Rex Rozario, Part 2: The Beat Goes on: New Developments at Exeter, the Music Scene, and China
To read Part 1 of this exclusive I-Connect007 multi-part interview conducted recently with PCB industry icon Rex Rozario, click here.
In Part 2 of I-Connect007’s multi-part interview with PCB industry icon Rex Rozario, we continue to discover more about what has made Graphic PLC the company it is today. Rex explains the work they’re doing with Exeter University, Graphic’s success in China, and his own personal experience in the UK music scene.
Barry Matties: Rex, tell me about what’s going on at Exeter.
Rex Rozario: We have a unit at Exeter University, at the Innovation Center. We are working with the new science park, which is just about to be completed by the Exeter airport. We'll have a facility for flying in, and for trains. It's for our development work mainly, because knowledge transfer is the most important thing. A good example is if you take Boeing, they had the monopoly of flying all the planes. Then, of course, Europeans from UK, Germany, France and Spain got together and with knowledge transfer developed the Airbus. I believe that's what we can do. The Exeter University allows access to all the facilities of their engineering college.
They have the latest developments in technology and we have the firsthand knowledge and can help them develop things like we did with LDI. We had the fifth machine ever built in the world, and Graphic worked with Orbotech on the second one, before it was launched out to production. We have a very close relationship. I think the other advantage for us, as compared to other companies around the world, is that we have more approvals than any other world competitor for our product. We can quite easily claim that nobody does it any better than Graphic, because they haven't got all those approvals. That's where we are now.
In 2006 we went to China and formed a joint venture [JV] with Somacis, called Dongguan Somacis Graphic PCB Company Limited (DSG). The factory was officially opened by the local mayor and other dignitaries in July, 2007. Most guys said we must be crazy because the Americans had been there a long time. When we got there the big companies were all rolling out production, but we still went and took our technology in. At that time, China was actually importing advanced technology from Japan and Taiwan. Suddenly they had a whole home supply market. When we started at the worst recession, all our competitors and guys thought we must be crazy and wouldn’t get work.
You wouldn't believe it Barry, because we didn't know the banking system and how it works in China. We said if anybody wants to use us it's 50% with order and 50% on completion and collection. They said, "You'll never get any customers, it’s the worst recession." After the first month we had a 16-week delivery backlog, because local customers suddenly realized they were saving freight charges from Japan and Taiwan, import duty, so it was cheaper and Graphic was getting a better price.
Matties: The factory set up is beautiful.
Rozario: It was designed and purpose-built and can compare with any other factory in the world. I think that up to this point, my life has always been with printed circuits; I haven’t had any other proper job.
Matties: Well, let's back up just a minute, because earlier today you told me that you were in the music and band business scene with some very famous musicians.
Rozario: That was all in my early years here in England. I took drum instruction from a local music shop and my drum tutor was Jim Marshall. At that time he was just an ordinary guy, a shopkeeper. I used to go to his house on Sundays. For sound proofing he used egg packaging boxes. Later on I joined his son and daughter and we had a band. We were called the Flintstones. I was one of the Flintstones. No loincloth or anything like that, and we progressed.
Back then I was helping out anywhere I could get some cash at night clubs and there was a local chap who I got to know by helping him out and for a drink and a few bucks for being there. That was the Ealing Club, which is the famous Ealing Club that most of the super groups in the UK had played at or started in. With my business acumen and attitude back then, I thought, "I could do this." I talked to him and said, "I'm living near Richmond and there's a Richmond hotel. If I have a night there, will you supply me with bands and give me a hand in how to organize it." And he did. Then I got married and of course I had to technically give up clubbing and my band and so forth, with my family living miles away. So I gave up my Saturday night.
Well, during that period there used to be a group who came in there and used the facilities for practicing, and they took over my night when I left. I realized later on that they were the Rolling Stones. They made their first record at the premises. If you read their autobiography you can see that’s where they started. In fact, Rod Stewart was a visitor of the club and he was travelling on the tube back to London one night. He was in the same compartment as the Rolling Stone's manager, who thought that he looked like the type of guy who could be a pop star. That's how he started.
It’s fun to look back on all these things and fortunately my children are also into music. My eldest son is now a professor of American Studies at Smith College in Massachusetts. He still has a group, called Merchant Bankers, which is a London East Ender term. They're still playing the Cream-era type music of Eric Clapton. My youngest son is also very much involved with music. He's a music specialist working with Amazon and based in Berlin. My daughter is a broadcaster with Radio Exe in Devon, England, and manages the Van Susan’s band in London. I am a director and chairman of Radio Exe.
Matties: You certainly have a rich history.
Rozario: Yes, but getting back to China, we learned as we went along. When employing people, we had to train them and started a training school. On a shop floor now in China about 60% are graduates and they can speak English, which made this much easier. Then we realized when comparing with our competitors that some of the big companies were losing about 40–50% of shop floor staff yearly. They come, they get trained and then they go home and get a job near home, and don’t come back.
Matties: A common problem there.
Rozario: It's continuous training. Then we realized how fortunate we were to pick this staff situation up so quickly and automate. From then on we were looking to automate everything we bought. Some automation wasn't available, because most people are quite happy to have manual labor for loading, unloading and so forth.
Matties: Especially in China where labor was cheap.
Rozario: Absolutely. They had four guys for one machine. In the end we chose to automate and you saw the factory. It's probably one of the very few fully-automated PCB factories. By that time we also designed things to suit us. In China we used pinless bonding. You saw the presses designed to our specification. Although we have many press platens, spacing is limited, more or less two inches. We can control the heat and pressure. We can do very complex boards and still maintain. No movement or anything like that. Our yields in China, same as here, 98.8% has been our average. If you're manufacturing rigid-flex, most competitors would be lucky to get between 60 and 80%. Usually it's less than that. Unless you are over 90%, you can't make any money.
