The five year forecast (2009 – 2014, see chart below) for the worldwide EMS and ODM sectors, plus worldwide total EMS industry, reflects the cost (spend) for product outsource design and manufacturing services and MCOGs sourced to EMS and ODM companies across the Americas, Europe and Asia for the following electronics industry end-market segments and products:
Automotive electronics: This includes automotive control modules and automotive modules / subsystems
Consumer electronics devices: Digital audio players; digital camcorders / cameras, digital video recorders and set-top boxes (DVRs), digital televisions and displays, DVD players and recorders, gaming devices, handsets / mobile phones, portable media players, smart handheld devices (smartphones), home networking (NAS, media adapters, blue tooth)
Computers: This includes desktop PC product, mobile PC, and other PC (thin clients…)
Industrial electronics: Industrialized control systems; semiconductor front and back end equipment, test and measurement equipment…
Medical electronics devices: Class I, II and III medical devices, medical instrumentation / systems.
Networking electronics equipment: This includes LAN switches; routers, wireless LAN (WLAN), and other networking (L4-7 switches, firewall / VPN appliances…)
Peripherals electronics (imaging / printing): Copiers, fax machines, multifunction peripherals, printers.
Servers and storage equipment: This includes servers and workstations; disk storage systems, tape drives, optical storage units, HDD / ODD.
Telecommunications: Mobile wireless infrastructure, broadband (DSL, cable modem), broadband customer premises equipment (CPE), traditional telephony (PBX, central office switches), IP telephony (media gateways, soft switches, IP PBX), other Telecom (cordless phones, answering machines), and optical transport.
Worldwide EMS Industry Revenue Forecast ($Billions), 2009 – 2014
EMS CAGR pulls ahead
One surprise in all of this is the EMS sector is forecasted to have a greater CAGR during the forecast period (2009 – 2014) at 11.4% compared to 9.3% for ODM. Perhaps this is part of the reason why ODM Wistron Corporation has emerged with its EMS-lite model. (See also: ‘ODM Wistron’s EMS-lite better than Pegatron, Hon Hai?‘)
“Some key factors shaping these market conditions pushing the EMS growth rate include growing saturation in PC outsourcing, growing momentum of EMS firms in notebook PC manufacturing, and a more diverse product mix and end-markets among EMS firms,” says Michael Palma, senior research analyst, EMS and consumer semiconductors at IDC.
Some noteworthy trends driving some segments this year include increased enterprise spending on IT boosting server, networking, and communications outsourcing.
In your search results, you will be able to further target provider options by choosing End Markets and/or other Services.
Conversely, EMS and ODM capacity levels have fallen to about as low are we’re going to see for a while.
One reason for this is believed to be because OEMs are now viewing the recovery as reason to anticipate an increase in outsourcing levels and they are therefore uncomfortable to make large investments in internal capacities. (See also: ‘EMS / ODM outlook, recovery tied to consumer electronics‘)
Emerging markets play key role
Additionally, the continued growth of emerging market segments (both EMS and ODM) such as industrial electronics, automotive, and medical electronics have been outpacing many of the traditional market for EMS and ODM such as computers, networking electronics equipment and servers and storage for the foreseeable future.
More EMS firms are developing ODM business models to address opportunities in automotive electronics, while ODMs are focusing on infotainment opportunities, which are easier for ODMs to invest in than other parts of the automotive segment. (Read an interview with Society of Automotive Engineers president on the future of automobile and electronics)
“In the medical segment, EMS firms have reached beyond traditional medical electronics opportunities to other forms of medical devices. In the industrial sector, firms have been more aware of not buying business by reducing project margins,” says Palma.
OEM trust rears its head. Again.
One strategy EMS / ODM companies are doing that could likely influence OEM supply chain decisions is more aggressive offering of their value add services to OEMs. The challenge providers are facing is getting OEMs to reveal more of their product and supply chain roadmaps…all of which is necessary for EMS / ODM partners to best serve OEM interests.
Meanwhile, numerous OEM and EMS channel checks accompanied by discussion with various consulting organization are reporting inventories beginning to increase across the electronics supply chain.
Many view this evolving situation, combined with ongoing OEM pricing pressure on EMS / ODM providers, as a perfect storm creating a fertile environment for renegotiating OEM-EMS contract service level agreements – in favor of OEMs.
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