EMS industry looks for new low-cost areas
Electronics contract manufacturers are migrating from China to Eastern Europe, Vietnam, and Brazil.
By Jim Carbone -- Purchasing, 6/4/2009 9:59:00 AM
More OEMs are adopting a regional approach to outsourcing and are looking to have products built in emerging economies, according to a new report by researcher Frost and Sullivan.
“An evolutionary process is unfolding within the electronics manufacturing services outsourcing strategy, and regionalization is proving to be a smart decision while balancing the need for migrating toward low-cost regions,” says Lavanya Rammohan, Frost & Sullivan senior research analyst “With the emerging hybrid model of regionalization and keeping high-volume manufacturing at low-cost regions, EMS providers have the opportunity to capitalize on new economies.”
There is a migration away from China to India, Vietnam, Ukraine, Romania, Poland, the Czech Republic, Brazil, North Africa, and the Middle East, according to Rammohan.
He says economic stability, lower wages, and substantial local market potential have put Eastern Europe, Asia, Russia, and Brazil in the spotlight, not just in terms of high-volume production alone, but also for the manufacture of high-tech products.
In addition, the level of R&D and design expertise in countries such as India, Singapore, Malaysia, Thailand, Vietnam, and Indonesia will propel these countries higher up the electronics value chain, according to the report.
Robust economic growth, development of infrastructure, higher levels of education, and government benefits are triggering a growth spurt in these emerging regions as the next outsourcing destinations as OEMs increasingly want to be closer to the end markets where they sell.
However, there are some challenges for EMS providers in these regions.
“EMS providers have to contend with challenges of under-developed infrastructure, logistics, and component supply base in most of the targeted outsourcing regions,” says Rammohan.
Also see: OEMs will push EMS providers to India
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