An Interview With Lelon Electronics Corp.

Lelon Electronics Corporation
Passive Component Industry magazine (PCIM) recently discussed Lelon’s growth and outlook with Mr. T. C. Wu,
President of Lelon Electronics Corp.

PCIM: Lelon Electronics is now in its 31st year and has enjoyed measurable growth since its early days. How many employees and production facilities do you operate currently and where are they geographically located?
Lelon: We have four factories—one in Taiwan, two in China, and one in Malaysia (joint-venture business with Elna Japan). Our total capacity is 820 million pieces per month and we have 3000 employees.

PCIM: Your organization has a well- diversified electrolytic capacitor product line. One product of particular interest is your aluminum V-chip component. Can you provide us with your capacity expansion details for the
V-chip product line?

Lelon: In the second quarter of 2007, we produced 170 million pieces per month. By the fourth quarter of 2007, it will be increased to 200 million/month. Our planned production for 2008 is 250 million/month. The aluminum V-chip products range in size from 3 x 5.3 mm to 16 x 16.5 mm. Our new products include a 4.5 mm (height) V-chip and a V-chip series featuring low ESR and high reliability (5,000-hour life).

PCIM: What type of polymers is Lelon currently working with and what other type of dielectrics will we see from Lelon in the future? Polythiophene or polypyrrole? Do you use the dip or vacuum method for cathode development?

Lelon: Lelon uses the polythiophene in our polymer cap. Polythiophene is the safest polymer, with high conductivity and temperature stability. Currently, we use the dip method and we are working on vacuum impregnation machines.

PCIM: Another product line of interest is your conductive polymer aluminum capacitors. Can you provide us with the capacity expansion plans of this product line?

Lelon: Currently, we produce 18 million pieces per month. Our planned production in 2008 will jump to 40
million/month. One of our companies in the Lelon Group is Lifu Machinery, which manufactures the production equipment for polymer aluminum capacitors. So, we can expand the capacity quickly in response to the increased demand in the market. Our yield is very high because we are mature in manufacturing this product.

PCIM: A relatively new development with your organization is capacitors for vehicle applications. Please provide us with some details on this.

Lelon: All of Lelon’s manufacturing sites were TS-16949 certified in 2006. We have established production and test equipment to meet the strict requirements for automotive applications. Currently, we are supplying parts for tire-pressure monitoring, car entertainment, and security systems. We are working with major car application providers to be listed in the Approved Vendor List (AVL) for “Original Equipment.” We expect to get approval in the second half of this year.

PCIM: In addition to producing its own brand of electrolytic capacitors, Lelon is a manufacturer for other suppliers. Currently, what type of products are you supplying and what are the percentages of the Lelon brand versus non-Lelon branded components that you sell?

Lelon: Ten percent of our sales in 2006 were for non- Lelon brand components. Polymer aluminum capacitors, standard through-hole, V-chip, snap-in, and axial are all manufactured for the Lelon brand and for the non-Lelon brand.

PCIM: As you are well aware, raw materials have seen a dramatic price increase recently. What steps has Lelon taken to preserve quality of your components while retaining or increasing your margins? What type of price increase have you experienced in anode and cathode foils? Can you etch your own foil in-house?

Lelon: We didn’t change the original design or material suppliers to achieve cost reductions. We continuously expand our production capacity and sales, enabling us to reach a better economic scale, which, in turn, enhances our negotiation ability with material suppliers. Additionally, we keep investing in our IT system to improve workflow. We gain profit mainly through efficiency in workflow and inventory management, not from materials. The cost for both anode and cathode foils has increased, and we think the price will not come back down in the near term. We have a subsidiary company under the Lelon Group called Liton Technology, which produces etched foils and formed foils in China and Taiwan.

PCIM: What end-use market segments are strengths of Lelon and in what markets are you looking to improve market share?

Lelon: Besides many consumer products, we have significant growth in computers (motherboards and graphic cards), communications, audio, security, and power. We are now focusing on automotive applications, high-power inverters, and energy storage applications. PCIM: Please provide details on Lelon’s annual sales year to date and what type of growth has it enjoyed over the past five years?

Lelon: 2003 USD 75.7 million
2004 USD 106.5 million
2005 USD 113.9 million
2006 USD 121.1 million
2007 USD 60.2 million (First half of 2007. We expect to have a significant growth in sales this year.)

PCIM: The passive electronic component industry has experienced increased market consolidation recently. Is growth by acquisition a plan Lelon has considered? If so, please give of some insight as to what Lelon may consider.

Lelon: Acquisition has been part of our plan for growth. Either to acquire or to be acquired is an option for us. We will consider the market position and the benefits to our shareholders and our employees after consolidation, as we consider these opportunities for acquisition.

PCIM: Lelon is in a joint venture with Surge Components Inc. How has this joint venture contributed to your success in North America?

Lelon: Surge Components, also known as Surge-Lelon, is the Lelon sales/marketing office for North America and has worked hard for Lelon for many years by helping us achieve approval status to become a major supplier at many top companies in North America. The Surge- Lelon marketing channels include a network of independent sales representatives and authorized distributors. All this and more has increased our North American sales significantly. Our partnership with Surge is a strong one, and we expect our sales to continue to grow rapidly in North America because of this special relationship.

PCIM: Years ago, there was a concern in the industry about the use of water-based low ESR products. What has Lelon done to address this concern?

Lelon: The issues of water-based low ESR capacitors have had a profound impact on the industry. Electronic engineers have been very cautious with the low ESR capacitors since then. Actually, this kind of issue continued to occur in recent years. To prevent continued case bulging problems from occurring, we recommend polymer aluminum electrolytic capacitors to our customers as the best choice to replace water-based low ESR capacitors. As the price of polymer aluminum capacitors has settled down to a reasonable level, more designs have adopted polymer aluminum capacitors to ensure the long-term reliability of the product. We expect the market demand for polymer aluminum capacitors will continue to grow in the coming years. Lelon has been one of the limited number of suppliers for polymer aluminum capacitors selected at first-tier computer motherboard and graphic card makers. Lelon is capable and has been ready for this trend. In closing, I’d like to say thank you to our loyal customers throughout the world. It’s because of you that we continue to reinvest our profits, expand our product line, increase our capacity, and work diligently for continuous improvement in all areas.

Additional Resources: (1) Aluminum Capacitors: World Markets, Technologies & Opportunities: 2010-2015 ISBN # 0-929717-47-3 (8/2010) (2) CAPACITOR FOIL: Global Market Outlook: 2008- 2013 ISBN # 0-929717-85-6 (2008)