The shift in production to low-cost regions has been fully accomplished over the past several years. Today, we are seeing OEM customers requiring their EMS partners to manufacture products near the regions where they are to be sold. For certain high-volume products like mobile phones and PCs, OEMs need to leverage the lowest cost in manufacturing. However, for other products the labor cost differentials are becoming less significant when weighed against the total cost of production (including transportation and logistical challenges). Offshore product migration will still take place, according to NVR’s forecasts, but it will be at a more moderate pace.

Both EMS firms and ODMs will experience strongest growth from production in the communications, computer, and consumer market segments. Specifically, EMS companies will find very strong growth in e-readers, tablets, enterprise storage systems, and personal navigation systems, while ODMs are projected to experience very strong growth in tablets, e-readers, cellular handsets, notebook PCs, and digital cameras. In general, EMS firms will tend to excel in technology-intensive product areas and complex board assemblies, while ODMs will excel in manufacturing commodity/high-volume products such as motherboards, monitors, handhelds, and consumer electronics.

Foxconn continued its extraordinary dominance as the leading EMS firm in the industry, outdistancing its closest contender by more than three times in terms of revenue. Flextronics remained steadfastly in the No. 2 position, followed by two ODMs (Wistron and Quanta Computer), and Jabil Circuit (Table 1).

Every year, New Venture Research conducts a financial and performance comparison and ranks the top 10 overall best-performing EMS companies. In 2011, HTC emerged as the EMS provider with the highest ranking score, followed somewhat distantly by Quanta Computer and Wistron, according to NVR’s metrics. Note that all of these high-performing companies were Asian ODMs. Jabil Circuit scored a respectable fourth in the rankings.

NVR has just published its widely acclaimed market research study on the contract electronics manufacturing services market in a report titled, "The Worldwide Electronic Manufacturing Services Market, 2012 Edition." More details can be seen at newventureresearch.com/wp-content/uploads/2012/06/ems2012-RS.pdf.

Randall Sherman is president and principal analyst of New Venture Research (newventureresearch.com), a market research and consulting firm specializing in the electronics manufacturing industry; rsherman@newventureresearch.com.

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