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Electronics Production | March 14, 2008

EMS providers put pressure<br>on mobile headset ODMs

ODMs that have dominated the market for years now have to face strong competition from EMS providers. This led to a drop in the shipment of mobile headsets in 2007.
The aggregated shipments dropped by 18.5% to 103.8 million units in 2007 (PY: 127.3 million units) states a report from iSuppli today. This has also triggered a drop in production of wireless headsets, which are down to 9% in 2007 (PY: 12.9%).

EMS providers on the other hand established a 21.1% share in the global shipments of mobile phones in 2007 (PY: 16.6%). The report states plainly, that ODMs had to yield a big manufacturing share to EMS providers.

The report also states that the sharp decline can mainly be attributed to the poor performance of Motorola in the mobile headset market. Taiwan based Compal Communications (CCI) has now become the largest global ODM for mobile phones. Both companies – Motorola and CCI – entered into a strategic partnership in 2004. Motorola is CCI’s largest OEM customer with 91.3% of its annual mobile phone shipments in 2007.

ODMs also have to counteract fierce competition from EMS providers. Foxconn and Flextronics have increased their capacities through strategic acquisitions and are now able to leverage benefits to their customers. The biggest problem for ODMs is the over-reliance on a single customer. iSuppli suggests to increase diversity and higher design provisions. ODMs should also concentrate on currently underserved segments, such as CDMA phones, smart phones and GPS phones.

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