you're thinking about geographies , what are you thinking in terms of talent , and how do you make sure that talent issues or staffing issues don't slow down growth in a particular region ?
Speaker 2I like that you also used the word staffing , because talent often is misunderstood . That is about the highly educated white color part of our organization , and I have to say that it is just as important in the blue color part of our organization , of our organization . So talent is not just about what is the highest education level , it is also about having people with proper technical and manufacturing educations , and I think it is maybe it's tough to say that it is a worldwide situation , because of course , we can all think of areas where it is absolutely more work needed , but where we are and let's start from the , the east if you go back some years in china , they would shift job just because of a little bit more in pay . Now they are much more steady going .
Speaker 2All this about that you are in a good working place , et cetera , plays a bigger and bigger role , and I could take exactly the same in Thailand and in Sri Lanka and in Mexico .
Industry Challenges and ESG Initiatives
Speaker 2So we see that our industry , like me , we are having many grey gray hat and that is , of course , a challenge . So we need to motivate young people to get started in our industry . I think that is an absolutely must central . We can , however , knock on wood and say that we have not said no to or to projects because of the labor shortage . But I fully see the talents .
Speaker 1Yeah , and I think it's important that companies kind of take responsibility for their own talent to a degree and think about training and think about how you can transfer skills globally and what you can do internally to bring that talent but also , as you say , that labor through and make sure they are available to you .
Speaker 2Last question Maybe a comment just before we're leaving this theme . I think it's also important that we as businesses and as industry try to explain better that we are actually in a very interesting environment , very interesting companies , whether if you're technical oriented , then we have fantastic interesting technical topics . If you are into maybe est or sustainability , then we are actually a cornerstone in the in the transformation .
Speaker 1Not a lot of the green energy transformation will take place if it was not because of electronics yeah , yeah , no , you're absolutely right and I think my sense is that when we get young people through the door , they realize that the factory environment is far more pleasant than they expect .
Speaker 1They realize the products that are being made are going into space , are saving lives , are part of the energy revolution , the sustainability and green energy revolution , green energy revolution um . So I think they see the value . We've just got to reach out to them and also show them that the the industry presents good , sustainable , well-paid careers and well , well paid jobs . And you know , talking , talking about the whole esg side that was the bit I wanted to kind of discuss a little bit as we wrap up . Um , and I've said this to you before , I always think of GPV as team green in Europe with , you know , with other teams that allocated different colours . I think you see sustainability and the whole ESG thing as a very strong cornerstone of your business . So I'm kind of curious where you see yourself in that journey and what initiatives you have in place and how they're progressing .
Speaker 2First of all , I'd like to say thank you for the nice and fine words . I hope that we can live up to it . But we are a Scandinavian headquartered company . We are coming out of Denmark , being a part of Scandinavia , and there sustainability and ESG , which is now the term that we're using , is very important and it is clear that , even if we stick to CO2 or carbon footprint , even if we're in a very low carbon intensity compared to other industries , we still are committed to take our share of this and we have a clear path to reduce our carbon footprint , with 70% based on a 2020 baseline , and we are well on track on that and I'm convinced that we are going to deliver . We are not just standing here and saying , okay , now it's 24 , so what do we do in 24 ? So we have a clear plan also for the following years , because otherwise we would not be able to do it . Maybe I didn't mention but the 70% reduction , that is , by 2028 . But ESG is more than just carbon footprint .
Speaker 2To many of our colleagues around the globe , it's also about social initiatives of different kinds . Sri Lanka was in a couple of years ago with very distressed financial situation , difficulties in buying food , etc . Then it's clear that we go out and help our employees and our employees . They go out and help others and they did a fantastic job in supporting some schools and hospitals , in supporting some schools and hospitals . And if we fast jump to the other side of the globe , in Mexico , they are also very active in taking responsibility for the society that they are living in . So I think that is also a very important part of how we see the world and that's an example . We are not . First of all , we are not doing a lot of sponsorships from a principal point of view , but we would never do a sponsorship in any big event . We are much more into sponsorship in the local area . It could be football or soccer in the local area where it is about kids , because that makes a bigger difference . We think yeah .
Speaker 1And I think having an impact where you are is super important . You know you have to be a citizen in all those locations and you have to think about the people you employ , the impact they have and , as you say , if you can do right by your team and your teams , you know kind of spread the love to other people in the community . It's hugely valuable and you know , as a leader of an organization , that's something that's heartwarming to see and you know a pleasure to get involved in . I imagine .
Speaker 2Yeah , I think in all what we do , we try to do it in an orderly way , and that has been our mantra for a long , long long time . But of course , we fully understand that in a modern situation , ESG is a part of this , of being orderly . But we want , in all aspects , to try to be orderly and I hope that everyone in our fantastic company understand that . And if there should be a place where it is not the case , then I also hope that they will let us know .
Speaker 1Yeah , that's it , having that feedback loop , having that open door , having that communication . You know , beau , every time I see you on your profile on LinkedIn , you're another part of the world and another facility . So you're certainly part of the world with another facility . So you're certainly putting in the air miles and getting around to see everybody and getting everybody's input and opinion , which is hugely valuable . Thanks so much for your time , bo . It's always a pleasure to chat . I guess we'll see each other again in Munich in November , if we don't see each other before . But in the meantime , let's talk again soon and thank you .
Speaker 2Thank you very much , and we at least will be in Munich at Elektronika .