Knowles Precision Devices’ president Chris Dugan is wrapping up 2021 year for the company and looking ahead to 2022.
Throughout the COVID-19 pandemic, Knowles Precision Devices has stayed focused on our primary goal of helping our customers address their most challenging application needs by providing high-performance components and innovative solutions. While 2021 did offer some unique challenges, overall, it was an exceptional year for our business. This is because even though all the unprecedented circumstances we saw in 2020, we were able to quickly adapt our business, making us really well positioned heading into 2021. As a result, this year was one of our best growth years to date.
More specifically, there were a few big reasons for this years’ success, including the diverse range of industries we serve, our ongoing agility and ability to adapt to rapid changes, and the strategic investments we continue to make in our company and employees.
Strategic Growth in Multiple Market Segments
One of our biggest markets for growth this year came from our rapid penetration in the electric vehicle (EV) space. We are now engaged with two dozen leading OEMs and design houses for EVs, including two-thirds of the top companies in this space. Unlike providers who traditionally supply commercial off-the-shelf (COTS) components for combustion vehicles, our components can reliably meet the high voltage demands required for EV charging and powering EV drivetrains. Additionally, EV designs are rapidly evolving, and specs are changing almost quarterly. It seems that each time we develop a solution for an engineering challenge, the finish line moves. While this would pose an issue for most suppliers, this is great news for us because solving new and quickly changing design challenges is where we excel.
To expand our RF and microwave product offering and accelerate growth for these applications, especially in the aerospace and defense industry, this year we made the strategic acquisition of Integrated Microwave Corporation (IMC). With this acquisition we bring products from a leader in the design and manufacture of custom RF filters and multiplexers and decades of experience supplying these components for mission-critical space applications to Knowles Precision Devices. This acquisition also greatly expands our presence across the RF spectrum as we now can offer RF and microwave filtering solutions that support applications from the VHF to the Ka band. With this combined IMC/Knowles product line, we are in an even better position to address all the size, weight, and power (SWaP) challenges facing organizations serving the defense industry today.
Another big growth area for us has been in trimmer capacitors, a product that has seen slow growth the last decade or so. However, in the last 18 months, trimmer capacitor demand grew more than 50 percent largely as a result of evolving designs for MRI machines and networking devices.
Turning Global Challenges into Business Opportunities
It is no secret that there are numerous supply chain issues impacting nearly all industries in a variety of ways right now. However, we have seen minimal impact to our business so far. Since we do not serve the commodity combustion vehicle capacitor market or the consumer electronic market, the semiconductor shortage has not really affected our core markets. Additionally, our machinery and processes are highly flexible, which means we can adjust to changes quickly and produce multiple case sizes with a variety of capacitance levels as needed. And, again, since we are not supplying commodity multilayer ceramic capacitors (MLCCs) for consumer electronics, we generally have more free capacity than some competitors, and in some cases, our lead times this year were about one-third of our competitors. This has positioned us well to take a lot of opportunistic market share in the industrial and telecom markets.
We are aware that to accommodate for current shortages, some MLCC manufacturers are ramping up capacity and some experts predict that by H2 2022 there may be a correction and we may actually see a surplus of MLCCs. But, since we are not a commodity component supplier, and we will continue to innovate on our MLCCs to provide options that are more reliable and temperature stable, we do not anticipate that the expansion of small case size MLCCs will impact our business.
Another set of widespread challenges for many of our customers was of course the continued impacts of the COVID-19 pandemic. We saw some orders postponed because the end OEM was waiting for parts from other suppliers whose manpower was impacted by COVID. We have also seen data that suggests many senior employees left the workforce altogether in the past year. At Knowles Precision Devices, we are investing in promotion from within and dedicating time and effort to ensure our employees understand our mission and know their work is valued here. As a result, we have a dedicated RF engineering team and many skilled applications engineers that can help supplement engineering resources for customers experiencing staffing issues or those who may have lost critical engineering skills. Our team members are always happy to share their knowledge and help figure out how to address our client’s design challenges.
Looking Ahead to 2022
Overall, I believe we are really well positioned heading into 2022. We have a record high order backlog; flexibility with our product offering that includes custom, build-to-print, and highly reliable COTS components for microwave and RF; we are well staffed with excellent engineers that will work with our customers to solve even the most complex engineering challenges; and we are growing in all the right markets. In 2022 we predict we will continue to see tailwinds in our key markets including medical, communications, EVs, and aerospace and defense, and we will remain focused on serving these markets through an investment in R&D and strategic acquisitions.
