Electronics Production | April 11, 2012
EMS industry: Moment of Reckoning
Apple/Foxconn investigation changes nature of USD 360 billion electronics contract manufacturing business.
For the footwear and apparel industry, the moment of reckoning came in the 1990s, when companies including Nike faced damaging revelations over their use of sweatshop manufacturing—an event that led to the creation of the Fair Labor Association (FLA). For the electronics industry, the moment has arrived in the 2010s, as an FLA investigation has revealed serious workers’ issues at contract manufacturer Foxconn, famous for its relationship with Apple Inc. The investigation underscores the serious risk to the public image of electronics brands lying in their $360 billion relationship with the global contract manufacturing industry. The result of the investigation is likely an increased focus on compliance—as well as rising costs for electronics brands, according to information and analytics provider IHS. “Much of the press coverage of the FLA investigation has focused on the impact it will have on Apple’s margins or on prices that consumers will pay for iPhone or iPads,” said Thomas Dinges, senior principal analyst, electronics contract manufacturing for IHS. “However, the real impact is on the overall relationship of electronic brands with contract manufacturers like Foxconn. Brands now realize that the biggest risk in dealing with contract manufacturers lies in the potential public relations disasters that can arise from worker’s rights issues.” Foxconn is the world’s largest maker of electronic components, headquartered in Taiwan but operating a number of large manufacturing facilities in China. The $360 billion question For electronics brands, the implications of labor issues are massive, given their fundamental reliance on the outsourcing of production to contract manufacturers. The global electronics manufacturing business, consisting of electronics manufacturing services (EMS) and original design manufacturing (ODM) firms, generated an astounding $359.8 billion in revenue in 2011. As brands have increasingly outsourced production, the contract manufacturing industry has undergone enormous growth in recent years, with revenue rising from $264.0 billion in 2006. While revenue is expected to dip in 2012, the industry continue its expansion trajectory in the coming years, with revenue expanding to $426.1 billion in 2015. Contract manufacturing is now an essential part of the electronics industry, accounting for 20.2 percent of all manufacturing revenue in 2011. “While the recent focus has been on Apple and Foxconn, the fact is that nearly all electronics brands make use of contract manufacturers,” Dinges said. “Because of this, nearly all brands are at risk from negative headlines in their local newspapers that could arise from news of worker issues.” The time is now For electronics brands, the moment has arrived to ensure that the contract manufacturing partners of brands are in compliance with FLA rules. IHS expects more audits will take place that will uncover further issues. Brand original equipment manufacturers (OEM) will be forced to expand their operations that focus on supplier responsibility and compliance. As contract manufacturers move to ensure compliance, contract manufacturers will expand their workforces and increase their pay scales in China, causing manufacturing costs to climb. Even so, given the small proportion of manufacturing costs compared to component expenses, this is unlikely to have a major impact on company margins or consumer prices. Rising costs in China likely will spur contract manufacturers to seek alternative, lower-cost locations for manufacturing. But because of the already extensive established supply chains and infrastructure in the country, China will remain the manufacturing engine of the global electronics industry.
Keysight, FormFactor and CompoundTek to collaborate Keysight, FormFactor and CompoundTek, have formed a joint plan to provide an advanced photonics on-wafer testing solution to include automated alignment, simultaneous optical-optical and optical-electrical device tests.
Wireless Telecom buys Holzworth Instrumentation Wireless Telecom Group Inc. has signed a definitive agreement to acquire Holzworth Instrumentation Inc., a Boulder, Colorado-based provider of specialty phase noise analyzers and signal generators.
NCAB Group acquires Altus-PCB in USA Altus-PCB is a full-service supplier of PCBs based in New Jersey, USA, that has a business model similar to NCAB’s. Tee US company has a high level of technical expertise and sells mainly to original equipment manufacturers (OEMs).
Mycronic's Thomas Stetter looks back at a successful year As the company is moving more and more towards becoming a full solutions provider, business is taking off and the numbers show very much confirms that the Mycronic's strategy is working.
Sponsored content by EsemdaContract manufacturer Esemda opens new facility in Vilnius and expands EMS The new facility has been built with reserved space for future expansions. As Esemda constantly grows, it is of great importance to be able to rapidly increase production capacity in large volumes.
IBL Löttechnik reviews 2019 IBL Löttechnik GmbH is staying on top of the market thanks to continues R&D investments.
Second install for EFI at Mid America Display Silicon Valley’s EFI will install a second EFI Nozomi C18000 single-pass inkjet, direct-to-board printer later this month to Mid America Display.
Ron Jakeman of Electrolube looks back at a successful 2019 Electrolube has been growing, both in terms of its footprint and financially, for a number of years not; Ron Jakeman details the company's progress.
