Electronics Production | January 21, 2009
Near doubling of Set-Top Box shipments creates opportunities for EMS providers
While many electronic products are experiencing slowing growth or even declines, worldwide Set-Top Box (STB) shipments are set to nearly double from 2007 to 2012, providing an attractive opportunity for contract manufacturers, according to iSuppli Corp.
Global STB shipments are set to surge to 215.5 million units in 2012, rising at a Compound Annual Growth Rate (CAGR) of 12.8 percent from 118.1 million in 2007. In 2008, shipments rose to 142.8 million units, up 20.9 percent from 2007. Meanwhile, the percentage of total STB manufacturing conducted by contract manufacturers will increase to 75.3 percent in 2012, up from 67.8 percent in 2007, iSuppli predicts. This will cause global STB contract manufacturing to soar to 162 million units in 2012, double the 80 million in 2007. This high growth outlook is spurring intensified competition among contract manufacturers and changes in the industry landscape that will affect brands, contract manufacturers and component suppliers that operate in the STB supply chain. The attached figures present iSuppli’s forecasts of global OEM and contract manufacturing of all types of STBs, including cable, satellite and digital terrestrial television. The major factor driving the expansion of the STB market during the near-term is the surge in demand in North America and Western Europe, due to these nations’ looming deadlines for the transition of television broadcasting signals from analog to digital. In the United States, the Department of Commerce's National Telecommunications and Information Administration (NTIA) launched the TV Converter Box Coupon Program starting in January 2008 that allows up to two $40 coupons per household for consumers to purchase certified STBs for the digital television transition. An estimated 35 million STBs will be required for this transition by the digital transition in February. After developed regions complete the transition during the next couple of years, emerging markets will pick up and fuel continuous growth of the worldwide STB market. Although China launched and finalized its digital TV standards in 2006 and started promoting them in select cities and provinces, the complete transition will not take place until 2015, which will provide Chinese consumers with a more gradual process by which they can adapt to the new digital TV standards. iSuppli estimates the five-year CAGR for STB shipments to China for the 2007 to 2012 period will be as high as 40 percent. “Although STB brands have already outsourced more than two-thirds of their collective annual unit shipments to contract manufacturers, usage of such outsourced production will continue to increase in the future,” said Jeffrey Wu, senior analyst, EMS and ODM, for iSuppli. “Brands believe that the use of contract manufacturing ensures asset flexibility, cuts time to market and allows them to focus on higher-value supply chain activities.” The two sectors of the contract manufacturing industry, i.e. Electronics Manufacturing Service (EMS) providers and Original Design Manufacturers (ODMs), have contributed approximately equally to the STB industry so far. However, the customer bases for EMS and ODM providers are very different. EMS providers primarily serve established tier-one OEMs, while ODMs build STBs for smaller, regional OEMs mostly in emerging economies. Future developments of these two sectors depend highly on brand companies’ outsourcing strategies and the competences they will have to develop in the future in order to provide and tailor support to their customers. Despite the strong expansion for STB shipments during the coming years, the industry’s annual growth rate will decline from 27.8 percent in 2007 to single-digit growth rates after 2011, due primarily to the proliferation of new televisions equipped with functions that can only be accomplished through STBs today. This situation means that STB brands and their contract manufacturing partners must solidify their positions during the next two years while the industry is still undergoing high growth rates in order to maintain the lead when the STB industry slows.