Supercharging growth with iConn | The Star

PETALING JAYA: The acquisition of iConn Inc by Cape EMS Bhd marks a pivotal milestone in Cape’s strategic expansion plans as it serves as a catalyst for substantial advancements in engineering and manufacturing capabilities.

This will in turn help strengthen Cape’s presence in the US market and position it for robust growth in the coming years.

Speaking with StarBiz, Cape EMS Bhd managing director and chief executive officer Christina Tee Kim Chin said establishing a robust engineering house in the Unite States is a time-intensive endeavour, and managing a skilled engineering team demands significant expertise.

Acknowledging these complexities, Tee said the decision was made to forge a collaboration with iConn, a company with whom Cape has a longstanding working relationship.

“We offer continuous manufacturing opportunities to iConn’s customers. iConn’s capabilities include the design of manufacturing and engineering of electronic components.

“Operating as a virtual electronics manufacturing solutions provider, iConn traditionally relies on external factories, predominantly in China, to fulfill its electronics manufacturing services (EMS) requirements.

“With this deal, we now offer them the chance to diversify their manufacturing base outside of China.

“Additionally, being part of the same corporate family streamlines technology transfers and eliminates complexities associated with intellectual property adoption from their customers,” she said.

Headquartered in California, iConn is involved in the provision of virtual manufacturing and design for manufacturing, engineering and sourcing. As at Aug 25, iConn’s unbilled purchase orders stood at US$7.6mil.

For the financial year 2022 (FY22), iConn posted a revenue of US$17.1mil and profit after tax of US$1.1mil.

Given that Cape currently depends on its customers for the provision of electronic schematic, assembly drawings, wire lists and test specifications for its box build assembly operations, iConn’s services will be complementary to Cape.

With iConn under its belt, Cape is moving up the EMS value chain by integrating iConn’s design and engineering capabilities into its operations.

More than 60% of Cape’s clients are located in the United States.

Revenue generated from exports to the United States made up about 54.9% (RM92.4mil), 55.3% (RM190.5mil) and 59.4% (RM220.9mil) in Cape’s FY20, FY21 and FY22, respectively.

Wireless communication equipment, digital metres used by utilities and wireless point of sales terminals makes up a big portion of the products Cape manufactures for its clients.

It also manufactures digital vending machines, portable printers and LED lighting products and has a consumer segment that manufactures household appliances and e-cigarettes for major brands in the United States.

Tee said Cape intends to grow the company’s customer base in the United States and thus reduces Cape’s risk concentration in a specific product or market, through the existing business and network of iConn in the United States.

“Our capabilities are well-aligned to cater to high-value customers and we recognise that expanding our presence in the United States is essential for capturing more export opportunities.

“China undoubtedly boasts the world’s largest manufacturing supply chain and while the United States is endeavouring to reshore some manufacturing, it still faces substantial challenges in doing so.

“Outside of China, Cape can be seen as a preferred choice for businesses looking to diversify their supply chains,” she said.

In the near term, Cape will focus on adding one new sector to its portfolio each year. The group is also targeting to acquire a minimum of two customers for each sector it serves.

“At the moment, we are serving six sectors. Some of these sectors have one customer only while others have two and some even up to three.

“Our target is to achieve a portfolio of 10 to 12 sectors in the years to come and have at least 10 to 15 customers to fully realise our targeted production capacity.

“We are also eyeing the electric vehicle and renewable energy sectors,” Tee said.

iConn has a wholly-owned subsidiary, iConn China, in Dongguan, which is an engineering, qualification and sourcing office. The team’s key responsibility is to look out for special expertise suppliers and manufacturing services that are not available outside of China.

Tee said iConn China will further strengthen Cape’s supply chain efficiency as well.

“While some technology players remain based in the United States, it’s evident from market trends the dynamics are evolving.

“Before, businesses used to talk about ‘China plus one’ strategy but now, some of our customers are mentioning ‘zero China content’ and we know this will be the forward industry practice.

“As such, we want to get ourselves prepared so that we can seize the opportunities that arise from this trend,” she said.

The ongoing US-China tension, Tee said, has seen the Cape group receive more supply chain-related enquiries, especially from businesses looking to relocate their operations from China.

“During the Covid-19 pandemic years, many adopted a cautious ‘wait-and-see’ approach. However, since the opening of China’s market earlier this year, I think everything has become clearer, where more and more supply chains are actively moving out of China.

“While China may offer competitive pricing, the focus is increasingly shifting to long-term strategic considerations, creating a more level playing field for non-China suppliers,” she said.

Cape also plans to explore new opportunities in Canada and Mexico where iConn currently has an active presence.