Worldwide market and trends for electronic manufacturing services
1. The Worldwide Electronics
Manufacturing Market
Presented by Randall Sherman
NEW VENTURE RESEARCH CORPORATION
A Market Research and Business Development Consultancy
Nevada City, California
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Who is New Venture Research?
Specialists in contract manufacturing and outsourcing management
consulting services for more than 15 years
Produce syndicated research on the EMS industry through Electronic
Trend Publications that is the most widely quoted in the industry
- The Worldwide Contract Electronic Manufacturing Services Market
- The Worldwide Electronics Assembly Market
- Electronics Manufacturing in China
- The Worldwide Original Design Manufacturing Market
- The Worldwide Printed Electronics Market
- Nanotechnology Markets and Trends
- The Worldwide Solar Panel Assembly Market
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The Worldwide EMS Market by
Geographic Region
21.4%33.312.6- Eastern Europe
13.8%Total 472.7247.3
9.8%14.89.3Rest of the World
20.4%156.562.0- China
17.0%328.8149.8Asia
8.3%60.140.4Europe
19.8%33.113.4- Mexico
7.6%69.047.9North America
CAGR($B)($B)Rev. by Region
20122007
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New Industry Player: ODMs
ODM - Original Design Manufacturer (also called an Contract Design
Manufacturer – or CDM) is a Chinese/Taiwanese OEM offering ‘contract
manufacturer’ (CM) services in a specific product area which other OEMs
can private label.
OEM Customer ODM Supplier End Product
Dell/HP/IBM Quanta Computer Notebooks
Ericsson/Sony BenQ Cell phones
Cisco Systems HuaWei Low-end routers
ElectroLux Zhongyi Light appliances
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Why OEM Customers Like ODMs
ODMs are low risk for OEMs because they no longer have to invest
in design, materials or inventory
ODM outsourcing is with an industry ‘expert’ in a specific product
area—not just a generic CM firm
ODMs are more attractive because they offer advanced designs, fresh
IP and the ability to bring a new product to market quickly
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Why OEMs Dislike ODMs
A ODM partner may become an industry competitor after several years
once they gain the product design knowledge
Many Chinese companies have not standardized their business
practices with regard to accounting and legal. Very difficult to
pursue equitable solutions in courts
Because of a tendency to accept unhealthy profit margins many
ODMs are putting at risk their future survivability.
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Chinese OEM/ODM Companies
Haier
Gree
Great Wall
Founder
Eastcom
Dongfeng
Desay
Datang
Dalian
Changhong
Changbai
BOE
Bird
Aucma
Amoisonic
SED
Putian
Peacock
Panda
Midea
Legend
Langchao
Konka
Kelon
Kejian
Kaifa
Jinling
Irico
Huawei
Huaqiang
Hisense
ZTE
Zhonghuang
Xiamen
Wandong
Utstarcom
Tongfang
Tiancai
TCL
SVA
Start Computer
Soutec
Skyworth
Shinco
Shangling
Shanghai Bell
SEG
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Strengths of Manufacturing in Asia
• Cost Leader – 1/10 direct labor rate of USA – the lowest cost
manufacturing region in the world
• Product Fit – High volume products that are price sensitive – computer
motherboards, cell phones, low-end networking, consumer products
• Reliability – Most Chinese firms are viewed as reputable, with highly
trained work forces. Stable wages, low inflation, good work ethic, high
technical capability
• Quality – Not as high as OEMs would like (Six Sigma) but generally
very good
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Strengths of Manufacturing in
Mexico/Eastern Europe
• Cost Competitive– 1/5 direct labor rate of USA – the lowest cost
manufacturing region in North America
• Product Fit – Best suited for low-to-medium volume products of
higher complexity and mix – appliances, automotive, industrial, medical
• Reliability – Politically more attractive with longer history of doing
business with the U.S. NAFTA/EC Commission a positive. Good
technical skills and infrastructure
• Quality – Excellent, have fully embraced advanced manufacturing
processes and systems– transparent to U.S/Europe.
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Weaknesses of Manufacturing in Asia
• Intellectual Property – there have been examples of Chinese firms are
going to steal designs and products to make knock-offs for domestic
markets
• Government Red Tape – Customs, tariffs, inspectors can be a friend or
enemy. Bribery is not an acceptable practice. There is favoritism to
local firms and a weakness in the legal system.
• Honesty – OEMs have some bad experiences with firms promising
things (volumes, quality, on-time delivery, parts, etc.) that they cannot
deliver
• Capital – Chinese firms lack capital to invest in technology, equipment
and advanced processes
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Weaknesses of Manufacturing in
Mexico/Eastern Europe
• Inflation – wages are subject to regular increases and many
government imposed benefits
• Costs – Power, telecommunications, transportation, wages could be
more efficient and competitive
• Competition – Could be more competitive and industry focused. No
apparent national priority. Electronics industry was theirs to lose
• Lack of Government Policy – Electronics industry lacks many
supporting government policies and tax incentives that China has to
improve competitiveness
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Summary/Conclusion
- Market for EMS will remain expand vigorously – particularly in
low-cost regions for next 5 years
- Private ownership in socialist countries will grow over the next few years
creating a more capitalistic society
- Mexico may regain favored partner status if improvements are made
and China stumbles in its offering. Eastern Europe makes steady
progress.
- Competition will intensify among Chinese suppliers over time creating
a ‘feeding frenzy’ and over capacity
- All regions are eager to find good and long-term partners – incentives
make the difference