Diversification helps Stars to shine brighter

Diversification helps Stars to shine brighter

Stars Microelectronics (Thailand) Plc (SMT) has been listed on the Stock Exchange of Thailand since September 2009. Chief executive Peerapol Wilaiwongstien discusses the company's strategy and outlook.

Stars is undergoing a transition. Could you walk us through this?

The company was founded in 1995 with an initial focus on integrated circuit (IC) packaging assembly, later expanding to additional products and printed circuit board assembly (PCBA). Our growth was interrupted as a result of the 2011 floods in Thailand, and with a loss of customers as well as a high reliance on one main customer, we decided there had to be a big change in the business.

Our vision for Stars is to become a global electronic manufacturing services (EMS) player, but in order to achieve this we have to set in place a strong foundation, which means a culture that takes into account all of the stakeholders in Stars. A strong foundation for us consisted of three factors: first, we had to become more cost-disciplined; second, we had to increase our focus on customers that were mature and provided reasonable profitability; and finally, we needed to have a diverse customer base across multiple industries.

What type of customers does Stars target?

We are more focused on advanced-technology products and are not specific to any particular industry. Currently we have five industries that we focus on: communication, medical devices, energy, the Internet of Things and infrastructure.

Within each of these industries we also want to have a diverse set of customers with their own business cycles -- whether they are startups or mature businesses -- because being diversified at both the industry and the customer level ensures that Stars can remain stable during periods of fluctuation within each industry. We are able to service these multiple industries because the fundamental process of electronics is similar across the board, with perhaps minor modifications to match the customers' requirements.

Do you have the necessary capacity to service new customers?

We have recently acquired a new factory to manufacture solar panels, giving us a total of three factories or 30,000 square metres. Strategically, we ensure that 20-30% of total capacity is available for new business because when working with new customers one never receives a full order on the first day; there is a period of testing and pre-production, ensuring that customers feel comfortable working with us and that they understand our capabilities. Should we be successful acquiring new customers, then we have the capacity to service their needs and we can also expand capacity as is required.

Stars' financial performance has improved in the past few quarters. Do you expect for this to continue?

Stars is still far from where we want it to be. However, we have been successful in laying a strong foundation for the growth to continue. We spent most of 2015 on becoming more cost-efficient and on internal development, and now we are focusing on acquiring new customers. This year we have already acquired 10 new customers for the business and next year we expect to continue as we want to ensure a diversity of customers within multiple industries.

Do you believe that Thailand and Stars can be competitive in this competitive global environment?

In the past the country had issues with political stability, but these past few years have restored confidence among foreign customers to return to the country without fears of riots and political conflict, so I appreciate this moment of political stability because it has allowed businesses to prosper.

As a company we have the benefit of being located within a free trade zone, which means no import or export taxes. We also research our customers to fully understand their needs and requirements and because we are vertically integrated we are able to provide solutions for them to succeed. Finally, our facilities are world-class in terms of technology and cleanliness.

Where do you see Stars five years from now?

We have an ambitious target for the company to be a global EMS player in terms of technology, performance and profitability and we have just begun on the path to get there. We will strive to improve by continually focusing on our core values to ensure that the company has the right culture, skills, creativity and diversity of customers. We want to see the company become sustainable financially, systematic in process, and world-class in operations to ensure that we have taken into account all the best interests of all stakeholders of Stars.

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