Harvard Business School
Rev. December 11, 1998
In October 1987, Edward Plummer, president of the Donner Company, was reviewing the company's position prior to planning 1988 operations. The Donner Company manufactured printed circuit boards to the specifications of a variety of electronics manufacturers. Each board consisted of a thin sheet of insulating material with narrow metal strips (conductors) bonded to its surface. The insulating sheet acted as a structural member and supported electronic components connected by the conducting strips. In the customer's plant, assemblers (human and/or automated machinery) positioned electronic components in the predrilled holes in the board, soldered them into place, and then installed the board in the final electronic product. At the end of 1987, there were 750 printed circuit board manufacturers in the United States. These manufacturers could be classified either as captive or contract manufacturers. Large electronics firms, such as IBM, AT&T and Digital Equipment, produced much of their own requirements in captive board shops. When large quantities of simple technology boards, or small quantities of fast turnaround prototype boards were required, these customers would usually subcontract production to contract manufacturers. Smaller firms also purchased from contract manufacturers, particularly when small lots of special boards were needed. The more technologically complex a board, the more likely it was that customers would eventually produce it in-house. Printed circuit boards, with their electronic components and circuitry, are the "guts" of virtually all electronic products. Due to the increasing use of electronics in all aspects of our lives, the printed circuit board industry has paralleled the growth rates of the computer, telecommunications and defense industries. This also has left the printed circuit board industry vulnerable to the frequent upturns and downturns of these industries. Since the start of operations in 19851, the Donner Company had specialized in making circuit boards for experimental devices and for pilot production runs. Most of the company's managers were engineers with substantial experience in the electronics industry. Plummer and the firm's design engineer, Bruce Altmeyer, had created several of the company's processing methods and had patented applications, processes, and modifications of some commercial machinery. Plummer and Altmeyer both believed that the Donner Company was more adept than its competitors at anticipating and resolving the problems inherent in new designs and prototype production techniques.
1Income statements are shown in Exhibit 1.
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Donner's manufacturing process produced circuit boards known in the trade as "soldermask over bare copper" (SMOBC) boards. This SMOBC process became popular in the early 1980s as customers demanded denser circuit patterns and greater reliability. The SMOBC manufacturing process consists of three stages: preparation, image transfer, and fabrication. In the first stage, artwork and computer control tapes are produced while raw materials are prepared for processing. In the second stage, the conductor pattern is...
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