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Teradyne, Inc.

Brian Amero Corporate Trade Compliance Manager. Teradyne, Inc. Case Study – Assessing and Managing Risk in the Global Marketplace May 2, 2006. Who We Are.

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Teradyne, Inc.

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  1. Brian Amero Corporate Trade Compliance Manager Teradyne, Inc. Case Study – Assessing and Managing Risk in the Global Marketplace May 2, 2006

  2. Who We Are • Teradyne is a leading supplier of Automatic Test Equipment used to test complex electronics used in the consumer electronics, automotive, computing, telecommunications, and aerospace and defense industries. Teradyne: Ensuring you can rely on electronics critical to everyday life.

  3. Where our employees are located 500 people in Europe 2500 people in the US More than900 people in Asia Headquarters in Boston 80 people inCosta Rica 4,000 employees worldwide ~ 40% of employees outside US

  4. Where is our revenue by region Europe 17% US 23% Asia/PAC 58% ROW 2% 1.1B Sales in 2005 77% of Revenue outside US

  5. Our Customers and Their Products Teradyne tests billions of devices each year that make electronics work.

  6. Trade Compliance Regulatory Environment • Changing governmental regulations • $ Penalties are rising • Variation in regulations • Multiple US Government Agencies • Complex trade regulations country by country • Enforcement of regulations increasing • Post 911 • Information being shared electronically among government agencies

  7. Trade Compliance Risk The challenge: • Limited trade expertise in all global locations • Limited resources/IT tools • Foreign business practices can be inconsistent with corporate culture of compliance (SOXX) The approach to manage the challenge: • Identify and validate local expertise – deep skill • Establish informal network, benchmark • Remotely oversee operation – hands on • Once processes established, audit

  8. Case Study - Problem Teradyne needed to lower manufacturing and service costs as well as support customers in the fast growing market of China • Lacked adequate understanding of China • Multiple government agencies • Regulations in Chinese • China’s regulations were quickly changing as WTO guidelines implemented • Rules varied based on Region/Port • Multiple Teradyne business units involved • Manufacturing for domestic China market - Customer driven • After sales support - Customer driven • Manufacturing for export - Cost driven • Applications engineering - Cost driven

  9. China Example Can Teradyne manufacture products in a single China location, supporting the domestic China market and export market while minimizing Duty (~8%) and VAT (17%)? • If unsuccessful, any cost savings may evaporate • The short answer was YES……… • However the real answer required a detailed understanding of China’s import/export rules

  10. China Example Location options included Domestic China Export processing Zones [ex. Jin Qiao North Zone best for domestic sales, Jin Qiao South Zone required 100% export] Free Trade Zone Regulations, benefits and restrictions varied widely by location No single source had a full picture view. Conclusion: Two China locations were required to meet Teradyne’s business needs

  11. Lessons learned • Establish a clear understanding of your business requirements • Look forward into the future. Minor requirement changes may result in different decisions • Understand “why”? Are there multiple business drivers • One solution may not meet all requirements • Establish a detailed understanding of your choices. • Ask the same question until you receive the same answer from multiple sources • Network and Benchmark • Seek out experts – deep knowledge and understanding

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