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Electronics Production | April 07, 2005

Does Sony Ericsson's success spells outsourcing?

Sony Ericsson's shipments increased by 56% in 2004 compared to the overall industry which rose by about 29%. Could the success be explained by the increasing outsourcing to EMS companies like Flextronics?
Many of the top tier handset OEMs are increasing their in-house manufacturing. Nokia outsources part of it's manufacturing to EMS companies such as Elcoteq and Jabil but as Evertiq earlier reported Nokia is expanding in Mexico and India which provides clear evidences of the growing in-house operations. Motorola outsources about 20% of its handset manufacturing and that percentage is not likely to be increased according to the company.

The growth for the EMS business may according to this be forecast to decline. "Given the fact that the top tier handset OEMs are taking substantial share, and are not planning to meaningfully increase outsourcing in the near-term, we believe EMS growth in the handset end-market will slow," said Deutsche Bank analyst Chris Whitmore. "We believe SonyEricsson's recent success speaks volumes to the benefits of the outsourced model- and provides hope that the top tier may eventually adopt an outsourced model," Whitmore said.
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