INZPECT TECHNOLOGIES, INC.

Responding to the Downturn in the Electronics Industry1

Introduction
The electronics industry is the main driver of the Philippine economy as it accounts for the
bulk of the countrys exports. It has consistently been a source of high-value original design
manufacturing (ODM) and original equipment manufacturing (OEM). Equipped with lowcost but highly-skilled labor and attractive incentives for export-processing zone locators, the
country was able to attract the worlds top electronic companies. The major players in the
industry consist of Filipino-owned subcontractors and multinational plants that cater to the
needs of their parent companies. Some known OEMs and ODMs located in the Philippines
are PSi Technologies, Inc., Ionics EMS Inc., Fastech Synergy Philippines, Inc., Philippine
Makoto Corp., and Precision Microcircuits, Inc. Most of them are large enterprises located in
export-processing zones and has acquired quality standards certifications.
From 2002 to 2007, the industry has experienced sustained growth in export performance.
However in 2008, the industry suffered as the financial crisis hit most industries worldwide.
From then on, the industry tried to cope and has finally stabilized in 2012.
Amidst this crisis, the Philippines small and medium enterprises (SMEs) that are strongly
linked to the local industry proved their resiliency as they explored opportunities that are
available within the country.
Among the SMEs that coped with the global downturn is Inzpect Technologies, Inc. an
original equipment manufacturer that primarily offers machines and electronic systems for
product inspection and quality control. It is located in Taguig City, Philippines. The company
started operations in 2003 with eleven employees and has now grown to 75 employees. Its
owners include two spouses, namely: Mr. Rolando and Mrs. Maria Teresa Laya and Mr. Jose
and Mrs. Digna Sumalabe. After working in several electronics companies, the owners
decided to put up their own business and ten years of operations bore witness to hard work,
expertise and entrepreneurship.
One of the key factors how Inzpect was able to survive the economic downturn in 2008 is
new industry penetration. Instead of solely catering to the needs of semiconductor companies
which felt the brunt of the crisis, it expanded its product and service lines to industries that
need automated quality inspection instruments such as the food and pharmaceutical industry.
In effect, Inzpect has opened its doors to a lot of opportunities as well as strategic challenges
that expanding businesses are usually faced with. These are market penetration, quality
management systems, management control systems, corporate finance and regional
expansion.
This case allows the readers to (a) witness the making of entrepreneurs and an enterprise, (b)
assess the condition of the business, (c) situate the company within the industry, and (d) come
up with key considerations that owners must deal with on a strategic point of view.

(This case was written by Benel P. Lagua and Donna B. Puzon as part of ASEAN Project No.
IND/SME/09/003/REG, Formulation of Case/Industry Studies to Develop ASEAN Baseline and Benchmarks
for SMEs in the Electronics Industry in the Philippines, Malaysia and Singapore. Accompanying this case is an
Industry Note on Electronics in the Philippines.)
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Overview of Inzpect Technologies, Inc.

The spouses Mr. Rolando and Mrs. Maria Teresa Laya and Mr. Jose and Mrs. Digna
Sumalabe have been business partners who have seen the successful run of their nearly 10year-old-business, Inzpect Technologies, Inc. Through a combination of technical skills in
design and engineering and a network of connections built from their previous jobs, they
have seen Inzpect grow from a 7-man operation to as high as 100 employees.

As the company name suggests, Inzpect is engaged in the design and manufacture of
machines and electronic systems involved in product inspection and quality control. The
machine automation output of Inzpect are custom-built to assist in performing tasks difficult
to handle manually on a reliable and consistent basis such as finding any small product defect
on high speed production lines, capturing and recording complex identification information
and guiding reports.
Inzpect is an original equipment manufacturer. It customizes machines to meet customers
electronic and systems requirements. Its mission is to serve their customers with utmost
perfection with their completed projects and give them absolute satisfaction with their
services. The company vision is to be the best in machine automation and the foremost in
systems integration.
The company acquires clients through the networks the owners have established through the
years. Their experience of working in various electronic companies has been most helpful in
building this network. They also attend trade exhibits to showcase their products and
services. Having the right contact persons among their client companies is critical to getting
the deal done. These contact persons should be the ones in-charge of deciding for
procurement.
Its services include:
1. Machine design and manufacture of inspection machines, laser marking machines,
tape and reel, test handler, PBC loader, flame off machine, post tape inspection
machine, tape to tape reworking machine, detaping machine and other customized
machine;
2. Vision system development and integration which includes optical character
recognition, optical character verification, wafer ID reader, 2D code reader, 1D code
reader, mark inspection, trim inspection and other customized vision system;
3. Machine upgrade and rehabilitation for new mechanical system and new control
system (PLC/PC based);
4. Ultra-violet curing application, development and integration for adhesives, inks,
epoxy and varnish;
5. Laser capability integration to existing machines; and,
6. System integration that provides automation to manual processes.
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Inzpect is an authorized Philippine distributor of:

1. Automation Solution Provider (ASP) of Cognex Vision Systems, Inc.
2. Fusion UV Systems, Inc.
3. TMS LITE LED Illumination Solution Partner
4. EIT UV Instruments Radiometers
5. Synrad CO2 Laser System
6. Sensor Instruments
7. Destaco Workholding Solution Toggle Clamps
8. Robohand, Inc. Automation Accessories
9. Fastech
10. Excem AC Motor, DC Motor, BLDC Motor
11. SAMICK Precision Ind. Co. Ltd. Shaft and Bushing
12. Rame-Hart Instrument, Co.
The main product of Inzpect is the vision system that utilizes the products and technology of
Cognex Vision Systems, Inc. Cognex is an American-based company which provides a
complete product line of vision products, software, sensors, ID readers and inspection
technology used to read and inspect codes, detects items, sort products and a number of
inspection processes in various stages of manufacturing. Inzpect installs Cognex vision
systems and calibrate it to meet the quality control and inspection requirements of their
clients. Its system is developed through vision engineering.
Their long-term partnership with Cognex started when a client asked for products from the
said company. Mr. Laya searched the internet and came upon the site offering this product
and is located in Singapore. Cognex required Inzpect to buy a starter kit and to send someone
who will undergo the training in Singapore. One of Inzpects pioneers, Mr. Dennis Soriano
was sent to the training. Thereafter, Inzpect sends an employee to undergo the training every
year and they also attend the General Membership Meeting.
Inzpects machine manufacturing process adopts the following phases:

It takes 9 to 12 weeks for a machine to be developed and the installation takes time. They
provide a one-year warranty on their machines. After which, they may be called up for
maintenance or repairs. The bulk of their earnings are mostly from machine manufacturing
and customization.
Because of the customized nature of original equipment manufacturing, Inzpect must be
prepared to be in constant dialogue with customers because it takes time to perfect the
machines. The installation process could take long and customers may become impatient
during the process. Inzpect provides continuous on-site personnel operation during this
development stage. Once the machine is finished, the company ends up with a generally well
satisfied clientele.

Brief History
Mr. Rolando Laya and Mr. Jose Sumalabe met as co-employees at Intel in 1988. Mr. Laya
took up Bachelor of Science in Electrical Engineering and graduated with a degree in
Electronics Technology at Technological University of the Philippines-Taguig. Meanwhile,
Mr. Sumalabe took up Computer Engineering at the Meralco Foundation Institute. Both of
them worked as electronic technicians and eventually as supervisors. They spent seven years
working in Intel wherein they gained both their expertise and network.
In 1995, they left Intel to work for its machine supplier, Ever Technologies. Evertech was a
Singaporean OEM (Original Equiment Manufacturer) company which established a sales
office in the Philippines. During their stay in Evertech, they both witnessed firsthand how
machines were made. Eventually, Evertech decided to float its shares publicly. At first, the
principal owner took it as a good sign but when the owner was bought out, a management
takeover took place which displaced the original Singaporean owner.
Meanwhile, both Mr. Laya and Mr. Sumalabe were contemplating on putting up their own
company. They wanted to make small machines that Evertech does not produce since the
company only produces big machines. The small machines need to be imported from other
countries. At the point, both of them saw the business opportunity on such operation.
Eventually, Mr. Laya transferred to Semateq while Mr. Sumalabe worked for Autosys. After
a year, Mr. Laya joined Autosys. Autosys was initially an electronic parts trading company
but with the expertise of both Mr. Laya and Mr. Sumalabe, they set up a service division to
take advantage of their skills.
After working together in several electronic companies, both were confident that they can put
up their own company because they already know how it is run. They already have a wellfounded network through their former co-employees in Intel who also worked for other
semiconductor companies.
On top of this, their spouses, Mrs. Maria Teresa Laya and Mrs. Digna Sumalabe share the
same expertise too, as both of them are electronics specialists as well. Mrs. Laya has a
bachelors degree in Electronics Communications Engineering and another bachelors degree
in Technician Teachers Education. Mrs. Sumalabe took up an accounting course and
eventually became an electronics technician herself.
So in 2003, the four of them finally decided to put up their own business.
With this decision, Autosys closed its service division and as a separation benefit, both of
them acquired half of the equipment in the service division.
They found a stall in FTI Complex, Taguig, Manila and entered into a three-year contract
with the stall owner.
Along with seven pioneer employees, the owners gave birth to Inzpect Technologies, Inc. on
8 May 2003. It coincided with the birthday celebration of Mr. Laya. Since the owners need
more funds to start the business, they borrowed from their relatives and one of them is Sally
S. Lumanlan who was an overseas Filipino worker that time. Another is Mr. Layas brother,

