The STI Acquisition Repositions NOTE For Long-Term Defense Programs, with NOTE CEO Johannes Lind-Widestam

Defense electronics is pulling the EMS industry in a new direction, and the companies that move early will shape the next decade of the supply chain. I’m joined by Johannes Lind-Widestam, CEO of NOTE to unpack what’s really behind their latest moves and why the UK has become such a central piece of the puzzle.

We get into the STI acquisition and how it strengthens NOTE’s position in the UK defense supply chain, expands geographic coverage, and adds specialized sites that win in distinct niches. Johannes also shares the story of adding former Chief of the Air Staff Sir Michael Wigston to the board and why board-level defense experience matters when customers are making long-term manufacturing decisions for security and defense programs.

From there, we widen the lens to the broader electronics manufacturing services market: where order coverage is improving, why communication and industrial look healthier, why medtech is softer, and why greentech can swing customer to customer. We also talk supply chain risk in plain terms, including memory constraints, AI pressure on foundry capacity, potential PCB allocations, pricing, and how geopolitical shocks can ripple through logistics and materials. Finally, we tackle regional strategy and growth beyond 2026, balancing organic growth targets with disciplined M&A.

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Transcript

Welcome And Deal Context

Philip Stoten, Journalist and Podcast Host 0:04

Hello from my house to yours. Welcome to EMS at sea level. Today I am joined by Johannes from Note. Johannes, always a pleasure to chat. I am fascinated by what's going on in the industry at the moment, particularly in the defense sector, and your results caught my eye. You finished the quarter with the completion of the STI acquisition. That closed around the 20th of March. That's clearly a positioning thing in the uh defense, super important in the UK defense supply chain. Tell me the thinking behind that and kind of where that repositions note.

Johannes Lind-Widestam, CEO, NOTE 0:41

I think it does it in a few different ways. Say that they are selling into Sweden or Finland, and that we can also facilitate local manufacturing for them. So I think it's um it's going to be a very interesting journey to see how we how we can utilize the footprint to help our new customers to STI to grow their business. Yeah. The kind of logic that we have.

Philip Stoten, Journalist and Podcast Host 1:44

Yeah, it makes a lot of sense, Johannes. And uh it feels like you've been a fan of the UK in terms of acquisitions, um, certainly pro post-Brexit. How many facilities is that you have now in the UK? How many factory sites?

Johannes Lind-Widestam, CEO, NOTE 1:57

Uh currently we have six sites, and and uh and uh they are are um there some of them are quite uh small. So so it's uh it's um it's it's it you can argue if we have too many sites or not, but uh everyone has its own position, and and and I mean both STI and Kaston, if you take the last two acquisitions that added three sites, they are very uh unique in their offering and and they're very successful in their own niches, if you put it like that. And and that means that they are those three are very easy to to to um to uh justify. They have also a bit of a wider geographic spread. When when when STI has uh factories outside of uh or southwest of London, down uh and and also up in Manchester while Caston is in in uh in Wolverhampton or Birmingham. So it's uh we are moving a bit away from London, where we have the three all the note sites are quite close to London area. So it's um it gives us a better geographic coverage and and and also much better customer segment coverage than we had in the past.

Defense Push And Board Upgrade

Philip Stoten, Journalist and Podcast Host 3:03

Yeah, and when we focus in on defense strategy, uh Node recently joined SOWF. You've also secured Nordic defense contracts, but you've also added uh Michael Wing Wingston, the former chief of airstaff, to your board. That's a really interesting addition, and I I it feels like a very strong commitment to the sector and a view that this sector is something you're in for the long term and you wanna you want to be a very significant part of the picture. Tell me a bit about that strategy and how you successfully got Sir Michael to join the board.

