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All About Flex: Disruption in the Supply Chain

Manufacturers need a highly dependable supply chain to successfully support their products. This is especially true of custom designed and built components, as many times, only one supplier is available for a component since tooling and development costs discourage dual sourcing.  Flexible circuits are highly customized; the myriad material and fabrication options, combined with individual design requirements, result in unique products only a few suppliers can build. When the originally qualified supplier is no longer a viable option, the disruption in the supply chain can be significant. 

Over the past few years, several disruptions have occurred in the flexible circuit industry.

In 2004, Multek acquired Sheldahl, one of the leading U.S. producers of high-volume flexible circuits. Prior to this, Sheldahl had filed for bankruptcy, in a move to shed debt and emerge as a viable company. Sheldahl was a major supplier of flexible circuits to the automotive market.

In 2006, Vulcan Electric Company purchased Flex Technology Inc., combining a core capability in heaters with an expansion into flexible circuits. Since flexible circuits and heaters use similar process technology, this was done as a horizontal move into new products. The flexible circuit business was run as a separate division until early 2015, when the company shut down the circuitry factory in New Hampshire.

In November 2005, Molex purchased Century Circuits, a flexible circuit manufacturer located in St. Paul, Minnesota. Molex recently made an announcement it will be shutting down its U.S. based flex-circuit manufacturing business.

In July 2014, Spirit Circuits announced that it purchased Teknoflex’s production equipment. Teknoflex was a flexible circuit fabricator located in the UK that was experiencing difficulties, which required a financial restructuring.

In June 2013, Graphic Plc acquired Calflex USA, Calflex gave Graphic a more global footprint as a supplier to the military, aerospace and medical industries within the U.S. 

In January 2015, it was announced that HEI, a manufacturer of microelectronic for hearing aids and other medical devices, filed for bankruptcy restructuring. HEI had a fine-line circuit fabrication facility in Tempe, Arizona. That facility ended up being purchased by one of its customers, to keep its flexible circuit source viable.

The level of disruption resulting from these kinds of events often sends the OEM or CM scrambling to keep a supply chain unbroken. In some cases, business might be mildly affected as advance warnings are provided and “last time builds” are accepted. In other situations, doors to the factory might be open on Monday and closed on Tuesday. This erratic history in the industry suggests a bit of due diligence should occur as part of the sourcing process. A few basic suggestions can make it less likely the purchasing will be reminded of the Earth, Wind and Fire song “Here Today and Gone Tomorrow.”

All this turmoil begs the question, “How can the risk of a sourcing decision be minimized?” A few simple steps can help:

• Check some customer references. This is often done by a supplier before extending credit. The same process can serve the end customer well.
• Visit the supplier. A full-fledged audit is often part of a medical or military customer’s process, but a polite visit with management, accompanied by a factory tour, can prove the right mix of capacity and capability exist.
• Ask to see financial records. Many small companies are justifiably reluctant to share this kind of information, but a modest amount of sharing doesn’t reveal proprietary information. Most suppliers see this as a reasonable request. And the best ones are generally anxious to share the fact that they have been successful.
• Asking questions about the length of time a company been in existence, who some of its largest customers are, and how much business is concentrated in the top few customers, are often revealing.
• The circuit board industry requires a considerable amount of capital equipment. Finding out what access to financial capital a company has is important; it may be an issue if rapid expansion in capacity or capability is required.

Flexible circuits are used extensively across a wide variety of products in the aerospace, medical, military, industrial and telecommunications markets. They often evolve from an engineer’s design ideas and become iteratively transformed into a part that fits a certain supplier’s capabilities. As such, they become even more highly customized and difficult to transfer among suppliers. Making certain the supplier will be there, supporting the ramp and decline during a product life cycle, needs to be an important part of a diligent customer’s product planning consideration.

Dave Becker is vice president of sales and marketing at All Flex Flexible Circuits LLC.