The Worldwide Electronics
Manufacturing Market
Presented by Randall Sherman
NEW VENTURE RESEARCH CORPORATION
A Market Research and Business Development Consultancy
Nevada City, California
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 Electronics Assembly Market
Cost of Goods Sold, ($B)
Segment
Computer
Communications
Consumer
Industrial/Medical
Transportation
2007
298.6
219.2
221.0
100.9
119.6
2012
408.3
305.3
375.0
136.4
160.9
CAGR
6.5%
6.8%
11.2%
6.2%
6.1%
Total
959.4
1385.9
7.6%
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The Worldwide EMS Market by
Geographic Region
2007
2012
Rev. by Region
($B)
($B)
CAGR
North America
47.9
69.0
7.6%
13.4
33.1
19.8%
40.4
60.1
8.3%
12.6
33.3
21.4%
149.8
328.8
17.0%
62.0
156.5
20.4%
9.3
14.8
9.8%
247.3
472.7
- Mexico
Europe
- Eastern Europe
Asia
- China
Rest of the World
Total
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13.8%Page 4
Worldwide EMS Direct Labor Statistics
Country
Hourly Rate ($)
Germany
10.67
England
9.03
USA
8.85
Japan
8.23
Ireland
7.70
Spain
6.12
Hungary
3.25
Mexico
2.55
Taiwan
2.58
India
1.25
China
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1.12
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CM Industry - 1994-2004
EMS Revenue Grow th ($B)
140
120
100
80
EM S Growt h
60
40
20
199 4
199 5
19 96
1997
1998
1999
2000
2 001
200 2
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2003
20 04
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CM Industry – 2005-2010
EMS Growth Estimate ($B)
350
300
250
200
150
100
50
2005
2006
2007
2008
2009
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2010
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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
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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
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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)
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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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Supplier Differences in Value-Add/Cost
Cost $
OEMs
CMs
ODMs
Development
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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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ODM Market Forecast, 2005-2010
ODM Growth Forecast ($B)
120
100
80
60
40
20
2005
2006
2007
2008
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2009
2010
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Chinese OEM/ODM Companies
Amoisonic
Hisense
SEG
Aucma
Huaqiang
Shanghai Bell
Bird
Huawei
Shangling
Irico
Shinco
Jinling
Skyworth
Kaifa
Soutec
Kejian
Start Computer
Dalian
Kelon
SVA
Datang
Konka
TCL
Desay
Langchao
Tiancai
Dongfeng
Legend
Tongfang
Eastcom
Midea
Utstarcom
Founder
Panda
Wandong
Peacock
Xiamen
Putian
Zhonghuang
SED
ZTE
BOE
Changbai
Changhong
Great Wall
Gree
Haier
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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
• Quality – Not as high as OEMs would like (Six Sigma) but generally
very good
• Reliability – Most Chinese firms are viewed as reputable, with highly
trained work forces. Stable wages, low inflation, good work ethic, high
technical capability
• Product Fit – High volume products that are price sensitive – computer
motherboards, cell phones, low-end networking, consumer products
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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
• Quality – Excellent, have fully embraced advanced manufacturing
processes and systems– transparent to U.S/Europe.
• Reliability – Politically more attractive with longer history of doing
business with the U.S. NAFTA/EC Commission a positive. Good
technical skills and infrastructure
• Product Fit – Best suited for low-to-medium volume products of
higher complexity and mix – appliances, automotive, industrial, medical
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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
• Capital – Chinese firms lack capital to invest in technology, equipment
and advanced processes
• Honesty – OEMs have some bad experiences with firms promising
things (volumes, quality, on-time delivery, parts, etc.) that they cannot
deliver
• 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.
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Weaknesses of Manufacturing in
Mexico/Eastern Europe
• Inflation – wages are subject to regular increases and many
government imposed benefits
• Lack of Government Policy – Electronics industry lacks many
supporting government policies and tax incentives that China has to
improve competitiveness
• Competition – Could be more competitive and industry focused. No
apparent national priority. Electronics industry was theirs to lose
• Costs – Power, telecommunications, transportation, wages could be
more efficient and competitive
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Summary/Conclusion
- Market for EMS will remain expand vigorously – particularly in
low-cost regions for next 5 years
- All regions are eager to find good and long-term partners – incentives
make the difference
- Competition will intensify among Chinese suppliers over time creating
a ‘feeding frenzy’ and over capacity
- Mexico may regain favored partner status if improvements are made
and China stumbles in its offering. Eastern Europe makes steady
progress.
- Private ownership in socialist countries will grow over the next few years
creating a more capitalistic society
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Conclusion
“It is not the strongest species that survive,
nor the most intelligent, but the ones most
responsive to change.”
Charles Darwin
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NEW VENTURE
RESEARCH CORPORATION
A Business Research and Development Consultancy
Nevada City, California
www.newventureresearch.com
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