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How to grow when you have 100% market share, Swedish CEO asks

[STOCKHOLM] The world's electronics companies manufacture 4 billion advanced flat-panel displays a year for smartphones, TVs and tablets, and every one of them is made with technology from a little-known Swedish company. While 100 per cent market share might be the dream of many executives, for Lena Olving at Mycronic AB, it's a challenge.

"If you have a 100 per cent share, it's hard to grow faster than the market," said Ms Olving, whose company's machines make the masterplates used to manufacture displays in a process not unlike the use of negatives in classic film photography.

Machines like Mycronic's are used to write microscopic images on plates, which then act as templates for mass production of high-resolution displays and computer chips. The bigger the display or TV screen being produced, the more accurate the template has to be and Mycronic's systems can cost US$40 million each. Since the advent of the smartphone a decade ago, every advanced-display manufacturer in the world uses Mycronic's products.

Since Ms Olving took over as chief executive officer in mid-2013, Mycronic has strengthened its grip over its main market and the stock has advanced some 600 per cent. Her challenge is to broaden Mycronic's offering and reduce the company's reliance on so-called pattern generators, which is an intermittent business in terms of orders that stood for more than 60 per cent of sales last year.

Ms Olving's response has been to buy fast-growing companies in related fields, such as electronics assembly and dispensing equipment. Mycronic has sealed five deals in the past two years and is poised to keep buying, Ms Olving said in an interview in Taby, a Stockholm suburb.

Her goal is to more than double sales by 2023, to 5 billion kronor (S$800.75 million), mainly based off growth in Mycronic's Assembly Solutions unit.

Mycronic, founded in the early 1980s with technology developed at Stockholm's Royal Institute of Technology, predicts growth in the push for autonomous driving and advanced safety features in cars, a business it accessed through last year's US$35 million purchase of Automation Engineering in the US. The unit sells solutions for assembly of precision camera modules.

Many vehicles today don't have a camera, but more new cars increasingly come equipped with sensor or camera-based cruise control and collision warning systems. In the future, standard cars will have six to eight cameras and premium vehicles will have more, Ms Olving said, quoting external sources.

With some 93 million light vehicles sold globally last year, according to LMC Automotive, that's a lot of cameras. Such equipment might also be added to city infrastructure to monitor self-driving traffic, she said. While AEI already holds about half of the global market in its segment, that can grow, she said.

"It's not unthinkable that in-house manufacturers of the camera equipment may leave the business as it's not seen as core, similar to previous developments within the auto industry," Ms Olving said.

While Ms Olving expects "fairly large organic growth" for the company as a whole, she needs more acquisitions to reach her sales target in four to seven years from 2016, when revenue was 2.32 billion kronor. For 2017, the company forecasts 2.80 billion kronor in sales and Ms Olving wants to reach her 5 billion-krona target "as quickly as possible."

"We systematically look for electronic equipment companies with high growth," Ms Olving said. "We have a gross list with interesting candidates" and "there are a lot of interesting objects in Asia but also in Europe and in the US," she said.

Mycronic takes a cautious approach when it comes to acquisitions given its small size, which means the company can't afford to fail with M&A, Ms Olving said. The Swedish company needs to "do its homework", she said.

Assembly Solutions is becoming an increasingly important leg at a time when focus in the pattern writer market shifts to capabilities - ever-improving resolution, bigger-sized screens and new applications - rather than on adding capacity.

"The part of Mycronic that will have the highest growth going forward is Assembly Solutions and it's also within that area that we will focus our acquisitions," Ms Olving said.