Electronics outsourcing will grow despite downturn
Electronics buyers can expect more consolidation and specialization in the electronics manufacturing services industry.
Jim Carbone -- Purchasing, 11/5/2009 3:31:48 PM
Despite the downturn, outsourcing in the electronics industry is "here to stay" and the electronics manufacturing services (EMS) industry will continue to grow, according to the CEO and chairman of EMS provider Sanmina-SCI.
Addressing the Nation
al Electronic Distributors Association's
annual Executive Conference, Jure Sola said OEMs will continue to outsource
began they are looking for the lowest total cost of ownership.
"A few months ago everybody was talking about insourcing," says Sola. "There is no insourcing. Cisco is not going to build a new factory. HP is not building new factories. IBM is not building new factories," he says
Sola says such companies don't want to manufacture because it is not a core competency for them. Companies that outsource are looking for the lowest total cost which outsourcing delivers.
"If you look at what has happened over the last nine months, companies that outsourced did not take write-offs and companies that do their own manufacturing are still taking write offs today," he says.
Sola says outsourcing will continue to grow because OEMs want to move from a fixed cost model to variable cost model and reduce their working capital which they can do by outsourcing.
"This industry is here to stay. We are a major part of the electronics supply chain and our customers cannot survive without us," says Sola.
He says buyers can expect more specialization in the industry where EMS providers focus on one or two customer segments such as medical and defense and aerospace.
Sola adds there will be more consolidation in the industry as well. "There are too many players and there will be mergers," he says.
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