Tensions in international trade since 2018 have complicated supply chain resilience for the leading top-tier brands within the electronics industry. Complex customer clearance and high tariffs have risen to the top of many purchasing problem-solving agendas. The need for supply chains outside of Greater China has become a prominent hot topic within corporate strategies. As the world experienced strict Chinese governmental lockdowns during the COVID-19 (New Coronavirus Pneumonia) epidemic, over-reliance on manufacturing within the Mainland called for alternative solutions. The moving trend towards Southeast Asian countries has since escalated.
Manufacturing since trade tensions surfaced has primarily reshuffled towards alternative countries of origin (COOs) such as Vietnam, Thailand, the Philippines, and Indonesia. As manufacturers face new challenges in foreign countries, one supplier has since localized for decades within Southeast Asia (SEA). In the 1980s, Harmony Electronics strategically chose Thailand as its first overseas manufacturing site. They have successfully made a name for themselves locally as a stable manufacturing powerhouse in the small town of Banpong, approximately two hours west of Central Bangkok. With the success of the first plant coming online in 1989, Harmony Electronics is currently expanding a second major manufacturing site approximately an hour North-East away from Banpong in the town of Om Noi. The first stages of building up to mass production will be ready as early as late 2023. A projected overall capacity increase of approximately 10% is targeted once the plant starts operations. With the successful ramping up of mass production in Om Noi, a total of 25% increase is expected in contribution to the overall Harmony group capacity.
With the worldwide trend in manufacturing moving out-of-China (OOC), C. Ching Yang, Vice-President of Harmony Group, is conscious of the structural, cultural, and managerial challenges while setting up production in a foreign country. Yang further comments, 'For Harmony Electronics, it will certainly be a much easier road for the new plant in Omnoi than for others just recently entering the ASEAN space'. Since Harmony's presence in Thailand in 1989, the company has cultivated an experienced management team that is well-versed in the Thai language, local customs, and other many aspects of Thailand's culture. Localization is not Harmony's long-term goal or strategic vision; it is a current reality. Over half of Harmony's current upper management team can converse fluently in the local language in daily management. Harmony's ability to service the SEA region and Thai domestic sales ability extemplo differentiates them from other industry newcomers who may compete within the same geographical territory.
Yang further elaborates, that Harmony is currently the only Taiwanese timing device manufacturer able to provide full-process assembly in SEA under their corporate management. Due to Harmony's early entry advantages within Thailand, numerous major brand customers have since approached them for strategic supply negotiations. These customers are looking to not only transfer their supply chain to SEA, but preferably to do so with the least purchasing risk possible. Harmony's maturity in Thailand is a core competence few currently possess within the timing industry.
Ching Yang, Vice-President of Harmony Electronics Corporation, currently heads Harmony Group's Crystal Device Division and is responsible for overseeing production expansion in Omnoi, Thailand
Photo: Harmony Electronics Corporation
Expanding Thailand's Production Base as Demand for Timing Devices Increase
Timing device plays an important role in all electronic devices. Quartz-based timing devices are the purest form of timing. The product is essential in converting high and low signal frequencies and filtering noise within the correct time and speed specification in an electrical circuit. This function can be achieved with a quartz crystal resonator. Another commonly used timing device in circuit design is the quartz oscillator. The quartz oscillator is a combination of the quartz crystal resonator and an IC within an oscillation circuit design. Based on various frequency control methods such as CMOS, LVDS, LV-PECL, HCSL, etc., quartz oscillators can be further divided into other timing product categories. These include popular devices such as the temperature-compensated oscillator (TCXO), the voltage-controlled oscillator (VCXO), the voltage-compensated and temperature-compensated oscillator (VC-TCXO), and so on. Further advanced assembly has also been achieved with the quartz crystal resonator. A thermistor can now be placed within the substrate of the crystal resonator, keeping the temperature variance between the crystal and thermistor at a minimum. This 2-in-1 thermistor crystal specialty product has one of the largest scaled-up production capacities in Harmony. As consumer electronics products and gadgets continue to proliferate in the lives of the public, the growth of demand for quartz components is expected in the long run. Rapid popularization of electric vehicles, advances in 5G, and AI applications, are only a few of the current applications that have brought an increase for quartz-based timing devices.
