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Forecast: increased outsourcing in assembly.

A recently published report from Electronic Trend Publications, Inc. (San Jose, CA), The Worldwide Electronics Assembly Market, Second Edition, relates that the assembly industry is undergoing significant change--both structural and economic--that is forcing companies to reassess manufacturing strategies. To survive, original equipment manufacturers (OEMs) must devise new ways to improve productivity and lower costs, In some cases, new strategies involve partnering with outside manufacturing specialists, commonly referred to as contract manufacturers (CMs), but this also involves other OEMs that specialize in producing electronics sub-assemblies later sold to another OEM for final assembly.

Competition in the industry has driven costs down to the margin, forcing companies to restructure manufacturing assets to remain viable. The extent to which outsourcing will continue to affect the supply chain is not fully apparent: In general, OEMs are looking for manufacturing partners that can manage more and more of the fulfillment process, However, if the OEM outsources to subcontractors everything except brand creation and marketing, the OEM risks losing a key core competency and value-add capability,

The upshot has been for many top-tier OEMs to concentrate on research, design and marketing tasks and outsource the manufacturing tasks--at least for those industries in which a high degree of automation exists. Worldwide demand for outsourcing assembly of electronic products will continue to expand aggressively over the next five years as large OEMs that have not yet outsourced jump on the bandwagon to remain competitive. As a result, OEM production capability will experience a net decline over the next few years as these companies divest and close down unproductive factories.

Consumer and transportation sectors are expected to expand and prosper consistently over the forecast period and experience strong economic expansion. The computer and communications markets will only average a low growth rate, which takes into account a downturn in 2001, followed by a projected recovery in subsequent years. Overall, all industries have been impacted negatively by events in 2001, though the most severe effects have been from the collapse in demand for traditional computer and telecom products that began in late 2000. On the bright side, a continued strong demand for consumer and transportation products, and a buildup in surplus supplies for military and avionics electronics products, still exists.

For more information, contact ETP, (408) 369-7000.
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Title Annotation:Industry News
Publication:Circuits Assembly
Article Type:Industry Overview
Geographic Code:1USA
Date:Feb 1, 2002
Words:377
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