The efforts of the "small company of smart people" specialists achieving their long-held dream of entry into the server field

Every year computers and the internet are working with more and more information, and the high-speed transmission technologies used to process this information are evolving. This high-speed transmission uses high-speed connectors. For over 10 years, Hirose has supplied connectors for use in the network devices of major international transmission equipment companies, but it has been a long-held dream of the company to supply high-speed connectors for use in servers. A project that combined sales and engineering personnel turned this dream into a reality.

Hopes for the long sought after server field

Needless to say, IT devices such as network devices and server devices use a great number of high-speed connectors. They handle massive amounts of data, now requiring high-speed connectors capable of gigabit transmission. Some even require transmission speeds in excess of 50Gbps. Shigeyuki Yamamoto, of the Sales & Marketing Group, specializes in these high-speed connectors. He recalls that sales and engineering personnel had worked together several times in the past to increase high-speed connector sales.

When high-speed connector business was first launched, in roughly 2005, the goal was to supply connectors to both the network device field, which consisted of core devices such as routers and switches, and to the server field. However, although the company was successful in having its connectors chosen for use in communications devices from major manufacturers, it failed to gain a foothold in the server field. “Initially we performed well in the network device field, but by the point when we actually made forays into the server field in 2012, it appeared that it would no longer be possible to increase business in the network device field alone. We desperately wanted to move into the server field,” recalls Yamamoto.

There were several reasons why Hirose was able to achieve success with network devices but its connectors were not selected for use in servers. The largest factor was cost, but quality demands and usage styles also differed from network devices. Toshiyuki Takada, a staff member who was stationed in the U.S. city of San Jose and led a dedicated high-speed transmission team when the project was launched, recounts, “For network devices, since ordinary users do not access the interiors of the devices, the design approach is to secure connectors to PCBs firmly, using spacers or the like, so that they would not come loose even if subjected to vibration. For servers, on the other hand, the main priority is cost. Designs do not need to be that robust, but costs need to be low.” Hirose’s competitive advantage lies in the fact that its products offer properties which cannot be easily copied by competitors, so the mentality was fundamentally different.

However, a single network device project could produce orders of several hundred to several thousand products per month, while a major server model could produce orders of several tens of thousands to over a hundred thousand products per month, for annual sales numbering in the several hundreds of thousands. “As a business division that dealt with high-speed connectors, this was a field we desperately wanted to get into,” says Yamamoto enthusiastically.

Stepping into the untested waters of “second source” business

One day a project came along which would serve as the company’s foothold into the server field. It consisted of manufacturing connectors under license as a second source manufacturer of connectors designed by a competitor. Major server manufacturers tend to avoid using a single company to supply the large amounts of connectors they use, so this project also required connectors to be supplied by two companies. The competitor asked Hirose to act as a second source manufacturer, but this was difficult for Hirose, with the value it places on originality, to accept. Yamamoto recounts, “The Sales & Marketing Group was enthusiastic about the project, as we felt it would be important as a strategic move that would help develop a positive reputation among server manufacturers. However, there were many in engineering and management that weren’t in favor of the idea.”

Masakazu Nagata, a high speed technology specialist in the Sales & Marketing Group at the time, now a member of the Engineering Group, had experience opening up the high-speed connector market together with sales personnel, and recalls a sense of urgency—that there would be little potential for future business growth if the company didn’t take on the project. In creating the master plan for deploying the project within the company, Nagata, together with Production Technology Department engineers, went on-site to the competitor's U.S. connector manufacturing plant, confirming production processes and calculating costs based on diagrams. He created detailed simulations of investment and royalty amounts, allocation of profits, and the like, and closely evaluated worst case scenarios in which profitability would still be ensured. “I desperately wanted for us to move into the server market, which would serve as a driver for future growth.” Despite worries about what level of profit could be secured in comparison to connectors developed in-house, and the risk of reduced profitability, he felt that there would be no future prospects unless the company began delivering product, and the members of Hirose, including management personnel, reached an internal consensus to move forward with the project as a strategic move. This was the start of Hirose’s first second source project.

The start of a difficult project

The project began as a means to get a foothold in the server field, but it faced challenges on all sides – quality, delivery times, cost, and more. With regard to quality, there were problems in the designs of the connectors developed by the competitor, and the server manufacturer frequently asked Hirose to make improvements. In order to implement these improvements, project members had to visit Malaysia, where Hirose had its mass production plant, multiple times, and then bring these improvements over to the manufacturer’s plant in China. “Entry into the server field was a long-standing dream of ours, so we actively and rapidly deployed measures and countermeasures which normally should have been handled by our competitor, the first vendor,” explains Nagata. These efforts succeeded in earning the trust of the server manufacturer, which began engaging in direct dialogs with Hirose.

With regard to delivery times, as well, the competitor experienced delivery delays, and Hirose was asked to take care of the resulting shortfalls. Hirose used its own techniques to create a manufacturing line capable of stable production of large quantities of connectors. “We used streamlined facilities and highly efficient production processes to maximize yield using the expertise of both the Production Technology Department and the Manufacturing Technology Department. We used Hirose’s manufacturing fundamentals here, as well.” One of these key measures, from the sales side, was, from the very start of manufacturing, to manufacture more products than ordered, always keeping products stocked. “We set it up so that if our competitor wasn’t able to supply products, we could immediately supply necessary product. We took an inventory risk to maximize sales, and it paid off, enabling the customer to feel safe relying on us,” says Yamamoto.

