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Electronics Production | April 23, 2007

EMS & ODM Industry Consolidates Faster Than Expected

Foxconn Electronics Inc. and Asustek Computer Inc. accounted for $18.5 billion—or 57 percent—of annual worldwide revenue among the Top-20 contract manufacturers in 2006, according to iSuppli Corp.
Concentration of revenue among the Top-10 Electronic Manufacturing Services (EMS) providers and Original Design Manufacturers (ODMs) accelerated at a faster-than-expected rate in 2006. In fact, the Top-10 EMS providers alone controlled 70.4 percent, or $111 billion, of the $157 billion market in 2006. The Top-10 ODM providers controlled 72.8 percent, or $72.8 billion, of the $100 billion market in 2006.

“Consolidation in the EMS/ODM industry is growing at a rapid rate as we see the big getting continually bigger," said Adam Pick, principal analyst for EMS/ODM at iSuppli. “To compensate, companies are morphing their business models in order to take advantage of the growing marketplace and expand their revenue."

In an effort to expand their market, contract manufacturers are transforming to address the stated and latent needs of OEMs. This is being done through acquisitions, targeting new markets such as mobile handsets and the blurring of the contract manufacturing business, wherein ODMs are aligning themselves more closely with EMS providers and vice versa.

“This last transformation eventually will eliminate the traditional acronyms associated with contract manufacturers as attempts are made to extend design and components manufacturing along the value chain," Pick said. “Because of this, the contract-manufacturing market will likely become even more competitive as these traditional, competitive boundaries disappear."

More on this will be discussed during an iSuppli Webinar entitled “What Did 2006 Hold for Asustek and Foxconn" on Wednesday, Apr. 25 at 8:30 a.m. U.S. Pacific Time (4:30 p.m. Central European Time).

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