Johannes Lind-Widestam, CEO, NOTE 3:37

Yeah, that is that was an interesting, uh, interesting story. And it it comes with uh it was one of the of the of the advantages that we got out from the STI acquisition. He was an advisor to STI and and I met with him the the days before we closed, and then I realized that uh he was he was not only a highly decorated uh person and with a high all rank with a lot of connections, he was also very, very nice and and to me very knowledgeable person. And I thought that this will be a very good addition to the board, and and this will help the board understand how how the defense businesses are are kept together and what you need to do to be strong, and so on. So I felt that we could not only continue with Sir Mike in his old position but also also add his knowledge into our our our board of directors. And and uh luckily he wanted to to join and and the board uh or the election committee uh thought it was a good idea to do it, and also the AGM approved it. So very happy. Yeah, it went very, very fast, I can say. I had my first meeting with with Sir Mike on like like March 18th, and then uh a month later he was elected to the board.

Philip Stoten, Journalist and Podcast Host 4:48

So that's he's a board member. Yeah, yeah. Yeah, it feels like you're building a nice diverse board and you're building it quite organically. There are there were other additions um recently, but that's something you've been very thoughtful about recently.

Johannes Lind-Widestam, CEO, NOTE 5:01

Yeah. Yeah, I also thought think the board has been searching for for having someone with EMS background for for some years. So you can say ever since I started as a CEO. And um now when when Jan uh joined us, he he has his own background from from Kitron in in some 15 years ago. And and he and I were colleagues at that time, so so I know him fairly well from that time, and and he's a very smart and and and uh and experienced businessman uh with a lot of other experiences outside of UMS. But also to add that experience in into the board is also adding some new new aspects to their discussions, and I think that's very, very, very important.

Market Recovery Across Key Segments

Philip Stoten, Journalist and Podcast Host 5:45

Yeah, it's hugely valuable indeed. And as we broaden out from the defense sector, which which feels like it's a very robust sector, but it feels like it's a a sector that's got lots of runway moving forward. If we look at the other sectors, a lot of the other sectors are quite challenged at the moment. How do you see those? And do you see any green shoots of recovery in any of those other sectors at the moment?

Johannes Lind-Widestam, CEO, NOTE 6:10

I think we we see uh I mean I I I I think I see that we we we uh we see that orders or order coverage is increasing again. I would be uh expecting a tighter supply market in the in in the coming uh quarters, uh, and that means that uh we get better visibility in in what the customer wants because they place longer orders. What we see then is that uh communication is is an area that I am expecting uh a recovery in in the coming uh quarters. Uh and for for many reasons. One is of course that we see the order coverage is increasing, and that uh that to us is is the most uh uh what you call it uh easy way to look at it.

Philip Stoten, Journalist and Podcast Host 6:53

Yeah, solid dot to bill.

Johannes Lind-Widestam, CEO, NOTE 6:55

Yeah, yeah. And uh also I think in in the industrial segment we see we see the same things. It it starts to build up. Uh we are uh in so those two sectors I'm quite uh or segments I'm quite um uh comfortable uh in. We have also said that MadTech will we'll see a quite slow second quarter. We we said that on on the call, and and that is also based on the order book that we have uh for for that. Uh uh while Green Tech is uh is a bit uh more, it has been more uh more um uh how do you say fluctuating, and I think that is that is a good thing. Um I don't think it's gonna it's gonna shrink. I think it I I've said I I expect it to be flat uh flattish or something like that, and that means that there will be rather big swings between the customers, but in the in in the in in the overall picture, I I think it's gonna going to be uh yeah, around zero, maybe a few percentage up or so when we close. But uh I don't see a very strong trend there. I think the trends security and defense super strong. Uh communication, I would expect that to be uh strong. Uh and then in industrial, I think we will have a growth in that, and and the order book for for the second and third quarter and uh or second quarter and the rest of the year also indicates that for the other two Mentec yes a bit weak, but it's our smallest segment at the moment, and then yeah, and Green Tech Green Tech had a uh I should say strong year last year compared to the year before, even though I think it's it's still on a weak level, and and we will see there's a lot of customers in that segment that can benefit from the higher oil pricing and so on, and and we will see the buttons, yeah.