Roger Laya. They started with a seed capital of P100,000 cash and several equipment that
they acquired from Autosys.
The company was registered with the Securities and Exchange Corporation with an
authorized capital stock of P1 million. It was divided into 10,000 shares at a par value of
P100 per share. The capital subscription was divided as follows:
Table 1. Inzpect Technologies Inc. Capital Stock
No. of Shares
Amount
Name
Subscribed
Subscribed
Rolando Laya
750
75,000
Maria Teresa Laya
250
25,000
Jose Sumalabe
750
75,000
Digna Sumalabe
250
25,000
Regina Masilang
500
50,000
Total
2,500
250,000

Amount
Paid
37,500
6,250
37,500
6,250
12,500
100,000

As a registered corporation, it complies with the Corporation Code of the Philippine under
the Securities and Exchange Commission, the National Internal Revenue Code under the
Bureau of Internal Revenue and the local regulations of the City Government of Taguig. For
the financial reports, it follows the Philippine Financial Reporting Standards for Small and
Medium-Sized Enterprises.
During the first six months of operations, the owners plowed back all earnings in the business
and prioritized the payment of their employees salaries. The spouses Sumalabe were the
ones who mostly financed the business because the spouses Layas assets were invested in
real properties.
Mr. Laya managed marketing and sales while Mr. Sumalabe focused on research and design.
Mrs. Laya handled the personnel while Mrs. Sumalabe managed the finances. The pioneer
employees took charge of design, service, procurement and accounting.
During that time, Mr. Laya said, dapat talaga malakas loob mo. Ang maganda non, alam ko
na kasi ang ginagawa kaya hindi na rin ako nahirapan. Dapat lagi kang may baon dahil
hindi mo alam baka pabagsak na yung isa so dapat may back-up ka. (You should remain
steadfast. The good thing is that I know what I am doing so it wasnt that difficult for me. You
should always have a reserve referring to business opportunities because you never know
when one will go down so you should always have a back-up.)
During the same year, their workforce grew from 11 to 30 employees. This signaled the need
to find a new location to accommodate the increasing workforce.
In 2005, they bought a 105 square meter lot in Taguig City for P1.2 million. Six months after
that, they acquired another lot nearby. It took one year to finish the building on the first lot
and in August 2006, they transferred to their four-storey office at C5 Service Road,
Pinagsama Village, Taguig City.

Organization
Mrs. Laya took charge as Inzpects personnel manager. She experienced teaching in a
technical institute so training and managing Inzpects personnel came out naturally with her.
Inzpect have grown from 11 employees in 2003 to around 75 employees in 2012. During the
peak period, it reached a total of 100 employees.
Inzpects workforce including the supervisors is mostly young. All employees are hired at the
entry level. Most of them started while they were still rendering their on-the-job trainings for
five months as part of their curriculum in college. Although student trainees are not required
to be compensated, Inzpect pays them 75% of the legislated minimum wage. They get most
of their trainees from Technological University of the Philippines. After the training, the
trainees may be recommended by their supervisors for probationary employment. This takes
five months and thereafter, they may be considered for regular employment. For promotions,
they utilize a performance appraisal system which used to be an annual appraisal but is now
implemented on a semestral basis.
Inzpect once tried hiring a supervisor from outside. However, the employees felt alienated
because they have a different training base. Eventually, that supervisor left and that started
their policy that all employees should be hired on an entry-level basis.
When asked about employee retention, Personnel Manager Mrs. Laya remarked, Lagi ko
iniisip na itong mga taong ito ay ginagamit lang kaming stepping stone kaya hindi ko
inaasahan na mag-stay lahat. Hindi naman kami malaking kompanya para makapagbigay ng
napakalaking benepisyo. Alam namin na ang pangangailangan ng tao ay talagang lumalaki
pero hindi naman namin kaya ibigay. (I always think that these people use us as a stepping
stone thats why I dont expect all of them to stay. We are not a big company to be able to
provide huge benefits. We understand that peoples needs grow but we cannot give
everything to them.)
Inzpects owners value their supervisors the most because they are critical to the companys
operations. Most of those who have left were employed by large companies.
Inzpects salary is lower than other companies, but their employees find satisfaction because
their work is very challenging and they have built a strong culture of teamwork which is hard
to find in relatively large companies. To inspire teamwork, the company provides teambuilding activities such as sportsfests, company excursions and Christmas party. The
employee benefits include health insurance, transportation allowance and quarterly bonuses.
One unique benefit that employees enjoy most is the free meal during lunch and in the
afternoon. Inzpects new building is still under construction and they plan to put up three
floors wherein the roof deck will serve as a board and lodging for employees who will render
overtime.
Inzpect has a funded, non-contributory deferred benefit pension plan covering all 31 regular
employees. Retirement costs are actuarially determined using the projected unit credit
method. This is accounted as retirement fund payable.
Over the years, Inzpect has trained around 200 people already. Mrs. Laya admits getting
weary of training people but they need to do it because they are not assured that their
manpower will stay with them for a long time.
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