On the cost front, the project discovered that as it continued to supply connectors, it was able to do so for less than the competitor. The competitor’s manufacturing processes included a great deal of waste, and it was even throwing away some precious metal materials. “Our high quality levels, delivery flexibility, and low cost were all recognized by the server manufacturer, earning their trust,” says Nagata. As a result, Hirose succeeded in being selected as a preferred supplier and obtaining information regarding the main connectors that would be used in next-generation servers. “If we hadn’t served as a second source, we never would have been approached to be a preferred supplier,” says Yamamoto. “We were now able to start the main connector projects we had been aiming for.” The hard work surmounting the difficulties encountered by the project had opened the way to new business.

Moving into the long-sought after server field by supplying original products

Hirose was finally able to launch a project supplying original Hirose products for use in the server field, but there were strong demands, especially, for further connector miniaturization. Specifications were not finalized for six months, and every week Takada received new requests from the server manufacturer. Ultimately the customer demanded products over 20% smaller than initially required, and in the course of meeting these exacting requirements Hirose succeeded in creating the world’s highest density connectors. “A major part of it was that the manufacturer was interfacing with us before internal designs had been finalized. We were able to get involved in server tolerance design, in areas such as PCB wiring methods and chassis design. The customer was surprised that a connector manufacturer would spend so much time on the mechanical design of sets,” recalls Takada. Project members frequently had video conferences with the manufacturers’ design teams, and competitors, unable to keep up, dropped out.

However, things did not always go smoothly. Even after the connectors were completed, the project faced various issues. It encountered one particularly high hurdle when installing prototypes. “In order to solve the problem of PCBs curling when heated,” explains Nagata, “we used the world’s first design that improved the mounting ability by moving parts within the connector while mounting. During the design stage this didn’t appear to present a problem, but during actual installation we encountered mounting defects.” Prototypes were brought to the Taiwanese manufacturer that handled mounting, but when mounting was performed, because the blades within the connectors moved, the manufacturer did not have a clear understanding of standards regarding connector placement on the PCBs, and they were unable to mount the connectors well on-site. “The server manufacturer understood the design, but it was the first time the mounting manufacturer had seen connectors like these. We explained to the mounting manufacturer several times that the advantage of these connectors was their floating blade mechanism, and they gradually came to understand,” says Yamamoto. In the end they succeeded in mounting connectors by partially securing them. “Mounting for prototypes was done in Taiwan, while mounting for mass production products was done in Shanghai, so I went with Yamamoto to both several times, gathering feedback and making improvements,” recounts Nagata of the difficulties the project encountered.

This wasn’t the only issue. Immediately before mass production they discovered a new problem that would only occur after connector mounting – the movable blade within the connector could pop out after installation. “Connectors were mounted in some of the servers which had already been shipped, requiring emergency reworking to address defects in products already in locations worldwide,” says Yamamoto. Hirose put its global subsidiaries into action, reworking several thousand server PCBs. “It was important to review and revise designs while at the same time rapidly handling the products that had already been shipped. We contacted our offices in the U.S., China, Malaysia, and Germany and asked them to implement countermeasures. We were able to complete these emergency measures in just over two weeks.” The swiftness of Hirose’s response in comparison to competitors earned it further praise, turning the problem into an opportunity.

These connectors were used in the successor (launched in July 2017) to the server manufacturer’s best-selling model, and business is progressing steadily. Of course, this position was in part made possible by the strategic efforts of sales and engineering, working together, but another major factor was that the each of the specialists in the “small company of smart people” did their own part to drive the project forward. “Generally speaking, sales and engineering each had their own roles, but because of our “small company of smart people” approach everyone’s work was led by a shared, solid understanding of the big picture. A major reason for the project’s success,” explains Yamamoto, “was that everyone, such as personnel in manufacturing sites, quality management departments, purchasing departments, and local sales and customer service personnel, shared a common objective and enthusiastically engaged in the project.” With regard to motivating the members involved in the project, Nagata says, “During the second source project we earned the trust of the customer, but we also earned the trust of those within Hirose. The fact that we had produced these results led by our strong determination also helped convince people within the company. The project’s goal was selection as a second source, and it became one of our success cases.”

Using the experience developed through the project

Business growth has already begun, with the server manufacturer inquiring about future projects involving multiple new connectors. However, given the “small company of smart people” approach, it does not plan to overextend itself, instead focusing on the development of next-generation products which can leverage the connector technologies developed through the project, as well as spin-off technologies. “We want to further refine our technologies and take on new challenges,” says Yamamoto. From an analysis perspective, the team says it is also considering support for the successor to PCI Express, the most common technology used in the server field. “Next-generation standards are also appearing, and high-speed connectors will need to further evolve to meet them. We are already discussing to what degree this can be done using current architecture, and what kinds of improvements can be used in areas where it can’t,” says Takada.

Nagata has already left the project to his replacement, but is using the experience he accrued to provide support for proposal activities for European customers. “From a global business perspective,” he says, “I am gathering accurate customer information to rapidly provide finely-tuned proposals. Doing so requires local super engineers, like Takada. I want to use this experience in various facets of business.” For Yamamoto, as well, this was the first time he had been involved in a project this large, with this many members. “It was a large project, with emails to customers being copied to over 50 other people. I felt a great deal of responsibility when communicating with others, and the project taught me a lot about how to provide support when working with customers and local personnel.”

The project opened to door to the large server market. Further market expansion will require that we keep an eye on the potential for working with other server manufacturers as we focus on resources in a form optimized for Hirose’s “small company of smart people” approach. The global market experience developed through the project will further expand Hirose’s share on the market for the high-speed connectors used in servers.