SINGAPORE – EMS revenues in Southeast Asia topped $20.7 billion in 2006 and are on track to reach $38.4 billion in 2013, Frost & Sullivan said today.

The region is benefiting from migration of multinational providers from the U.S. and Europe looking to reduce their manufacturing costs and underutilized capacity, says Frost.

EMS providers generally prefer making investments in larger markets such as China and locating near OEMs customers. However, with long-term growth expected, they are likely to set up or expand their existing bases in Southeast Asia to minimize the risks of concentrating on just a few geographical areas, says the firm.

Medium-volume products such as medical equipment and automotive electronics are seen as the better fit for Southeast Asia, since EMS providers will have sufficient volume to cover fixed costs. These products contain a high degree of IP specific to OEMs, thereby presenting a significant entry barrier for original design manufacturers (ODMs) and any new participants. Hence, specializing in low-volume products can prove advantageous to EMS providers in the long term, Frost reports.

EMS providers can also benefit from pursuing collaborative design with OEMs and share any IP created, rather than providing complete design services to prevent any conflict of interests. This arrangement can also provide EMS providers with the knowledge and skills gained during the design phase to the manufacturing phase of a product, reports Frost.  

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