Business model of Sanmina

Customer Segments

Sanmina principally provides services to original equipment manufacturers operating in the communications, computing and storage, multimedia, industrial and semiconductor, defence and aerospace, medical, automotive, and energy sectors.

According to its annual report, the Company has historically generated a substantial proportion of its revenue from companies within the communications industry. While these customers are not limited by jurisdiction, the US remains the Company’s largest single market.

Sanmina serves a number of returning customers. In all of the past three years around 50% of the Company’s total annual net sales was generated by its ten largest customers. No single customer, however, accounts for more than 10% of the Company’s annual revenue.

Value Propositions

In providing original equipment manufacturers, it is crucial that Sanmina’s products and services are reliable and effective as their use in third party products will reflect directly upon the Company’s customers.

As such, quality is the key value that Sanmina provides to its customers.

Having been established more than 30 years ago, Sanmina is an established name within the industry and has cultivated a reputation as an efficient and reliable performer, both in terms of its products and its ancillary services, and more recently its computing and storage solutions.

The Company’s diverse range of products and services is indicative of its commitment to innovation.

Channels

Sanmina operates a website at www.sanmina.com where customers are able to access information on the Company’s products and services. Sales however are made either through one of Sanmina’s sales teams directly or through an authorised distributor.

Customer Relationships

While it is possible for customers to browse Sanmina’s products and services on its website, purchases cannot be made on a self-service basis. Instead, customers must contact the relevant regional sales team directly to discuss their individual requirements.

Typically, major customers will negotiate a supply agreement with Sanmina that range from between three and five years. As part of these contracts the Company provides support services and technical assistance.

Sanmina interacts with its customers directly through its social media presence, comprising Twitter, Facebook and YouTube accounts, and keeps customers updated with company developments through its website’s news section.

Key Activities

Sanmina Corporation serves the original equipment manufacturing market with a range of integrated manufacturing solutions, manufacturing components and products and various after-market services.

Sanmina’s operations are managed as two businesses:

• Integrated Manufacturing Solutions, comprising printed circuit board assembly and test, final system assembly and test, and direct-order-fulfillment; and
• Components, Products and Services, comprising development and sale of interconnect systems, mechanical systems, non-volatile DIMMs, solid state drives, DRAM solutions, defense and aerospace products, storage and optical products, and Radio Frequency modules.

It also provides direct order fulfillment and logistics services, after-market product support, and global supply chain management solutions.

The Company principally serves customers within the communications networks, computing and storage, multimedia, industrial and semiconductor capital equipment, defense and aerospace, medical, clean technology, and automotive industries.

Key Partners

Sanmina collaborates with a range of companies in order to provide its customers with the most efficient and reliable service possible.

The Company operates several partner programs to manage its relationships with supplier partners, manufacturing partners and logistics partners. These include the Vendor Consigned Inventory Program, the Supplier Managed Inventory Program, and the Release to Forecast Program.

Partners are granted access to the Partner Connect service through which they are able to respond to requests for new purchase orders, receive forecasts, and review real time inventory information for Consigned Inventory programs. Sanmina has recently partnered with Nokia for the delivery of data centre solutions, Ouraring for the development of a wearable sleep-aid device, and with Brighter to produce a connected diabetes device.

Key Resources

Sanmina’s key resources are its technology and product designs, its manufacturing facilities and supply chain partners, its distribution and sales networks – including warehousing and logistics facilities, its IT infrastructure and its personnel. Searches of records held by the US Patent and Trademark office identified eight patent applications filed in Sanmina’s name.

These include applications for a ‘Side loading enclosure for a rack mount type storage unit’, a ‘Fast startup hybrid memory module’ and a ‘Retaining clip for use with a mass storage device’.

Cost Structure

Sanmina incurs costs in relation to the management and operation of its manufacturing facilities – including acquisition of supplies, the development and research of product designs, the distribution and storage of its products, the maintenance of its IT infrastructure, and the retention of its personnel – which number more than 40,000 worldwide.

The Company also operates offices and sales centre in more than 25 countries, which accrue costs in the form of rent and utilities.

Revenue Streams

Sanmina derives revenue from the sale of manufacturing services, components and other products, as well as through the provision of order fulfillment, logistic and repair services. The Company operates two business units but has only one reportable segment: its Integrated Manufacturing Systems business, comprising printed circuit board assembly and test, final system assembly and test, and direct-order-fulfillment. The Company’s Components, Products and Services business comprises multiple operating segments which do not meet the requirements to be presented as reportable segments in their own right. As such, financial information for these segments is presented in a single category.

In 2015 Sanmina generated $6.37 billion in annual revenue, up from $6.22 in 2014. The Company’s Integrated Manufacturing Systems segment accounted for around 80% of its total annual revenue, with the remaining 20% made up by Sanmina’s Components.

Products and Services business. Typically, the Company generates around 80% of its net sales from foreign operations across Asia, Latin America and Eastern Europe.