Rakon [Electronics Sector]

Aug 28, 2009

Rakon keeps its seat in global GPS boom

The company is expanding as others in the industry worry

by Graeme Kennedy [NBR]

High-tech GPS componentry manufacturer Rakon is expanding production capacity to meet huge expected global demand in the personal navigation device market.

The Auckland-based international company has for the past three years been the world’s fourth-biggest supplier of high-performance precision crystals that are the units’ heart and generate their radio frequencies.

Rakon annually supplies 50 million temperature compensated crystal oscillators (TCXO) to all GPS manufacturers, and sales and marketing executive director Darren Robinson says a new wave of consumer growth has just begun.

“We have seen the trend for some time and it is so big we have to expand our manufacturing capability,” Mr Robinson says. “We began a partnership with a Chinese company last year to increase our production.

“GPS is already going into mobile phones — 100 million will be sold this year and 700 million in 2014 — and is being embedded in laptops and notebooks while the latest version of Windows has the function as standard.

“We have grown up with GPS and because of our knowledge and expertise we understand the industry’s requirements.”

Rakon topped the electronics manufacturing sector in The National Business Review’s monthly Exciting Companies series with a 74.8 rating in surveys conducted by strategic business consultancy New River. It was followed by Spidertracks, Indigo Systems, Emendo and NextWindow (see table.)

Rakon was started in 1967 by Mr Robinson’s electronics engineer father Warren, who ran Auckland marine radio manufacturing business Marlin Electronics.

“Each channel on a transceiver had two crystals so the radio could have 20,” Darren Robinson says, “but they were all imported and took weeks to get here.

“He saw an opportunity to manufacture them locally so he sold Marlin in 1965 and moved into the basement at home to work on it, reading technical manuals and pulling crystals apart.

“He was the first to manufacture crystals in New Zealand and cleaned up all the domestic demand before opening a factory in Singapore and exporting throughout Asia.”

Mr Robinson says new technology in he late 1970s developed circuitry that synthesised radio frequencies using one reference crystal rather than 20, dramatically changing the crystal industry.

“My brother Brent, now Rakon CEO, joined the business and saw the declining demand as the new technology moved in at a time when NEC Australia was developing one of the first mobile phones.

“He looked for a new product and came up with the TCXO - a normal crystal has an error of 20 parts per million but mobiles need 2.5ppm performance for frequency stability.

“Brent, who was also an electronics engineer, got it down to 1ppm, which was superior to other versions and the smallest.

“We started seeking markets and found the US GPS industry where Magellan, which produced the first hand-held unit, was looking for a lppm TCXO.

“The GPS market was just emerging in the early 1990s and our product was exactly what the industry was looking for — by the mid-1990s we were selling to most GPS companies.”

Rakon later developed the oven compensated crystal oscillator — a larger crystal surrounded by a central heating circuit to increase stability and lift performance to one part per billion.

Mr Robinson said Rakon was working on other overseas projects, including a home mobile phone-base, which provided a stronger signal and faster data download driven by a high-stability TXCO with an error performance of 0.1ppm.

The company is also involved with a UK-French venture specialising in telecom infrastructure.

“We floated in 2006 to bring capital into the business and grow it as a sustainable long-term crystal company of a scale similar to our major competition,” Mr Robinson says.

Rakon has factories in Auckland, the UK and France and joint ventures in India and China with 800 staff, including 500 in New Zealand.

MOSTLY UPHILL

A fall in demand due to the recession and increasing competition from Asia has plunged the electronics manufacturing sector into the doldrums with consumer and industrial markets badly hit.

Many firms, particularly those dependent on other industries which themselves are in difficulty, say product demand has been severely reduced, forcing staff cuts.

Strategic business consultancy New River found in its survey of the sector that some manufacturers believed the market had begun to recover but business conditions were rated difficult or very difficult by 76% of respondents and buoyant by just 5%.

The survey indicated that high volume manufacturing in Asia, particularly from China and Taiwan, had become a long-term trend although some New Zealand companies were taking their production offshore.

“Importing components from overseas is another difficult issue with some suppliers closed down and others building to order, which extends lead times for our manufacturers to get goods to market,” it said.

“Those companies finding business neutral or buoyant say they are discounting to get sales while others are focusing on market niches such as Australia — and repair work is busier as consumers are less likely to buy new product.”

Business conditions

Respondents’ rating of current business conditions in the ELECTRONICS Sector

Very buoyant =0%
Buoyant =5%
Neutral =19%
Difficult =57%
Very difficult =19%

Top 10 ELECTRONICS

Rank / Company/ Excitement rating

1 Rakon 74.8
2= Spidertracks 68.0
2= lndigo Systems 68.0
4 Emendo 66.0
5 NaxtWindow 64.5
6 Phitek Systems 59.0
7 Simtrix 56.0
8 Fisher & Paykel Healthcare 52.0
9 Tait Electronics 47.0
10 Arrowhead Alarm Products 46.0