Flex Investor and Analyst Day Highlights
Future strategy poised to ignite expansion through industry convergence
At the 2017 Flex Investor & Analyst Day, held Tuesday, May 10, 2017, at the company’s New York Innovation Lab, Flex CEO Mike McNamara and key executives laid out their vision for the next several years as the company provides Sketch-to-ScaleTM solutions to more customers. This vison is focused on how Flex will use the company’s platform to access new industries and unlock new markets, while providing more strategic engagement with customers and suppliers.
The company’s executives showed how Flex is working with customers across industries to create solutions for a world where products work together as systems: cars that know a driver’s health, audio and VR partnerships, and supply chain innovations that accelerate deployment of technologies required for a more connected world.
“We are in a structurally different era today. It's not about the land or the resources or controlling production. It's really built around applying intelligence,” said Flex CEO Mike McNamara.
“Our world has moved into a place where the analysis of data, the intelligence that we can get off data, can actually help manage our lives and create economic benefit.”
Innovation and New Ventures
Flex President of Innovation and New Ventures Jeannine Sargent explained how Flex has moved from the traditional world of build-to-print, to the new Sketch-to-Scale strategy, adding value for customers by working with them to create new solutions and accelerate time-to-market.
These expanded product creation capabilities are helping customers incorporate technology advances quickly, providing Flex with an opportunity to demonstrate unique and differentiated technologies. Sargent noted that this effort has resulted in more than 230 patents issued in 2017 to date, up from 140 last year. Flex currently has a portfolio of over 1,200 patents, and another 1,100 pending.
Global Procurement and Supply Chain
Tom Linton, Flex chief procurement and supply chain officer, noted that as supply chains become more complicated, it’s possible to find new value by enhancing the strategic partnerships with suppliers. With the expansion of Flex’s Design Centers to multiple locations around the world, this is providing a much more interesting venue for suppliers to interact with Flex and the company’s customers, as the multiple parties can work together to create the best possible product.
By moving the procurement function to more of a collaborative design role, Flex is able to build a marketplace platform similar to an Amazon, Airbnb, or VISA. And customers can come to Flex knowing that the company has vetted and sourced the right materials for a product, while using scale to secure the best possible price.
Consumer Technologies Group
In the company’s Consumer Technologies Group (CTG), President Mike Dennison noted that last fiscal year, his group improved its portfolio with more than $1 billion in new bookings, acquired two new audio factories as part of the new strategic partnership with Bose, and is building a million square feet of manufacturing capability to help Nike reinvent the footwear business using modern techniques.
Dennison also commented that changes in CTG are reducing the seasonality of his business, a positive repercussion. In addition, he sees his group’s 2-4% operating margin target expanding in the future when you factor in the opportunities to reinvent footwear, and grow substantially in areas like AR/VR and Connected Living. He outlined a future 3.5-5% operating margin range for CTG beginning in FY'19.
Communications and Enterprise Compute
In Communications and Enterprise Compute (CEC), Flex President Caroline Dowling sees a market in transition, with Flex’s Cloud Data Center and Optical businesses producing double-digit growth in FY’18.
As part of this growth in Cloud, Dowling’s group is working across Flex to plan and integrate how a smart and connected world will impact data centers and communications. “Think about how an autonomous vehicle is going to drive 40 terabytes of data per week per car. Think about the 1 terabyte of data a drone can generate every day. And think about average users, we use 650 megabytes of data today on average and probably our teenage kids maybe 850 megs,” noted Dowling. At the same time, health data, mobile devices and IoT sensors will only add to this flood of data.
These needs for connectivity, capacity, and reduced latency will drive wireless data protocols to 4.5, 4.9 and 5G, delivering greater speed and coverage for interconnected edge devices. On the server side, the CEC group has developed Sketch-to-Scale architecture systems that enable global deployment of new hybrid cloud solutions. From the Open Compute Project to Open19, CEC’s hundreds of engineers are building a strategy for success as the need for AI, data processing and faster wireless access continues to grow.
High Reliability Solutions
In the health technology and automotive areas, High Reliability Solutions (HRS), President Paul Humphries outlined how Flex is focusing on mega-trends and high-growth sectors to capitalize on intelligence for a growing population, aging society, increased urbanization and an explosion of connected IoT devices.
Humphries sees the major technological changes in automotive as an opportunity to integrate many of the key technologies Flex helps design and build.
“That's driving additional compute power in the car, the need for additional storage and for server capability working towards capability in the cloud, faster connectivity, data analytics, artificial intelligence and machine learning,” said Humphries.
In medical technology, Humphries’s group is capitalizing on the increased importance of connectivity in hospitals, homes and for managing chronic disease. Humphries noted, “You go from not just having the device but you actually have a device that's connected to the cloud that uses data analytics to provide insights to doctors and patients and allows them to improve the affordability of care.
The Energy, Telcom, Networking and Enterprise Compute industries all bring in several billion dollars of revenue for Flex each year. These key infrastructure industries supply the renewable energy and communications and enterprise compute muscle needed to revolutionize industries, ranging from solar energy to 5G wireless.
Industrial and Emerging Industries
Industrial equipment is moving from a world of siloed equipment, where machines didn’t communicate with each other, to an Industry 4.0 world of interoperable, connected machines and increased automation.
Flex President of Industrial and Emerging Industries (IEI), Doug Britt says “In 2016, 10% of machines were connected and 8% of factories were automated. By 2025, 25% of factory tasks will be automated and 50% of the machine fleet will be replaced.”
This is one example of a tremendous macro shift in the world of industry. In the shorter term, Britt’s team is also working to help customer’s retrofit their existing equipment to tap into more data and evolve business processes.
Throughout the presentations in New York City, Flex executives reiterated that as all products, devices and technologies become smarter and more connected, the company’s experience across 12 different industries, each at over $1 billion dollars in scale, offers a unique perspective on how to create new innovations. By capitalizing on this cross-pollination, Flex is working to create a smarter, more intelligent world.
To read and hear the full audio recordings and transcripts from the Flex 2017 Investor & Analyst Day, please visit our Investor Relations site.