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Electronics Production | August 24, 2005

Electronics supply chain under change

The electronic industry's supply chain is changing because of the fact that OEMs more often choose to control their purchasing of components.

OEMs continues to outsource it's manufacturing to EMS companies and ODMs but OEM companies are showing an upgoing trend in taking back the control of the purchasing of certain components. "This trend is likely to continue, because OEMs increasingly believe this is the best way to resolve procurement problems arising between them and their contract manufacturers," said Jeffrey Wu at analyst firm iSuppli. During the last five years the global supply chain levels have lost their transparency and the fact that the OEMs are controling the purchasing of components has driven down the semiconductor prices. The OEMs have also contributed to sudden and unexpected changes in the supply chain inventory balances, which has not been for the benefit to the manufacturers. "Contract manufacturers are devising ways to climb up the value chain to combat drastically-eroding margins, breaking down the conventional boundaries between EMS providers and ODMs. Contract manufacturers are expanding their global footprints to serve the OEMs in fast-growing emerging markets, a practice that increases operational complexity," said Jeffrey Wu.
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