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India electronics manufacturing services (EMS) and contract manufacturing
India electronics manufacturing services (EMS) and contract manufacturing
India electronics manufacturing services (EMS) and contract manufacturing
India electronics manufacturing services (EMS) and contract manufacturing
India electronics manufacturing services (EMS) and contract manufacturing
India electronics manufacturing services (EMS) and contract manufacturing
India electronics manufacturing services (EMS) and contract manufacturing
India electronics manufacturing services (EMS) and contract manufacturing
India electronics manufacturing services (EMS) and contract manufacturing
India electronics manufacturing services (EMS) and contract manufacturing
India electronics manufacturing services (EMS) and contract manufacturing
India electronics manufacturing services (EMS) and contract manufacturing
India electronics manufacturing services (EMS) and contract manufacturing
India electronics manufacturing services (EMS) and contract manufacturing
India electronics manufacturing services (EMS) and contract manufacturing
India electronics manufacturing services (EMS) and contract manufacturing
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India electronics manufacturing services (EMS) and contract manufacturing

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India's challenges to offering global contract electronics manufacturing services (EMS).

India's challenges to offering global contract electronics manufacturing services (EMS).

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  • 1. India as a Destination Source for EMS ( Electronics Manufacturing Services ) presented to Gathering of Indian EMS Executives New Delhi, India by Mark Zetter, President VentureOutsource.com
  • 2. http://www.ventureoutsource.com/about © Venture Outsource 2005 EMS Evolution v Over the next 10 to 15 years, the electronics HW industry will evolve into two primary business models • product solutions companies • product innovation/development • customer channel relationships • operations management companies • product concept/industrialization • process development, manufacturing, logistics
  • 3. Fabrication/ Mech Assy http://www.ventureoutsource.com/about © Venture Outsource 2005 Traditional EMS Product Design ATO > Distr. ATO > End-users/ Reverse Logistics Cisco Palm IBM Nokia Reptron Arrow Avnet VARs Component Suppliers Flextronics Foxconn Solectron Celestica Sanmina-SCI Jabil Circuit PCB fab., Encls., Plastics Back-end Front-end Services Backward Integration Intel NEC Motorola Customer Direct Service Outlets Internet Direct Mail EMS Evolution
  • 4. http://www.ventureoutsource.com/about © Venture Outsource 2005 EMS Evolution v The technology outsource supply chain model is becoming the dominate model and can never be reversed v Supply chain purchasing power has swung in favor of the outsource provider v The larger outsource providers excel in the ability to rapidly advance and scale the art of process
  • 5. http://www.ventureoutsource.com/about © Venture Outsource 2005 Drivers v Outsourcing electronics manufacturing can have real economic benefits even in the absence of product cost savings
  • 6. Drivers --- Est. Costs to OEM by Outsourcing --- Savings Internal OEM Operating http://www.ventureoutsource.com/about © Venture Outsource 2005 Cumulative (1) (2) (3) (4) (5) (6) (7) Dollars Percent Costs Materials $76 $76 $76 $73 $72 $70 $70 $68 $8 11% Labor $4 $4 $1 $1 $1 $1 $1 $1 $3 75% SG&A $6 $3 $3 $3 $3 $3 $2 $2 $4 67% Finance $2 $1 $1 $1 $1 $1 $1 $1 $1 50% Freight $4 $4 $5 $5 $4 $4 $4 $4 $0 0% Overhead $8 $6 $5 $4 $4 $4 $4 $4 $4 50% EMS Profit $0 $4 $4 $4 $4 $4 $4 $4 -$4 n/a Total OEM Cost $100 $98 $95 $91 $89 $87 $86 $84 $16 16% (1) Shared resources = greater capacity utilization (2) Production in less expensive regions (3) Cost-efficient product redesigns (4) Optimizing logistics (5) Co-locating suppliers (6) Controlling component supply through verticalization (7) Greater purchasing economies of scale
  • 7. Captive Manufacturing Outsourced Manufacturing Statement of Operations Statement of Operations Working Capital Working Capital http://www.ventureoutsource.com/about © Venture Outsource 2005 Drivers Revenue $ 325,000 Revenue $ 325,000 COGS $ 231,000 COGS $ 231,000 Gross Margin $ 94,000 Gross Margin $ 94,000 R&D $ 30,800 R&D $ 30,800 S,G&A $ 38,500 S,G&A $ 38,500 Other Expenses $ 3,082 Other Expenses $ 3,082 E.B.I.T. $ 21,618 E.B.I.T. $ 21,618 Inventories $ 196,000 Inventories $ 39,200 P,P&E Net $ 622,000 P,P&E Net $ 155,500 AR net of AP $ (25,000) AR net of AP $ (25,000) Net Working Capital $ 793,000 Net Working Capital $ 169,700 ROWC (21,618 x 4) 11% (21,618 x 4) 51% $ 793,0 00 = $ 169,700 = ROWC
  • 8. Indian EMS Strengths http://www.ventureoutsource.com/about © Venture Outsource 2005 v Domestic market potential v Inexpensive indirect labor v Large skilled direct labor pool v Language base
  • 9. Improvement Opportunities http://www.ventureoutsource.com/about © Venture Outsource 2005 v Low electronics HW manufacturing capacity v Lack of infrastructure v Market responsiveness
  • 10. Improvement Opportunities http://www.ventureoutsource.com/about © Venture Outsource 2005 v Changing governmental policies v Inadequate global marketing of manufacturing technologies v Lack of cohesive R&D roadmap with little CapEx
  • 11. Singapore China http://www.ventureoutsource.com/about © Venture Outsource 2005 Productive Capacity Technological infrastructure India Japan USA Israel S Korea Taiwan Malaysia Mexico Philippines Indonesia Thailand Low High High Low Competitiveness Source: IMF World Economic Outlook
  • 12. Philippines http://www.ventureoutsource.com/about © Venture Outsource 2005 Physical Infrastructure High Management Taiwan Israel India Brazil Mexico Indonesia Thailand USA Japan Malaysia S Korea China Low High Low Competitiveness Source: IMF World Economic Outlook
  • 13. Worth a Closer Look http://www.ventureoutsource.com/about © Venture Outsource 2005 v Advanced research conceptualization • regional vs international v Component design (front-end services) • fuel component manufacturing • build EMS infrastructure v New product introduction (NPI) • design-to-alpha, beta • embedded systems
  • 14. Worth a Closer Look http://www.ventureoutsource.com/about © Venture Outsource 2005 v New business development • branding v Attracting/retaining OEM customers • manufacturing velocity • perceptions, quality v Customer support • electronics HW reverse logistics
  • 15. What’s Next? http://www.ventureoutsource.com/about © Venture Outsource 2005 v Universities and EMS/SMT technology centers v Make a market (government and NGO) • international and regional industry organizations • strategic partnerships, effective media utilization v Regional and national government v Private sector (mfg. operations, hi-volume EMS infrastructure) • facility locations consistent with international logistics • finance cost buckets, operations metrics/KOIs • program management (CFT, DRT, S/CAR, transfer protocols) • operations (DFT, MPI/TPI, GHK, IPA teams, alerts)
  • 16. Accompanying articles Steps to develop and promote Indian EMS http://ventureoutsource.com/india-ems Discussion on Indian EMS http://ventureoutsource.com/india-ems-challenges About VentureOutsource.com #1 Resource & community for OEMs seeking electronics services, information on contract electronics manufacturing, and referral toll free. http://www.VentureOutsource.com/about 1346 The Alameda, Suite 7 San Jose, CA 95126

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