Matties: Do you attribute that high yield to the level of automation that you put in? What is the cause for such success?
Rozario: One reason is the automation, but also the design, equipment, technology and the experience that some competitors don't have. That is a plus. Certainly the automation helps, because the less handled, or man handled, the fewer deficiencies. That's working for us. We kicked off real production in 2008.
Matties: You built the factory from the ground up also?
Rozario: Oh yeah. When we looked at it, and to our advantage mind you, this was just a bit of land with nothing on it. If there was something on it then the price would've been different. We picked it up, but then again in China, you actually don't own the land.
It's got to be a local guy and they introduced somebody who bought the land and then built the factory to our specification. Of course, working from ground level helps a lot because you saw the effluent plant, and you saw the underground piping for anything to spill into. It's two meters down, or nearly six feet.
Matties: It's fantastic. A really a great shop.
Rozario: You can walk down there to all to the machinery and so forth. This is why, even in China, straight away within weeks of opening it up we had ISO 9000 and ISO 14000, for the environment. In China, not many companies even thought about it.
Not many companies in Europe or the U.S. even have ISO 14000. That's for tighter controls of effluent that goes down. Then we have Nadcap in China and again that's the military approval and not many U.S. or other companies around the world have it, except the big guys who have the approvals.
We can manufacture anything in China that we can manufacture here in the UK, but in higher volume and with better yields and obviously a competitive price. We will supply anybody who wants it. Sometimes we supply the competition that doesn't make our type of product. It saves them from investing and doing all the experimental work and whatever. They make a margin and it's their customer. That's working very well for us. As I said, the production is over $50 million and that's not bad considering we started in 2008 and many competitors were already there.
Now we're looking at getting to the $100 million mark. I know there's a slow down at the moment. That won't last very long, because obviously the world is our oyster for selling high-tech PCBs.
Matties: I’d like to come back to the Chinese market a little later. Now, tied to your strategy though, you also made an acquisition in the U.S. I believe.
Rozario: Yes, Graphic acquired Calflex, who for 35 years has specialized in flex and rigid-flex. We are now putting rigid-flex in there. Again, they are fully ITAR approved and so forth. It's a long standing company.
Matties: Is that wholly owned by Graphic?
Rozario: That's fully owned by Graphic. The Hallmark side is fully owned by Somacis. For DSG it’s a 50%, owned JV with Somacis.
Matties: What was the strategy with Calflex? Was it to have a flex shop in the U.S.? Was it to be a feeder shop for DSG? Tell us a little bit about your thinking.
Rozario: I think the initial idea was for it to be a gateway to the U.S., because you have to be there and you must have ITAR and everything else to be qualified to do the job. The plans were that we could develop it into a real-time rigid-flex shop because we have the experience, we can get the yields, the technology and there's a huge market base there. And because we have 48 years’ experience, with that type of product it's what you know and the experience you've got if you want to capitalize on it and make a profit; otherwise it's quite difficult. The boards are getting very complex and we do 50-layer boards here. Not every day, the occasional one comes in, but we can do any number of layers the customer wants and maintain it. Of course even with inspection and whatever else, we're always the first. We have an IST tester and were one of the first to get it.
The guy who designed it is an ex-Graphic employee who is based in Canada now, and that's very expensive equipment. We have always been in developing and looking at what can be done for the future.
Matties: Does that come from your personal drive? Is that your natural curiosity that drives you?
Rozario: I won’t take all the glory here. We have a team. Everyone joined in and we all worked together.
Matties: I understand you have a team, but there's also leadership and a vision.
Rozario: I try to be visionary and look where to go next, and like with China I remember our technical people saying, "Why do you want to go there? Why don't you spend the money here? We can expand and so forth." Of course you can see the benefit from being in there. There's a huge marketplace and many things you can do there. Anywhere around the world if you start a business, to grow it takes time. In DSG we are going from zero in the worst recession, to over $50 million in China. Not many people start from zero and go up that quickly. That's available in China, because the facilities are there and there's a focus on people looking for good Chinese supplies. Imagine then, that almost 80% of what we manufacture is China to China.
Our export is limited to about 20% of what we manufacture there. From that point, we are not building cheap product and flooding the world. It's used in China.
Matties: You're really serving the Chinese market.
Rozario: We’ve got a captive Chinese market. Then again, when you look at it, even the world’s companies come to China. We are now the sole supplier or the only approved supplier for some of these large companies from the U.S. or UK.
We've been around for a long time, and I think there’s business trust and confidence in the people who approach you. As I was saying, when I first started in Devon I had to do everything, get the machinery in, get a team together, technology, go out and talk to customers, gain their confidence and be someone who knows the product. In those days the larger companies were very particular. They didn't want change and they gave you a hard time to get in to be a supplier. It wasn't easy. I know I'm going back a bit in life and many launches ago, but we eventually got a foothold. Then that's it. Then they see the product and they get it. We worked very hard, but some of our suppliers, like BAE, we've been with for 48 years—since we started. They were one of our very first customers.
Matties: You received at one point their Supplier of the Year award, among all of their suppliers.
Rozario: In ‘95 I think we were the supplier of the year in the UK, but the gold award we got last month is from BAE. Now we are into gold and that takes a long while, because customers don’t easily issue awards to people; obviously it's got to be proven that they can come up with the goods. But coming back to the future again, we're still wondering where we go from here.
Matties: That's what I'm wondering.
Coming next: Rex Rozario, Part 3: The Future Beckons