The electronics manufacturing service (EMS) market is highly dynamic, driven primarily by the consumer electronics and communications sectors.
EMS providers are also finding increased opportunities in niche markets such as the medical, industrial and aerospace and defence sectors.
In response to the growing competition levels in the industry, EMS providers are increasingly adopting innovative and strategic business models. These include better knowledge of customer needs, understanding the business models of customers/original equipment manufacturers (OEMs), effective communication tools, creating global footprints and focusing on core competencies.
New analysis from global growth consulting company Frost & Sullivan finds that the growing demand for consumer electronics will increase the outsourcing trend in the industry.
Increasing end-user demands, especially in the consumer electronics sector, and fast-paced technological developments pressure OEMs to continuously introduce new products into the market. Consequently, OEMs have to increasingly depend on EMS providers who offer significant benefits such as cost savings, reduced time-to-market, reduced time-to-volume, quality and flexibility. Leveraging the capabilities of EMS providers, OEMs can focus on research and development activities as well as sales and marketing strategies, while saving on capital investments.
“The dependence of OEMs on EMS providers is more predominant in the consumer electronics, communications technology and computer, storage and peripheral sectors,” notes research analyst Kasthuri Jagadeesan. “The consumer electronics sector generates maximum revenues and drives the need for outsourcing. These apart, the automotive electronics market also provide growth opportunities for EMS providers to improve on their market revenues.”
However, the increasing competition in the EMS market, the threat posed by the original design manufacturers (ODMs) and penetrating into niche market segments remain constant challenges for EMS providers. In order for EMS providers to sustain their presence in the industry, they must provide value-added services, effective supply chain management and create global footprints.
“The intense competition faced by the EMS providers is forcing them to enhance their value proposition and offer integrated and end-to-end solutions,” says Jagadeesan. “A strategic partnership with OEMs will enable the EMS providers as well as the OEMs to contribute effectively to the success of the end-product and also to achieve high profitability and good market share.”
Since OEMs remain very selective in choosing their EMS partners, EMS providers should focus on maintaining long-term relationship with their customers through their enhanced value-added services, strategic partnership and alliances, as well as through diversification. EMS providers should also focus on maintaining scalable business solutions, customer-centric models, effective supply chain management strategies, penetration into niche markets and effective information technology tools.
For more information contact Patrick Cairns, Frost & Sullivan, +27 (0)21 680 3274, patrick.cairns@frost.com, www.frost.com
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