China EMS 'snapshot' released.

Alameda, CA -- Chinese companies are moving up the value chain in product design, and their engineering teams offer customers an increasing array of technical options and product features. That's according to a new report by Technology Forecasters Inc. (techforecasters.com).

Chinese electronics manufacturing and design (EMD) services are forecast to grow from an estimated $38.3 billion in 2005 to $74.7 billion in 2010, TFI found. By comparison, combined global EMS and ODM revenue is expected to grow from $202.4 billion in 2005 to around $370 billion in 2010. Meanwhile, the market for electronics hardware is projected to increase from $1 trillion to around $1.5 trillion.

The report provides a snapshot of the Chinese electronics manufacturing industry. It centers on "indigenous" Chinese EMD services--companies that started or are largely located in mainland China, usually in the past 10 to 20 years.

Company profiles include data on revenues, major products and customers, major geographic sales regions and commentary on company operations from many of the major domestic players, including Brio Technology, Elite, China Greatwall Computer, NingBo BIRD, WKK Holdings, Wongs Technology and others.

Chinese EMD services are forecast to grow at a 14.3% compound annual growth rate between 2005 and 2010. This assumes slowing global growth rates through 2007, followed by longer-term growth curves through 2010. A low growth rate forecast is also presented.

Chinese EMD sales are concentrated in consumer electronics and computers, with communications, both mobile and fixed, coming in a distant third. Chinese EMD services sell the majority of their products in Asian markets, with the Americas and Europe coming in second and third.

Currently, Chinese EMD accounts for about $12 billion in sales, while electronics OEMs contribute another $23 billion. TFI predicts 11.8% CAGR of Chinese EMD sales of consumer electronics, 15.6% CAGR for computers and peripherals, and 21.5% CAGR for other electronics such as medical and instrumentation.

According to TFI, advantages of China EMS/ODM providers include price, ability to service smaller size contracts and the local Chinese company's facility in dealing with Chinese customs. Disadvantages are acknowledged in ease of communication, quality control and IP protection.

"A central strategic issue is whether China-based EMD can successfully compete, over the long run, with global EMS/ODM whose facilities are distributed worldwide in close proximity to important end use markets, such as North America and Europe," writes TFI. The firm says the answer is probably closely tied to the Chinese currency. "China's unique resource is its virtually unlimited pool of low-cost labor. While there can be temporary shortages when the pace of change is rapid, in the longer run China has tens of millions of rural workers yet to be absorbed into the modern industrial economy. Furthermore, China's universities and technical institutes turn out more than 200,000 new engineers and technicians annually."

Other potential roadblocks include inflation, shortages of labor and basic resources such as energy, global competition and global integration of EMS/ODM services.

Edited by Mike Buetow