EL SEGUNDO – In the early 2000s, manufacturing capacity shifted abruptly from the high-cost regions of North America and Western Europe to the low-cost nation of China. The second half of the decade has brought a new series of evolutionary and strategic steps for EMS firms that focus on factors beyond labor cost when it comes to selecting a location for production.

“The regional diversification by electronics manufacturers can be attributed to other China-centric factors, including a mobile workforce, inflation, taxes and the rising costs of transportation due to soaring oil prices,” said Adam Pick, principal analyst for EMS/ODM market intelligence services at iSuppli Corp. “Ultimately, the emphasis has greatly shifted from labor costs only to the total cost of ownership, which considers managerial resources, organizational structuring, manufacturing competencies, intellectual property and, of course, logistics.”

A quick analysis of the recent capacity expansions announced by leading EMS providers, ODMs and OEMs reveals a number of new trends impacting the global electronics manufacturing business, says iSuppli. The first trend is the rising penetration of emerging regional economies, a factor that continues to be critical for many EMS and ODM providers. To wit: India’s domestic market has attracted direct investment by several leading foreign providers, including Foxconn, Flextronics and Jabil.

More recently, Russia has become a focal point. While television specialist Vestel has been building an ODM/own brand manufacturing presence in Russia for some time, Foxconn in August announced a $50 million investment in the nation to build data-processing systems for Hewlett-Packard, according to iSuppli.

The second trend is that proximity to large, local markets with fast-growing product segments appears to be critical to ODMs. This is particularly true for firms seeking to establish LCD-TV manufacturing for Western European distribution. Wistron Co. and Quanta Computer recently established capacity in Eastern Europe to build flat-panel sets for OEMs including Sharp Electronics and H-P. The ODMs’ local presence in the region helps minimize tariff costs throughout the European Union, says the research firm.

Third, OEMs appear to be looking to diversify their manufacturing profile. The rise of Vietnam as an alternative, low-cost manufacturing zone with both skilled and unskilled labor has attracted EMS providers, ODMs and OEMs during the past 18 months.

It’s no secret that North American and Western European manufacturing capacity have been significantly downsized during the past few years. During the past six years, Solectron, Celestica, Sanmina-SCI and Elcoteq alone have shuttered at least 38 facilities across North America and Western Europe.