Memory And PCB Supply Risks

Philip Stoten, Journalist and Podcast Host 8:41

Yeah, the energy shock with respect to oil pricing is a challenge for everybody, and that's pretty much even. You mentioned in that last answer uh the supply side and some of the challenges in the supply chain side. We've heard a lot about the memory issues, and AI is obviously sucking a lot of the oxygen out of the room with respect to uh foundries. How do you see that? And how are you? You've been through supply chain crisis before and quite recently. How do you mitigate that challenge as you as you see it on the horizon?

Johannes Lind-Widestam, CEO, NOTE 9:14

I think the only way to do it is to is try to have as as open dialogues with your suppliers as you can and also with your customers, and try to bring the three of us in the same room and and discuss solutions because there will be there will be shortages and there will be gaps in the supply chain when it comes to memories. I also think there will be in other other areas. It's it's a bit tricky to say. I I heard some someone who was saying that uh from the PCB industry that they are expecting to see uh to see uh uh allocations and and there's supposed to be price increases, and I think we have started to see that from some of the suppliers that that the pricing is adjusted upwards. This is to me a an area where where um where where uh the the US-Iran uh conflict might uh impact both from it from a transportation point of view but also from from uh from a raw material supply into the into this. So it's um I would say that that that will also uh face some some issues, and then we what normally happens is that all these allocations start at one end and then it spreads out through the supply chain because when something is starting to be a bit um uh or thin in supply, then everyone is a bit scared and they start to over order and and suddenly you have uh created your own your own understanding. So we will see what happens.

China Slowdown And Regional Options

Philip Stoten, Journalist and Podcast Host 10:37

But yeah, it becomes like the toilet paper crisis if you're not careful. Everybody talks themselves into a problem. You um we already talked a bit about the UK footprint and the significance there. When I look at the other regional performance, you had a good year in Estonia, the plant grew there, Bulgaria held nice and steady, China was down quite substantially, given the current geopolitics and tariff environment. Where does that fit into your long-term strategy and is it something that you think will bounce back?

Johannes Lind-Widestam, CEO, NOTE 11:10

I think China China is a bit of a of a challenge. And and and the reason is that if you it has transformed in into something that it wasn't. I mean, if you go back 10 years, everyone wanted China to be the producer of low-cost uh goods into Europe, and and and they had a very strong position in that. And I often say when I started at Note, it was by far our largest factory. Now I think it's done after the acquisition of STI, it's our sixth largest factory, so it's it's a lot of things has happened. Um but if I look at at um the outlook for the site, I mean it it's it's it's a bit uh I mean China has a bit of oversupply, in my opinion, when it comes to to electronic manufacturing, and that means that there is a there is a fight for for for the business. And and therefore I think it's uh uh our our growth projections are not very strong in China. So I said that I expect China to to be lower the full year of 26 compared to 25. And that is because we don't we we we we don't see that we have a bounce back there. And and what happens in the future in the in the longer term, I think there is um there's a few things to keep in mind. I I think for us, our our factory in China is still profitable, it's still uh reliable, it's still uh we still uh have have a strong management team and and loyal uh staff and so on. So we we think it's a nice and well functioning site. So so we we uh we are expecting it to see to continue to perform well under uh the under the volumes that we see. But um yeah, we we we do what we can to to try to try to uh bounce back if you put it like that on the top line. So this but it's yeah, it's not it's not great. Yeah, it is, it is. And and and and uh we have been struggling the last few years with with with winning new large contracts in China, and that and that uh that we see the effect of now.

Philip Stoten, Journalist and Podcast Host 13:10

Yeah, and your your other sites become more and more competitive, and you become more and more efficient in those, and you invest in uh places like Toursby, which um you know makes that even even more competitive. Do you feel there are other regions that you need to be thinking about? A lot of people are starting to build out footprints in India, obviously the Americas, um, with respect to tariffs and geopolitics. Is that something you just keep a uh watchful eye on at the moment?