Harmony Electronics has been manufacturing quartz crystals, quartz oscillators, and other quartz-related, ceramic substrate-based electronic components for nearly half a century. Since the establishment of the company in 1976, Harmony has been working in collaboration with Japan's Daishinku Corporation (KDS) on technology, design, and quality for timing devices. Long-standing customer base includes major electronic EMS' and their end customers. Harmony has consistently placed top ten in worldwide ranking annually. With existing manufacturing facilities in Taiwan, Guangdong, and Thailand, Harmony's products include a value-added addition of purchasing flexibility for their customers. Current major applications for Harmony products include industrial, communications, networking, consumer, and automotive. The trend in product performance has been geared towards miniaturization and high operating temperatures to keep in line with technological advances.
Harmony Electronics Corporation headquarters, located in Kaoshiung, Taiwan. Harmony is one of the few true manufacturing of timing devices worldwide
Photo: Harmony Electronics Corporation
Vice-President Yang highlights the importance of diversifying operational risks, even when trade tensions are not evident. Since 2000, China has become a major global production base for consumer electronic goods. Even so, Harmony Electronics has retained significant manufacturing operations in Thailand during and after its expansion to China that same year. Manufacturing experience in China in the 2000s allowed corporate strategy to take a long-term comparative look at the pros and cons of manufacturing in culturally different regions. Harmony's operational risk diversity has benefited from a long-term study of producing multinationally. A healthy proportion of Harmony's overall capacity has always been focused on Thai production, thus ensuring the growth of experience for the local management team and the nurturing of internal local talent. At the end of 2014, Yang's team decisively purchased land for a second factory in Omnoi, an industrial zone adjacent to Bangkok. The decision took into account the rapid changes in Chinese law and regulations and a projected long-term increase in demand for quartz components in the international market. In addition to Harmony Thailand's own cash funds, 400 million additional funds from the headquarters in Taiwan were injected into Thailand between 2021 and 2022 to financially aid new construction. The Omnoi factory is currently scheduled to be completed by the end of 2023 at the earliest and will be mass-produced in three phases to welcome the wave of supply chain restructuring.
Thailand Omnoi will continue to expand on Harmony's existing management expertise in SEA management
Many Taiwanese manufacturers have chosen to set up production bases in Thailand amid global supply chain restructuring. While work has begun for many new corporate entrants in Thailand, actual ROI results from new investments in Thailand would not be conclusive in the short term. In comparison, Harmony's second expansion in Thailand will bring less risk for its investors and customers. Yang points out, 'Familiarity in local culture, regulations, and language is a core competence difficult to ascertain, even with the correct talent. The quickest and most appropriate progression from pilot-run to mass production in Thailand is a familiar road for Harmony. This knowledge gives our company a greater degree of control over overseas investment stability. It will invariably help the Harmony brand maintain a favorable position in the global market whilst simultaneously attracting new international customers and investors.'
Combining R&D with SEA country of origin advantages to seize new business opportunities
Varying degrees of governmental lockdown policies during the COVID-19 epidemic led to an upsurge in demand for computers, mobile devices, and other electronic products. Unfortunately, excessive purchasing eventually led to a Bullwhip Effect in supply and demand. The predicament of excessively high inventory levels in the past two years has resulted in soft worldwide demand across the majority of the electronics industry, particularly within the consumer segment. A return to relative normality is expected after 2023, but many experts remain conservative in their predictions. Harmony Electronics has quickly refocused its targeted segments to other more promising applications and markets to maintain stable operations.
With over a hundred quartz timing component brands worldwide, Yang gives insight that few are true manufacturers. Whilst the OEM strategy for these brands is respectable in their own right, Harmony differentiates as being the source of the industry assembly supply for timing devices. As a true manufacturer, Harmony is active in all levels of the multi-tiered timing supply chain. Top customers for Harmony include international brands, assembly contract manufacturers (CMs), as well as OEM/ODM and private labeling for other timing brands. Harmony caters to a multitude of applications for such customers, including products used in the safety-sensitive sector for automotive use. Harmony's strength do not solely lie within the context of geography. Backed with a well-rounded manufacturing resume for a variety of markets, Harmony aims to utilize its advantages in R&D capabilities, quality, and production scale to serve all customers with a need for timing. The company also hopes to be able to help the local SEA market gain greater purchasing flexibility and sourcing advantages, thus strengthening the competitiveness of the regional supply chain ecosystem.
Arial view of Harmony Omnoi, Thailand, currently at the end of construction and ready to come online at the height of current supply chain reorganization
Photo: Harmony Electronics Corporation