Etteplan and Scanfil to start strategic cooperation in joint customer projects Engineering company Etteplan and contract manufacturer Scanfil have today agreed to enter a strategic partnership in Finland.
Sponsored content by SourcengineComponent Aggregators vs E-Commerce Marketplaces What is the difference between electronic component aggregators and a marketplace?
67% of a buyer’s journey is now done digitally. Learn how marketplaces emerged as full-cycle procurement platforms and challenged the traditional component aggregators.
The lovechild of ACE Production and InterSelect Carlos Bouras of Nordson Select gave us the rundown of the result of the integration and combination of ACE Production and InterSelect GmbH - the new Integra.
American Battery Metals, U.S. lawmakers convene American Battery Metals Corporation has completed a series of meetings with lawmakers and personnel in the Department of Energy and Department of the Interior in Washington, D.C., to discuss issues critical to the domestic battery production and storage industry.
Cogiscan, Critical Mfg. form strategic partnership Quebec, Canada-based Cogiscan and Critical Manufacturing, headquartered in Portugal, have forged a strategic partnership to deliver smart factory solutions for electronics manufacturers.
Collins Aerospace expanding in North Africa Collins Aerospace Systems, a unit of United Technologies Corp., has taken the first step toward the expansion of its existing site in Casablanca, Morocco.
Sponsored content by NCAB Group Benelux B.V.Failure is not an option for a PCB More than 30% of the Gerbers NCAB Group Benelux B.V. reviews, have problems. However, the PCB are integrated in key end-user product with more and more High Tech PCB. We are here to support you on the new technologies growth to maintain a high reliability and quality. Contact us to review it together.
The advantage of Vantage - Garrett Wong tells the tale Nordson Asymtek's Garrett Wong gives us a rundown of the business year and also details the Vantage Advantage
Saki’s Eddie Ichiyama details a very successful business year Eddie ichiyama from Saki gave us an update on how 2019 has been for the company and also shared some details on the recent expansion in the Czech Republic.
The ripple effect of Enrico Krog Iversen while being an active part in creating one of the fastest growing robotics companies in modern time might have been enough for most people, that does not seem to have slowed down a certain Danish entrepreneur.
Yamaha's Ichiro Arimoto on the business year and the company's new ventures Evertiq had the opportunity to talk to Ichiro Arimoto, General Manager of Yamaha Motor Europe, about the business year and the company's new ventures.
Sponsored content by Nordson ASYMTEKStart-to-finish conformal coating with reliability and efficiency Nordson ASYMTEK’s flexible, modular, Panorama™ S-Line delivers conformal coating process control in a space-saving footprint with overlapping line processes that minimize manufacturing floor space. This innovative, patent-pending line layout trims 50% of the line’s length by using the lower compartment in each piece of equipment for functional use. Combined with Nordson ASYMTEK’s global support, this complete conformal coating line delivers quality, product reliability, efficiency, and safety for all your conformal coating applications.
Mycronic, Indium forge strategic partnership Indium Corporation has announced a strategic partnership with Sweden-based Mycronic, to develop no-clean and water soluble solder pastes for jetting applications.
SCHMID delivers PlasmaLine to Hofstetter PCB SCHMID announced it has installed the company’s first PlasmaLine comprising ICP etch & sputter deposition of its Korean JV SCHMID AVACO at Hofstetter PCB AG in Switzerland.
Cobot market to reach USD 9+ billion by 2025 A new report from Tractica is forecasting continued rapid growth for the global collaborative robot (cobot) market over the next few years, reaching revenue of USD 9.7 billion by 2025.
MixComm scores USD 8+ million in series B round New Jersey-based fabless semiconductor company MixComm has secured USD 8.6 million in series B funding led by existing investor, Kairos Ventures.
SIA elects 2020 leadership The Semiconductor Industry Association (SIA) Board of Directors has elected ON Semiconductor CEO Keith Jackson as its 2020 Chair and Qorvo CEO Robert Bruggeworth as its 2020 Vice Chair.
Si wafer shipments recede for fourth straight quarter Worldwide silicon wafer area shipments slid for the fourth consecutive quarter of 2019, according to the SEMI Silicon Manufacturers Group (SMG) in its most recent quarterly analysis of the industry.
Decline in Q4 DRAM contract prices lessens as buying momentum recovers According to the latest analysis from the DRAMeXchange research division of TrendForce, Q4 DRAM ASP is as of yet undergoing a slight QoQ decline, but this decline has shrunk down to 5%.
Technica forms growth-focused equity fund San Jose-based Technica USA has reached an agreement on an equity investment centered on future growth for the global PCB fab and assembly supplier.Load more news