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By Adam Pick, iSuppli Electronics Production | November 20, 2007

Electronic Manufacturing Capacity Undergoes Global Rebalancing

In the early 2000’s, manufacturing capacity abruptly shifted from the high-cost regions of North America and Western Europe to the low-cost nation of mainland China. However, in the second half of the decade, iSuppli Corp. is tracking a new series of evolutionary and strategic steps for electronics contract manufacturers that focuses on other factors beyond labor cost when it comes to selecting a location for production.
That said, the regional diversification by electronics manufacturers can be attributed to other China-centric factors including a mobile workforce, inflation, taxes and the rising costs of transportation due to soaring oil prices. Ultimately, the emphasis has greatly shifted from labor costs only to the total cost of ownership, which considers managerial resources, organizational structuring, manufacturing competencies, intellectual property and, of course, logistics.

A quick analysis of the recent capacity expansions announced by leading Electronic Manufacturing Service (EMS) providers, Original Design Manufacturers (ODMs) and OEMs reveals a number of new trends impacting the global electronics manufacturing business.

Table 1: Reported EMS/ODM Capacity Expansions, 2005-2007



The first trend is the rising penetration of emerging regional economies, a factor that continues to be critical for many EMS and ODM providers. As iSuppli has been reporting for several years now, India’s domestic market has attracted Foreign Direct Investment (FDI) by several leading providers including Foxconn, Flextronics and Jabil.
More recently, however, Russia has become a focal point for electronics manufacturers. While television specialist Vestel A.S. has been building its ODM/Own Brand Manufacturing (OBM) presence in Russia for some time, Foxconn Electronics Inc. in August announced a $50 million investment in the nation to build data-processing systems for Hewlett-Packard Co.

The second trend is that proximity to large, local markets with fast-growing product segments appears to be critical to ODMs. This is particularly true for firms seeking to establish Liquid Crystal Display-Television (LCD-TV) manufacturing for Western European distribution. Wistron Co. Ltd. and Quanta Computer Inc. recently established capacity in Eastern Europe to build flat-panel sets for OEMs including Sharp Electronics Corp. and Hewlett-Packard Co. The ODMs’ local presence in the region helps minimize tariff costs throughout the European Union.

Third, OEMs appear to be looking to diversify their manufacturing profile. That said, the rise of Vietnam as an alternative, low-cost manufacturing zone with both skilled and unskilled labor has attracted EMS providers, ODMs and OEMs during the past 18 months.

It’s no secret that North American and Western European manufacturing capacity has been significantly downsized over the past 10 years. During the past six years, Solectron, Celestica, Sanmina and Elcoteq have shut down 38 facilities across North America and Western Europe.

However, the surprise is that all this manufacturing did not only go to China—but also to other regions that have a strong allure for EMS providers and ODMs.

iSuppli’s Electronics Manufacturing Capacity Database tracks the footprints (by region, country, city, square feet) of the Top-10 EMS providers, the Top-10 ODMs and the Top-30 OEMs. The database also provides EMS/ODM forecasts for each of the key global regions and emerging markets. For more information on the Electronics Manufacturing Capacity Database, please visit: http://www.isuppli.com/catalog/l3_emso.asp?sr=emso&se=206

Adam Pick is a principal analyst for EMS/ODM market intelligence services at iSuppli Corp. You may reach him directly at apick@isuppli.com.

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