Johannes Lind-Widestam, CEO, NOTE 13:38

I think I think uh geographic coverage is something that we are after. I mean, we have talked about Germany quite a lot over the last couple of years and also US. I mean, I mean, we we still believe that, for example, Germany is a is a very interesting uh industry. We were a bit uh afraid of it, if I if I may say from say from from uh from mid of last year and then and throughout the fall, because we uh we felt that the automotive industry would would be suffering a lot and and that the emasis that were were heavy into that would start to chase other business. So we were a bit uh nervous and we we were in some processes to actually to acquire businesses and then we just uh withdraw from from them. Yeah. Because we didn't want to buy a problem if you if if if you put it like that. Now we can see that it's um it is starting to bounce back uh a little bit. So so it's uh so so I it it's not I don't expect it to be that uh bad as we were were uh fearing at at that time. So so I mean in cap reported that it was not uh was it was not it's it was not very very strong, but it was not weaker than it was, it was fairly aligned. We will see about Hansa now they have the big BMK acquisition.

Organic Growth Formula And M&A Discipline

Philip Stoten, Journalist and Podcast Host 14:55

The BMK acquisition, yeah. Yeah, that's quite substantial and a big integration for them coming up. Um last question when you look at growth beyond 2026. Obviously, with respect to 2026, people can refer to your guidance there. But when you look beyond that, do you think organic and MA opportunity or what what's your strategy there? You've you've done some very successful MA's over the last few years.

Johannes Lind-Widestam, CEO, NOTE 15:20

Yeah, I think it's I mean, we are we I often say that we should do one acquisition a year at least, and and some years we do too, and and some we we don't do. But uh since I started we have done seven acquisitions and and I've been here seven and a half years, so we we're keeping pace if you put it like that. But I think that the interesting part is that if you read the and and try to get yourself in involved in in how the defense industry is going, what we have tried to do is to say, okay, with the STI and with the growth projections we we see we we are expecting our our security and defence uh uh will be roughly 30 percent. I think we said 25 to 30, and if it goes well closer to 30 for the rest of the year. But also, since that is the area that is growing, my expectation is that in at the end of this year it will be closer to that level. If you then see that this segment growth growth somewhere 20, 30 plus percent, then you get six to nine percent purely mathematically as a group growth from this area. So and I think that there is that there is possibility to grow the rest of the of the segments at least five percent a year. So if you then add it together, I think we have a we have a formula that will take us to to a bit uh above the 10 10 10 percent in into closer to 12 to 15 percent organically. So I think there is we have all the all the possibilities to to to to do a very good journey by ourselves. Then of course acquisitions is attractive. It's uh I mean now we paid a pre what we say quite high multiple for STI on the 25-year number. If I look at the projections of 27, it looks very, very attractive. The same as as when when when Keatron announced the acquisition of Delta Nordics. I mean it was quite expensive if you look at the current trading, but if you look two years ahead, maybe maybe a fair evaluation or even maybe a good deal, yeah. So you have to see what is the what is the projections, what is the order coverage, what what what is yeah, how secure or how comfortable can you feel with with what will happen in the coming say 12 to 24 months from an acquisition because that that that is also important. So if there is possibilities in other regions, we will of course jump on them as as as well. But um yeah, it's yeah, it's a complex equation. Yeah, and and our our ambition now is to is to get back into into decent growth organically. That is our our by far our our highest uh ambition for for this year, and that will give us some how shall you say uh peace to to to continue to to to operate in the way we do. So we have um and me we have struggled there, so we we need we need to prove that we that we that we are we are the growth uh engine that we have have seen over the last uh say seven, eight years. Uh yeah, yeah, yeah.

Philip Stoten, Journalist and Podcast Host 18:15

And also continue that efficiency and that performance in terms of eBITAR and uh all those other numbers. Um congratulations again, um, especially on the defense stuff and the uh addition of the board team there. That acquisition seems to have brought more than just a company to you. So I think that's hugely valuable. Um and thanks so much for your time today, and I look forward to chatting again soon. Thank you. Thank you.