Jabil Circuit makes a jabillion different kinds of electronics.
The company is one of the leading providers of outsourced
electronics manufacturing services (EMS) in the world. It makes
electronics components and parts on a contract basis for computers,
smartphones, printers, and other consumer electronics, as well as
more complex, specialized products for the aerospace, automotive,
and healthcare industries. The company's services range from
product design and component procurement to product testing, order
fulfillment, and supply chain management. Jabil Circuit operates
more than 100 plants in about 30 countries.
Operations
Jabil Circuit conducts business in two segments: Electronics
Manufacturing Services (EMS) and Diversified Manufacturing Services
(DMS).
The EMS segment (about 60% of revenue) focuses on IT, supply
chain design, and engineering for all things electronic. Customers'
products are used in applications for automotive, digital home,
industrial and energy, networking and telecommunications, point of
sale, printing, and storage.
The DMS segment (about 40% of revenue) focuses on manufacturing
services for material sciences and technologies. It works with
customers to develop and manufacture products for consumer
lifestyles and wearable technologies, defense and aerospace,
emerging growth, healthcare, mobility, and packaging.
Geographic Reach
Jabil Circuit's plants are in Argentina, Brazil, China, Finland,
Hungary, India, Japan, Malaysia, Mexico, Poland, Russia, Singapore,
South Africa, South Korea, Spain, Taiwan, Ukraine, and Vietnam, as
well as in Austria, Belgium, Canada, France, Germany, Ireland,
Israel, Italy, Scotland, the Netherlands, and the US.
Singapore, and China are its largest markets, accounting for
about 30% and about 20% of sales, respectively. Customers in Mexico
and the US generate about 20% and less than 10% of revenue,
respectively.
Sales and Marketing
Jabil Circuit depends on a small number of customers for a
significant percentage of revenue - five customers account for just
less than 50% of sales. Its top customer is Apple (25% of sales)
and other significant customers are Cisco Systems, Dell
Technologies, HP Inc., LM Ericsson, General Electric, Ingenico,
NetApp, Valeo, and Zebra Technologies.
Financial Performance
Jabil Circuit posted a 4% revenue increase to about $19 billion
in 2017 (ended August) from 2016. It was the third straight year of
higher sales. A 9% revenue increase in the DMS segment drove the
overall rise due to stronger sales in consumer lifestyles and
wearable technologies, healthcare, and mobility. Most of the
increases came from new business for existing customers. The EMS
segment's revenue was flat year-to-year.
Jabil took about $160 million in restructuring charges in 2017,
which cut its net income from 2016 in about half to about $129
million.
Cash flow from operations rose to $1.2 billion in 2017 from
about $916 million in 2016. The company reported an increase in
non-cash expenses, accounts payable, and accrued expenses and other
liabilities. Those were somewhat countered by an increase in
inventories and accounts receivable.
Strategy
To compete in a rapidly consolidating industry, Jabil provides
production on a global scale and operates through semi-autonomous
business units that are dedicated to individual customers. The
company continues to add services and to expand globally through
acquisitions, including deals to acquire manufacturing operations
from customers looking to reduce costs through outsourcing. The
company tends to place manufacturing plants close to its
customers.
Jabil had expanded its work in the health care device market and
it has been a strong performer for the company. Operating income
from production for health-related products, which include
drug-delivery systems, has grown about 20% a year.
Apple has been a long and profitable customer for Jabil, and the
company counts on that to continue in 2018. Jabil has been a key
supplier for Apple's iPhone and that includes the iPhone 8 and X
released in late 2017.
Jabil implemented a restructuring program in 2017 (ended August)
to realign costs and consolidate manufacturing in lower cost areas.
The program included job cuts and cost the company about $160
million in 2017. It plans to save up to $90 million a year with the
moves.
Mergers and Acquisitions
Acquisitions have extended Jabil's product portfolio and its
geographic reach.
In January 2016 Jabil acquired Inala, a South African energy
products provider and systems integrator. The deal acquisition
expanded Jabil's presence in the market for remote location energy
products and marked its first venture in Africa.
In June 2015 Jabil acquired Clothing+, which makes the sensor
fabric in the Victoria's Secret smart bra. It has been integrating
electronics into textiles for almost two decades.
In August 2015, Jabil acquired Kasalis, which makes
sophisticated systems used in the assembly high-precision optical
equipment.
In 2015 Jabil's healthcare and packaging division, Nypro,
acquired Plasticos Castella, a molder of plastic lids for
condiments. Nypro's acquisition of Plasticos Castella expands smart
packaging capabilities by combining design, engineering, and
manufacturing facilities in Spain and Hungary with the services of
Nypro's six North American plants.