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Business

Chip trader UKC expands electronics manufacturing in Vietnam

TOKYO -- UKC Holdings, a large Japanese trading house specializing in semiconductor devices, plans to ramp operations up to full tilt at a new electronic manufacturing services plant in Vietnam by the end of 2017. 

UKC is spending about 1.5 billion yen ($15 million) on the plant, which is involved in manufacturing key components on behalf of smartphone makers.

The company hopes to expand the plant's operations to include contract manufacturing of resin substrates for OLED displays. Currently, the plant only puts electronic components into printed circuit boards that control cameras and batteries. 

The operations at the new plant in a Hanoi suburb, which came on stream in April and mainly makes printed circuit boards for Samsung Electronics' Galaxy series, have been on the right track. The company has increased the number of workers at the facility to around 300.

The plant boasts cutting-edge technology to insert semiconductor chips and other electronic parts into flexible printed circuits, which are used mainly to squeeze many parts into the narrow space within smartphones and other portable devices.

FPCs are made of soft resin. Inserting tiny condensers, connectors and semiconductor chips accurately into sucuit boards requires highly sophisticated technology.

UKC has been winning contracts to do the task for manufacturers by capitalizing on its competitive technology to limit distortions of circuit boards during heat treatment.

The plant in Vietnam is capable of handling circuit boards for camera modules and lithium-ion batteries. It is also equipped to make FPCs for OLED displays. Demand for displays using organic light emitting diodes is growing fast.

Eye on expansion

UKC will dispatch engineers working at its plant in Dongguan, a city in the Chinese province of Guangdong, to Vietnam to help workers at the new plant acquire the skills and expertise needed to handle the new operations.

UKC racked up some 28 billion yen in sales from its EMS business in the year through March.

The company is seeking to boost EMS sales to 40 billion yen in three years by expanding operations in Vietnam, winning more contracts for the plant in Dongguan and raising productivity.

Profit margins in the EMS operations are higher than in UKC's core trading business, which involves purchasing and selling electronic devices. The company aims to boost overall profitability by ramping up its EMS business.

The global EMS market is dominated by Taiwan's Hon Hai Precision Industry, known as Foxconn, which recently acquired Japanese electronics maker Sharp. A few other Taiwanese companies, including Pegatron and Quanta Computer, also have solid presence in the sector.

Most Japanese players in this field, like UKC, are trading companies specializing in semiconductor and electronic parts that have diversified to EMS operations in areas where they are competitive.

In November 2015, UKC announced it would start merger talks with rival Kaga Electronics, but terminated the negotiations in April 2016.

The two companies apparently failed to strike a deal because of disagreements on the stock exchange ratio. Differences in corporate cultures have also been seen as a factor behind the breakdown of talks.

UKC has since adopted a go-it-alone strategy focused on expanding businesses with strong growth potential.

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