Ad
Ad
Ad
Ad
Ad
Ad
Ad
Ad
Electronics Production |

Several trends to develop in the EMS and OEM business

Based on information from research studies and consulting engagements several trends will develop over the next five years in the EMS and OEM business. The availability, price, and environmental impact of oil will play a larger role in future business strategies.

The record price of oil is forcing OEM companies to rethink their business model, especially where products are manufactured as well as the extent of their supply chain networks, predicts TFI. TFI also believes that carbon emissions will play a vital role in customer buying decisions. A product will be judged not only on its cost, but on carbon emissions it produces. One important contributor is the average 12,000-mile supply chain that many manufacturers rely on. Most OEM companies manufacture in China and distribute these products in North America and/ or Europe, reports mbtmag. In five years, TFI expects the global electronics manufacturing to be more evenly balanced than today. Regional manufacturing will replace the massive outsourcing strategy. Although still important, low-cost labour is not driving sourcing decisions as strongly as it did five years ago. OEM’s will pay attention to an array of factors, such as materials, labour and direct overhead, but also border security issues, infrastructure, currency fluctuations and labour force capabilities. However the demand for manufacturing is overtaking actual supply. As a consequence EMS-providers can charge more and employees can demand higher wages. Corporate costs due to regulations compliance and other expenses are also rising faster than elsewhere. Mbtmag said since TFI began tracking costs in China several years ago, these costs have more than doubled; to say China's cost competitiveness may loose advantages. Vietnam, India or Western China however have neither infrastructure nor capacity to replace industrial Eastern China as a low-cost location. TFI predicts that OEM companies will arrive at “the best “low-cost” region might be whatever is least expensive nearest the end market”. There would be Mexico for North America and Eastern Europe for Western Europe. When the end market is Europe, total landed costs in Romania are equivalent to China, for example, according to mbtmag. Top-tier EMS providers have the global capacity to benefit from the regional approach. Small EMS companies can stop moving operations halfway around the world as the industry's obsession with China wanes. Mid-tier EMS companies may be too small to win big OEM work that requires a regional strategy and too big to compete in smaller niches. The EMS industry is expected to continue to consolidate and much of it may come from mid-tier companies joining forces or getting acquired by top-tier players.

Ad
Ad
Load more news
March 28 2024 10:16 am V22.4.20-1
Ad
Ad