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Worldwide market and trends for electronic manufacturing services

Electronic Manufacturing Services

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Worldwide market and trends for electronic manufacturing services

  1. 1. The Worldwide Electronics Manufacturing Market Presented by Randall Sherman NEW VENTURE RESEARCH CORPORATION A Market Research and Business Development Consultancy Nevada City, California
  2. 2. Page 2 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
  3. 3. Page 3 The Worldwide Electronics Assembly Market Cost of Goods Sold, ($B) Segment 2007 2012 CAGR Computer 298.6 408.3 6.5% Communications 219.2 305.3 6.8% Consumer 221.0 375.0 11.2% Industrial/Medical 100.9 136.4 6.2% Transportation 119.6 160.9 6.1% Total 959.4 1385.9 7.6%
  4. 4. Page 4 The Worldwide EMS Market by Geographic Region 21.4%33.312.6- Eastern Europe 13.8%Total 472.7247.3 9.8%14.89.3Rest of the World 20.4%156.562.0- China 17.0%328.8149.8Asia 8.3%60.140.4Europe 19.8%33.113.4- Mexico 7.6%69.047.9North America CAGR($B)($B)Rev. by Region 20122007
  5. 5. Page 5 Worldwide EMS Direct Labor Statistics 1.12China 1.25India 2.58Taiwan 2.55Mexico 3.25Hungary 6.12Spain 7.70Ireland 8.23Japan 8.85USA 9.03England 10.67Germany Hourly Rate ($)Country
  6. 6. Page 6 CM Industry - 1994-2004 EMS Revenue Growth ($B) - 20 40 60 80 100 120 140 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 EM S Growth
  7. 7. Page 7 CM Industry – 2005-2010 EMS Growth Estimate ($B) - 50 100 150 200 250 300 350 2005 2006 2007 2008 2009 2010
  8. 8. Page 8 Leading CM Companies in Mexico, 2007 Benchmark Electronics – Guadalajara BenQ – Mexicali Celestica – Monterrey, Querretaro Elcoteq – Juarez, Monterrey Flextronics – Aguacalientes, Guadalajara Foxconn – Chihuahua Jabil – Chihuahua, Guadalajara, Reynosa (2) Plexus – Juarez Sanmina-SCI – Apadoca, El Salto, Guadalajara (2), Monterrey Solectron – Chihuahua, Guadalajara Venture – Tijuana
  9. 9. Page 9 Leading CMs in Eastern Europe, 2007 Benchmark Electronics – Romania Celestica – Czech Republic, Romania Elcoteq – Estonia, Romania, Russia EPIQ – Bulgaria, Slovakia Flextronics – Czech Republic, Hungary (2), Romania, Ukraine Foxconn – Czech Republic (2), Hungary Jabil – Hungary, Poland (2), Ukraine NOTE – Lithuania, Poland Sanmina-SCI – Hungary SIIX – Slovakia Videoton – Bulgaria Zollner - Hungary
  10. 10. Page 10 Leading CM Companies in China, 2007 Benchmark Electronics – Suzhou Celestica – Dongguan, Shanghai, Suzhou Elcoteq – Dongguan, Shenzhen, Beijing Flextronics – Changzhou, Dongguan, Doumen (2) Nanjing, Qingdao, Shajing, Shanghai (2), Shenzhen, Xixiang, Zhuhai Foxconn – Beijing, Chongchang, Dongguan, Jinchang, Kunshan, Shanghai, Shenzhen, Tianjin, Taiyuan, Yashou Jabil – Beijing, Huangpu, Nanjing, Shanghai (2), Shenzhen, Suzhou, Tianjin (2), Wuxi (2) Sanmina-SCI – Kunshan, Shenzhen, Suzhou, Wuxi USI – Shenzen, Shanghai Venture – Shanghai (2)
  11. 11. Page 11 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
  12. 12. Page 12 Supplier Differences in Value-Add/Cost Cost $ Development OEMs CMs ODMs
  13. 13. Page 13 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
  14. 14. Page 14 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.
  15. 15. Page 15 ODM Market Forecast, 2005-2010 ODM Growth Forecast ($B) - 20 40 60 80 100 120 2005 2006 2007 2008 2009 2010
  16. 16. Page 16 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
  17. 17. Page 17 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
  18. 18. Page 18 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.
  19. 19. Page 19 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
  20. 20. Page 20 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
  21. 21. Page 21 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
  22. 22. Page 22 Conclusion “It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change.” Charles Darwin
  23. 23. Page 23 NEW VENTURE RESEARCH CORPORATION A Business Research and Development Consultancy Nevada City, California