Globalisation is a key strategy for ST Engg. The objective is to deliver sustainable growth by penetrating new markets around the world. In 2003, the Group reached new milestones with the announcement of a new acquisition in the US and steady progress by its existing ventures.

In its globalisation drive, the US is a prime market for ST Engg where the level of defence spending has grown in recent years. The signing of the US-Singapore Free Trade Agreement in May further opened doors to trade between the two countries.

Closer home, ST Engg will also look for opportunities to expand in China through joint ventures and alliances in non defence areas, particularly in the commercial business of the Aerospace, Electronics and Land Systems sectors.

(I) A Balance of Capabilities

Globalisation will enable ST Engg to extend its global footprint by building a network of capabilities and operations to better serve its customers, who themselves are operating worldwide in some cases.

Technologies that the Group hopes to acquire include areas such as network-centric solutions in demand by modern armed forces and unmanned air vehicles and robotics, just to name a few. The Group will focus on acquiring businesses that support the leading prime US and local defence contractors in the countries it hopes to penetrate.

In the Aerospace sector, the Group hopes to grow its capabilities – be it through acquisitions, joint ventures or alliances – so as to tap the increasing demand for total aviation support. It has started winning business from low cost carriers through innovative packaging of offers.

In the Electronics sector, the focus will be in the area of network-centric capabilities as well as leveraging dual use technology for commercial and military applications. The Group is also looking to develop capabilities in integrated wireless communications, decision support systems, training and simulation, and advanced materials and sensors.

To grow its overall business in the Land Systems sector, ST Engg will focus on expanding its commercial business portfolio as well as overseas defence exports. This will balance the Group’s land systems portfolio, which has traditionally been skewed towards defence land systems, and provide a more balanced platform for future growth utilising dual use technology.

This strategy will leverage ST Kinetics’ expertise in customised vehicles to enter the commercial automotive market, focusing on niche areas as well as other subsystems areas. The Group’s investment in hybridisation technologies and solutions can be effectively applied in municipal vehicles, like refuse trucks and buses, to provide lower fuel consumption and the ability to handle the start-stop cycles of such vehicles.

ST Engg’s Marine sector benefited from the addition of VT Halter Marine to its network. VT Halter Marine made commendable progress in its first year of operations, and lends the Group an important platform in the US to grow its global commercial and naval newbuilding business.

(II) Growing its Global Presence

ST Engg’s globalisation strategy will be based on a combination of acquisitions, joint ventures and alliances. Another significant part of the Group’s globalisation strategy is overseas export sales.

ST Engg’s acquisition policy is based on identifying profitable and growing companies with strong management teams that offer a good strategic fit with ST Engg and its core business. The acquisition must be accretive to the Group’s earnings in the medium term and enable it to address new markets and/or broaden its capabilities. A well executed acquisition strategy will significantly contribute to the Group’s ability to sustain growth in the medium and long term.

At the same time, subsidiaries under ST Engg proactively pursue partnerships with companies that have complementary technologies or capabilities to gain a foothold in strategic markets.

ST Engg’s overseas export sales business leverages the strengths of the entire Group to penetrate major markets and regions. However, the different business sectors retain the flexibility to target specific markets either as prime or subsystem contractors. The Group expands through alliances or licensing arrangements with strong local companies as a flexible approach to tap into new markets. This enables the Group to develop leading products that penetrate markets worldwide.

For example, the Multi-Channel Multipoint Distribution System, which is making waves in Mexico by bringing cable programmes to about half a million homes, is expected to take off in other parts of the globe. Very Small Aperture Terminals (VSAT) and wireless communication products are also currently sold in more than 50 countries, and recent investments in Canada and China aim to extend the market reach.

(III) Important Milestones in 2003

In October, ST Engg announced the acquisition of Miltope through its US subsidiary, Vision Technologies Kinetics. This acquisition will further expand ST Engg’s business in the US market and help to reach its goal of becoming a major defence and engineering group. The acquisition will also give the Group access to Miltope’s customer base, which includes the US Department of Defense and major US defence and aerospace organisations.

In 2003, VT Halter Marine won contracts from the US Coast Guard, Pasha Hawaii Transport Lines, the Puerto Rico Port Authority and the US Commerce Department’s National Oceanic and Atmospheric Administration.

The recent Miltope and VT Halter Marine acquisitions will form a synergistic partnership that will enable ST Engg to serve its customers in the US looking for integrated solutions from a single trusted service provider.

This year, ST Engg significantly strengthened its presence in China with joint ventures in the commercial business of the Aerospace and Land Systems sectors. Both joint ventures are awaiting regulatory approvals. ST Aero and China Eastern Airlines announced a joint venture to provide commercial aircraft repair services from its facilities at Pudong Airport and Hongqiao Airport in 2004.

In April, ST Kinetics announced a plan to form a joint venture, Beijing Zhonghuan Kinetics Heavy Vehicles, with Beijing Heavy Duty Truck Plant to design, manufacture and sell specialised heavy commercial and industrial vehicles to the local and overseas markets.

In addition, ST Elect strengthened its presence in China with a new wholly owned subsidiary, ST Electronics (Sichuan), in Chengdu and a new subsidiary, INFA Systems, in Hong Kong. Further abroad, it took stakes in Cadmus Technology, a leading payment solutions and data management services provider in New Zealand, and PolarSat, a Canadian company based in Quebec.

(IV) A Place on the World Stage

ST Engg’s globalisation initiative is focused on securing medium to long term growth by expanding its capabilities and international networks. Going forward, new opportunities in the commercial arena are expected to increase the relative contribution of the Group’s commercial business. ST Engg’s journey to become a global enterprise has truly begun.