Outsourcing wave likely in Electronic Manufacturing: iSuppli

January 30, 2012: In the present day uncertain economic condition, it may be difficult to imagine that the electronics manufacturing industry is in the path growth. But it is true as the original equipment manufacturers (OEMs) have resorted to outsourcing in a big way.

EMS &ODM information and analysis provider IHS observes that this will be one among the three important trends that will reshape the electronic manufacturing services (EMS) industry over the next ten years.

It is predicted that the year 2012 will be a tough period for the electronic manufacturing services providers, as the revenue is predicted to decline and reach $ 357 billion, which will be a one per cent decline from $ 360 billion the previous year.

Most of the EMS vendors have forecasted that the 2012 will be a year of stability in terms of orders. However IHS remains doubtful whether the next one year would bring any modifications in the continuing situation of the past six months, which is noted for volatile customer orders and concern over the increase in sales.

The three trends that will drive growth of the EMS market according to IHS are:

  1. Manufacturing outsourcing to go for next phase of outsourcing

    Most of the manufacturers responded that they are planning for the next phase of outsourcing. IHS believes that outsourcing will lead to the next phase of growth of the EMS industry over the next ten years. However the exact pace at which this will happen still remains uncertain.

  2. Service to gain more importance

    The second significant trend in the next ten years will be the renewed focus on services. The after sale service will assume more value in the eyes of the EMS providers. Since the profit margins gets reduced for most of the products the EMS vendors will have to provide after sales services such as warranty and on site repair. Such services will be necessary for the EMS vendors to grow and to build a strong relation with the customers.

  3. Consolidation to pick up

    The third important trend that will be observed is consolidation. It is predicted that Electronic Manufacturing Services companies will have to move towards consolidation irrespective of their size within the next ten years. The decrease in the number of the companies will result in reduced competition, which will put an end to too many companies fighting for limited amount of business.

With the increasing demand from the OEMs in terms of expanding their geographic reach, and increasing the scale, only a few of the EMS vendors will be able to be in par with the demands.

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