E. Europe’s supply base starts to evolve
Jim Carbone, Executive Editor, Electronics, Purchasing Magazine -- Purchasing, 1/26/2006 2:00:00 AM
It may take awhile, but Eastern Europe will eventually become a viable source for electronic components and other production materials.
Many OEMs and electronics manufacturing services providers already have manufacturing in Eastern and Central Europe. Companies have to import many components, but a supply base is developing around low-tech items.
"We source locally for items that would be prohibitively expensive to ship," says Joe Carson, chief procurement officer for Lucent Technologies. Items include cable assemblies, racks and enclosures. Lucent also needs local sources of supply for software and professional service to support its equipment.
However, the supply base for production materials such as semiconductors, liquid crystal displays and other electronic components will take a while to develop.
Some analysts think the supply base in Eastern Europe will take a long time to develop because there are sourcing alternatives in Western Europe.
"The supply base in Eastern Europe at this stage is immature at best right now," says Jeffrey Wu, an analyst with researcher iSuppli. "There are many mature and highly sophisticated component suppliers in western Europe who are in close proximity to EMS providers in Eastern Europe." Those "financially justifiable alternatives" in Western Europe preclude the need for immediate development of component suppliers in Eastern Europe, according to Wu.
Many buyers will be content to purchase components from electronics distributors serving Eastern Europe. He says distributors are growing their business 20-40% per year.
"With their warehousing presence, distributors have a good chance of aggregating demand and do well with logistics support and shipment fulfillment," he says.
Ian Crawford, vice president of global sourcing for IBM, Crawford says for an indigenous supply base to develop, it has to be cost competitive, produce the same quality as global suppliers and in the volumes that OEMs and EMS companies need. If a supplier can’t do that, why would an OEM and EMS provider use those suppliers, he asks.
"In the end we have to see how the supply base develops," he says. "It may be that the continuing influx of global suppliers will form the basis of a supply base in these countries," he says.
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