2016 Year in Review

It was a rough year for Saturn. In addition to overall industry sales being soft, we lost two large customers in the LED market. On top of all of this, our Founder, CEO, and Dad passed away on July 25th—making this officially our worst year ever. However, true-to-Saturn-form, we’ve picked ourselves up and rejoined the battle that is our industry. We have stabilized sales, reorganized our management team, and streamlined production to adjust to the current situation.

Continuous Improvement

While the norm is to cut capital expenditures during a sales downturn, we have taken a contrarian approach and actually increased our investments (one of the perks of being a debt-free company). Below are some of the highlight purchases from the past year.

a) ATG flying probe – Fully automated 8-head probe has throughput more than 3x that of standard flying probes. This investment was made to support small batch and quick turn projects of increasing technology levels.
b) Mania router – Saturn fronted the R&D costs to develop Mania’s first all-new production router in more than 15 years. The experiment was a success. The new design offers 2x throughput on standard rectangular outlines, and 3x output on complex outlines. Saturn is in negotiations to issue a blanket PO to replace the entire fab department with this new style machine.
c) Mania Drills – Saturn’s multilayer business has more than doubled and now accounts for a majority of domestic production. To support this change in product mix we purchased a new high speed drill from Mania. A purchase order was issued for a second drill that is destined to land in January 2017 for install in February 2017.
d) Yonit Deburr – We have been working for the past few years to develop a supply chain for capital equipment from China to include both sales and service support. This past year we finally established a working relationship with a wet process manufacturer of extremely high quality robust scrubbing equipment. The new deburr has all the bells-and-whistles, including high RPM brushes, Ishii-Hyoki style drives, automatic panel thickness measurement and brush adjustment, and digital PLC controls.
e) CAMTEK AOIs – As lines get finer with more advanced technologies we found ourselves needing to replace one of our Mania AOI’s. We were so impressed with the new Camtek AOI’s accuracy, ease of use, and throughput that we decided to wipe out all 3 Mania AOI’s and replace with 2 latest technology Camtek AOI’s – something we have never done in our history.

Continue establishing overseas supply chain for Capital Equipment

While we spent previous years solidifying our relationship with Mania for drilling and routing equipment, we always struggled to find a solid wet process supplier in China. While capital equipment has always been available for purchase in China at 25%-50% of current costs, there has never been much movement here due to the lack of service, which is our main goal in establishing these relationships.

This past year we firmly established a solid working relationship with Yonit for their scrubbing equipment. These include deburr, Aluminum oxide jet scrubbers, pumice scrubbers, high pressure rinse lines, and thin core/flex scrubbing equipment. With the purchase of the deburr unit, we were able to bring over their service team and manager for a multi-week training session with our entire maintenance crew to have them factory certified to support Yonit’s equipment line.

For this upcoming year our target is to establish a relationship with an automation equipment supplier for loading and unloading equipment to further address increasing labor costs.

Enhancing overseas PCB partnership program
Over the past two years, we have continued to grow our relationship with Glory Faith for 2 to 12 layer rigid PCBs. GF is in many ways a larger version of Saturn in that they hold many of the same certifications that we do, including TS16949. Furthermore, they have taken the same approach towards process control to achieve Delphi’s C7000 certification for high reliability PCBs for use in harsh environments.

This past year we also established a relationship with Elec & Eltek, one of China’s premier high technology and HDI PCB fabricators to further expand our high reliability product offerings to our North American customer base.

Copper Clad Laminate Supply Issues

The market environment continues to pose significant challenges. In addition to the market rolling into 2017 with soft sales, we are facing one of the largest supply chain challenges in 15 years.

The lithium ion battery market has incorporated into their products 9 micron copper foil that is made using the same equipment as the copper foil used to make our copper clad laminate. The problem is that the battery guys are paying up to 4x what we pay so many foil manufacturers have converted their ½ and 1 ounce drums over to 9 micron production. This has resulted in a global shortage of standard copper foil for our industry. As a result, prices for standard rigid laminate have increased by approximately 50%, with price increases in multilayer laminates expected soon. Further compounding the problem is that even if you can come up with the extra money for the price increase you will still have a problem getting materials since many distributors are now on allocation.

Fortunately, Saturn has historically had extremely strong relationships with our suppliers due to our continued loyalty and quick payment terms. As such, we have solidified our supply chain to cover 2017 projected requirements--with 1/3 of the materials already sitting in our warehouse.

Looking Forward to 2017

Being battle tested by thriving through past market recessions, we are looking forward to gaining increased market share this coming year by doing what we have always done best – stick to our game plan no matter what the market conditions. We have numerous capital equipment plans in place, continue to make progress on utilizing software to make us smarter manufacturers, and will be re-implementing our marketing program through this year after a three-year hiatus. Accordingly, our target growth by Q3 will be 20% YOY. I think it’s going to be a fun ride regardless of whether we hit this goal or not and I look forward to working with you all along the way.