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Finding a Win-Win: The Dilemma of Consolidation

Finding a Win-Win: The Dilemma of Consolidation

by Harvey Kaylie, Founder and CEO – Mini-Circuits

The past few years have seen unprecedented levels of consolidation in the RF and microwave industry.  The recession of 2007 set an economic ripple effect in motion that’s had delayed consequences for suppliers and customers. The succession of high profile mergers and acquisitions was primarily driven by financial conditions. Low interest rates post 2008 made it an attractive time for larger, cash-rich companies to acquire smaller, more specialized companies still struggling from the doldrums of recession sales. On the surface, consolidation may look like a win-win for the stakeholders involved, but it comes with a hidden cost, and unfortunately, customers are getting stuck with the bill. We find ourselves with a dilemma where what’s ostensibly good for the financial health of companies ends up leaving a lot of customers with fewer choices, and worse, impending obsolescence of products they’ve relied on for many years.

For example, we’ve seen a recent upsurge of product obsolescence for VCOs and synthesizers, leaving many customers with the challenge of finding a second source for these complex and highly sensitive parts.  These are generally specials prepared for specific customer requirements, and because they’re so specialized, there’s often no second source readily available.  Suppliers may offer a last time buy to give customers lead time to plan, but this only delays the enormous effort and expense of replacing the part.  They may offer a substitute part with comparable performance, but which requires engineering on the customer end to fit the new part into the system.  In any case, the negative impact on customers is significant.

Ideally, customers want suppliers to be responsible for providing products over the life of their needs.  Some may say this sounds utopian, and that it’s not practical for suppliers to continue offering old parts when newer, higher-performance products are more profitable.  But at Mini-Circuits, we take a different position.  We believe customers have put their trust in us to support their needs, not just for the short term, but for the long term as well.  We take that trust very seriously, and we stand by our obligation to support our customers through good times and hard times alike.

We have a longstanding policy never to obsolete a product that a customer is using.  We’ve taken the necessary steps and established internal procedures to ensure that when a customer purchases a product from us, we have the ability to offer that product for as long as they need it.  Even in cases beyond our control—for example, when one of our suppliers obsoletes a component—we develop a form, fit and function compatible replacement product at our own expense to meet not only the specs, but also the characteristic performance of the product the customer’s been using.  This takes a lot more effort, but it’s part of our commitment to customers.

The purely financial argument says to never invest in a product for which the investment is greater than the return.  Investing in substitute parts results in no added profit—or diminishing profit if the product is on a downward slope toward end-of-life—and requires engineering time and effort that may be more profitably spent elsewhere.  But we believe strongly that customers should never be adversely affected by conditions we face within our company.  And despite conventional wisdom, over time, our policy on product longevity has led to the robust, long-term partnerships with the diverse base of customers that has been key to our success and continued growth, even in hard economic times.  I think that makes Mini-Circuits unique, and it allows us to offer peace of mind to our customers in a business climate where uncertainty is becoming the norm.  As an example, our first mixer, SRA-1 was introduced in 1970 and is still being actively produced and sold today after 46 years!

In fact, Peace of Mind has become a mantra within Mini-Circuits.  It encapsulates our philosophy of customer service and support, and our promise of reliable product supply for the life of the customer’s system is at the core of that philosophy.  This ensures that when customers choose a Mini-Circuits part for their system, they’re not just getting the performance they expect with our absolute commitment to quality excellence, but also the assurance that they’ll have a supply of the part as long as they need it.

Peace of Mind also extends beyond customers of existing Mini-Circuits parts alone.  Decades of design experience allow us to offer fast, easy replacement solutions to customers looking to replace end-of-life competitor parts.  Our engineers work directly with customers to characterize the part we’re replacing.  We search our extensive database of existing designs for the closest match and compare the two parts for variations.  We then modify our design to match the performance of the original part, so from the customer’s perspective there’s no change.  Finally, we qualify the new part with a full panel of electrical, mechanical, and environmental tests to ensure reliability.  This not only gives customers a solution to their replacement needs, but also the peace of mind that comes with reliable supply for the life of their needs.

So, while the economic tide has led many to respond by focusing capital on the most profitable products and rationalizing others, Mini-Circuits is responding by staying closer to our customers than ever, continuously innovating to offer more value, and staying true to our conviction that we succeed when our customers succeed.  In the long run, that’s a win-win for Mini-Circuits and our customers.