The end of EMS?
01 November 2010
Last week someone shared with me his thoughts that the death of the Tier 1 EMS provider was imminent…
His argument started with the notion that ‘Foxconn’s days are numbered…’ and went on to explain the two main reasons why. The Chinese (and I think we can assume that he included other Asian manufacturing centres in that category) are not going to remain a ‘low-cost geography’ forever. As we all know, for several years there have been signs that the skills within these countries are moving towards global standards, training and experience are on the rise, and consequently the engineers involved are starting to expect a better quality of life based on higher wages.
As we also all know, the days of cheap oil are over and transporting goods around the world is therefore becoming more expensive and is also less environmentally acceptable.
Put these two facts together (and I am willing to accept them as facts) and you have the high volume electronics manufacturing sector, of which the EMS companies are the prime exponents, losing a large part of its ‘raison d’être’. Or so the argument goes.
Personally I can’t see such a catastrophic end in sight for the high volume sector for the simple reason that the EMS providers have mastered adaptability and flexibility. Taking a quick look back at my home country, the UK, ten years ago the majority of the world’s major EMS providers, computer manufacturers and cell phone companies had major plants in the UK and/or Ireland. Within three years of this virtually all OEMs had outsourced, or EMS providers had consolidated, or OEM manufacturing capacity acquired by their EMS providers – and then left for Eastern Europe or to Asia. Few remain, mostly as NPI centres, but most have left.
The same will happen in China if it stops becoming economically advantageous. The EMS companies will simply migrate (at least in part – I can’t see the China home market going away!) to the next venue of choice. India probably, or parts of Africa possibly. If it makes sense for off-shoring to come back onshore due to transport and environmental considerations it will do that too. Such is the global resource of these companies that they have the flexibility to move where they want as quickly as they want. As a consequence, it is my belief that it will be the EMS providers who retain the high volume manufacturing market without it drifting back to the OEMs.
And don’t forget electronica?
On this publication we usually make a big fuss about productronica, undeniably the major global exhibition for the electronics manufacturing industry. However, in the off-years Munich hosts the equivalent show for the electronics design community, electronica, and this will take place next week (9–12 November 2010). While there is much at this show centred around components, there is also much of interest to the production and test engineers. I think the interesting facet of the show is that it has virtually all of the main test and measurement suppliers on the exhibitor list. If you would like to find out more we have a full preview in our events section.
What are your thoughts on this subject? Let me know by sending an email to: tim.fryer@imlgroup.co.uk
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