The sound of 100 million people worldwide making free calls on Skype's Internet phone system just might be money in the bank to Singapore injection molder and manufacturer Aztech Systems Ltd.
The publicly listed company, which opened a sprawling, 2,000-employee manufacturing campus late last year in Dongguan, China, is hoping the popularity of Skype will keep it on a path that has seen sales rise by 50 percent and profit triple since 2003.
Aztech introduced a telephone this year that connects to both a computer for Skype and to traditional phone service. And the firm is set to unveil a model that plugs directly into the Internet so Skype can be used without a computer.
The telecommunications-oriented company also is putting resources into its other large division, contract manufacturing, an area where it competes more directly with traditional plastics molders. Contract manufacturing made up 41 percent of its S$101.1 million (US$65.2 million) in sales in the first half of this year, up 55 percent from last year. It is the firm's fastest-growing segment.
Aztech announced in January that it had opened the 464,000-square-foot plant in Dongguan, where it has 36 presses with clamping forces up to 250 tons, and 100 mold makers. The plant added four injection presses, consolidating two smaller sites nearby and doubling Aztech's overall manufacturing capacity.
While plastics is not its core technology, the firm decided to bring those plastics functions in-house about five years ago after shipments were delayed by suppliers, and as a way to control costs and speed product development. That move was part of an extensive restructuring.
Aztech's sales are less than half what they were at their peak in the late 1990s. From 1998-2002, the firm lost money, but turned itself around after deciding to focus on higher-end work, boost efficiency and not pursue business at any cost, said Martin Chia, senior vice president of sales and marketing.
``We learned lessons from that - from seeking sales, but sacrificing profit,'' Chia said Oct. 13 at the Hong Kong Electronics Fair. ``We want to be profitable, but we want to be selective.''
To prove the lesson has stuck, the firm points to first-half profit margins that rose one percentage point to 19 percent, in spite of Aztech having to paying more for raw materials, labor and electricity.
Now, its largest customer, the Singapore division of U.S. computer chip maker Advanced Micro Devices Inc. of Sunnyvale, Calif., is roughly 10 percent of its business. Aztech ships about 2 million high-speed computer modems a year, both under its own name and for other firms. As Aztech's largest single product, the modems account for about 4 percent of the world's total, he said.
The firm wants to balance its business between contract manufacturing; making products like MP3 players sold retail in Asia under its own brand names; and original design manufacturing - or designing and building modems and other telecom products for other manufacturers, including Verizon. ODM was 47 percent of the firm's sales in the first half of 2006; retail was 13 percent.
Aztech and its team of 100 product designers and researchers pay close attention to tech trends, Chia said, particularly combination devices like phones/personal digital assistants and cameras/phones/MP3 players. Spotting trends and taking advantage of them requires working closely with customers, he said.
For example, to make its specialized Skype phones, Aztech must get approval from Skype Ltd., which is owned by eBay Inc. and has a reputation of being picky with suppliers, Chia said.
``It's not a company where you say, `I want to do a Skype phone,' '' he said. ``You need a lot of their source code. They talked to our customers, they tested our engineers. There are so many people who want to work with Skype - they are very selective.''