One Stop Micro

A typical mid-size micromachining service provider runs over a hundred jobs each year. Many will be from returning customers. The others will be new customers. These new customers have to be obtained through marketing and sales efforts. This includes putting up booths or making presentations at trade shows/conferences, ads on the Internet and magazines etc. All this costs money and effort. Repeat orders from loyal customers don’t have this level of sales and marketing overheads.

Analyze with some numbers

Assume that, in a normal year, your profit after tax and all other expenses is 10% of sales. Let’s say that, for a totally new customer, 15% of every order goes towards marketing and sales (actuals plus overheads). If this were a repeat customer, the 15% would be reduced to something like 5%. It will not be zero because you still have to talk to the customer over the phone, visit them and take them out to dinner (which is when you get a real feel for the state of affairs) etc. So, the savings on sales and marketing would be 10% of the order value, which goes straight to the bottom line. Your profitability has essentially been doubled. This is music to the ears of equity holders.

It is difficult to acquire new customers, and even more difficult to find those who will be placing repeat orders over the coming years. And when you do come across a potential repeat-customer, cultivate them very carefully. Don’t let go easily!

So where does all this fit into contract manufacturing? To start with, long-term contract manufacturing (as opposed to the product development phase) is basically an order that repeats every day. Admittedly, the margins are squeezed on such orders because products in the marketplace should be competitively priced or else you end with a million players crowding a small segment.

The Advantages

An order that is repeated after a gap of a few weeks or months is easy to set up and run since it has already been done before. But an on-going microfabrication process- a long-term job- is the best of all. A lot more effort goes into the initial setup on a production system: sturdy tables and fixtures, high reliability motion system and laser, rugged optical and motion setup, production process documentation, work-crew scheduling etc. Once the job starts running, there is almost no changes to be made, except routine maintenance. The profitability now depends mostly on how well the production is managed, what the pricing strategy is, and on overheads (like salary, utilities, consumables). Other factors include equipment downtime, stability of process, QC and documentation requirement, ability to increase throughput by speeding up the process as it matures.

The reason I bring up these variable factors is to point out that contract manufacturing can be a lucrative deal for laser micromachining process providers- provided that it is handled well. Since profits are achieved while squeezing costs (and not the customer!), it can be a win-win situation for the customer as well as provider.

Factors Affecting Process Speed and Stability

As mentioned above, process stability and speed are important factors in profitability. The laser, the heart of the system, should be dependable. Beam energy and quality should not drift too much, even during 24/7 production. Downtime should be minimal- Excimers are notorious for their downtime due to gas refill and mirror rotation requirements, firing circuitry issues etc. Beam-realignment should not be too time-consuming after every laser head or optical element change-out.

The motion system should also be reliable. It should be robust enough to handle high speeds with high loads, and settle fast. Instead of pushing it to its limit, the motion system incorporated should be slightly better than what was initially used during test runs.

In an other article, we will look at on-site fabrication versus outsourcing from a buyer’s perspective.