KCE embarks upon expansion to enhance global stature
SET-listed KCE Electronics Plc makes printed circuit boards (PCBs) for the global automotive industry. President and chief executive Pitharn Ongkosit discusses the company’s strategy and outlook.
Mr Pitharn expects KCE Electronics will be a US$1-billion company in six years.
Please explain KCE’s business model.
KCE is among the top five automotive PCB suppliers globally, among the top 50 of all PCB manufacturers globally and one of the largest in Southeast Asia. We’ve been in this business for 30 years, with sales offices worldwide and five factories throughout Thailand. More than 70% of our customers are first-tier automotive suppliers such as Robert Bosch, Delphi, Continental and several others that have factories all around the world. We’ve begun making inroads with Japanese automotive suppliers, as this is a large customer base, and with our track record of quality we expect to be their suppliers as well.
KCE is embarking on its largest expansion. Could you provide more details on this?
We have been gradually expanding capacity for the past decade, and today our output is 186,000 square metres per month, with utilisation rates near 100%. We’re currently in the process of opening a new factory next to our headquarters in Bangkok’s Lat Krabang district, which will provide an additional 130,000 sq m per month in new capacity, and closing the older one.The new factory is the largest expansion KCE has ever done, and with the improvements in technology and manufacturing processes, we believe it is our best. We expect the new plant will reach full utilisation in three years, and then in 2017 we expect to design and build another one in the same area with another 186,000 sq m of capacity.
What impact does technology have on your business?
Technology is everything, and every day improvements are made through new technological breakthroughs and cost reductions in materials and end products. We have to maintain our competitiveness and move, at the very least, in line with the industry.
What impact do the baht and commodity prices have on your business?
Most our business consists of exports, and therefore baht volatility does affect us. However, most of our costs are in US dollars, so we have a natural hedge for a significant portion of the business. We’re continuing to find ways to increase the portion of the natural hedge.For example, our long-term loans are in dollars, and we have a conservative financial hedging strategy through forwards and options to help mitigate any volatility in the baht. Commodities are more volatile than the baht, but the overall impact on us is minimal, but should raw material prices increase then the entire industry is affected.
What differentiates KCE from its competitors?
There are several key points that differentiate us, but chiefly it is our chairman, Bancha Ongkosit. He began the PCB business when the electronics industry was still in its infancy, and through his knowledge of the products, materials and manufacturing process, we’ve been able to transfer his knowledge to create one of the best-quality PCB manufacturers globally.It’s because of these factors that KCE has been able to increase revenue in dollar terms by 20% per year since 2000.
What are the biggest risks facing your business?
There is a risk in everything. We worry about the baht, commodity prices, how to improve our manufacturing processes further, our long-term business goals and short-term ones as well. One risk we think about is the potential of increasing labour costs in Thailand. As the country continues to develop further, our business will have to expand and migrate to new countries with lower labour costs, and to successfully achieve this we’ll need a very strong operations system to be able to manage a global enterprise.
What impact will the Asean Economic Community (AEC) have on your business?
The AEC will be positive for both our company and Thailand. For Thailand to continue developing as a country and for its economy to continue growing, we need to allow more people into the country to work. The same applies to KCE — for us to continue growing, we need to keep expanding our workforce, and we hope with the AEC that the increased labour pool and competition for jobs will increase the quality of workers in Thailand.
Where do you see KCE five years from now?
Over the past five years, we’ve focused on improving our manufacturing processes, back-office operations and cost management, all of which have been successful. Our aim this year is to break 10 billion baht in revenue, doubling to 20 billion in three years. The industry is currently growing by 5-7% per year, so we have to continue to gain market share by expanding our market, our products and improving constantly, so that six years from now KCE will be a US$1-billion company.
Source: Bangkok Post