ALAMEDA, CA -- A common theme arose during discussions at Technology Forecaster's quarterly meeting last week: knee-jerk reactions on the part of OEMs and their manufacturing partners to the challenges of global electronics manufacturing are not working. 

Attendees reportedly expressed considerable frustration at the tactical measures they are taking to meet environmental regulations such as China RoHS and finding profitable and socially responsible ways to manufacture the low-volume, high-mix products that represent the next wave of electronics outsourcing for the global arena. "I am so tired of the fire drills for WEEE, RoHS, and now China RoHS," one OEM complained.

According to TFI, there is a better way. The first wave of outsourcing transferred OEMs' manufacturing costs from their bottom line to that of the EMS firms. Now it's time to focus on the OEM's internal management costs and the efficiencies that can be wrung out of the supplier interface.

TFI's latest benchmarking study on environmental requirements, its eighth overall, covers OEMs' performance and paths to profitable compliance. "The study's 127 OEMs graded their own companies a 'C' for keeping up with new product-focused substance and recycling legislation and regulations worldwide," says TFI president Pamela Gordon. "Our members see the business value of approaching 'design for environment' proactively, such that they are ahead of customers' and regulators' increasing requirements." 

Mike Kirschner of Design Chain Associates said that based on just-released translations of Chinese government guidance documents there is some overlap between RoHS and China RoHS, but the differences are extremely significant. For example, the requirement for product testing by domestic Chinese facilities will have significant consequences that aren't relevant to EU's RoHS. Incredibly, the deadlines are fast approaching even though many of the most basic requirements of the laws are not finalized.

This quarter's research on electronics manufacturing in India uncovered several trends: Based on a Web survey of over 400 electronics industry managers, TFI projects that the number of electronics companies selling product in India will rise by 24% in the next two years. At the same time, the number of companies manufacturing in India is likely to rise by 63% during the same period. Most OEMs and EMS providers are attracted to India by the potential for serving the local market, which differs from the typical manufacturing strategy in China. 

The question for OEMs and EMS providers alike is: Just how big is India's consumer electronics market? "That depends on your assumptions about the size of the middle class," says Bruce Rayner, TFI's vice president of research. "For most electronics goods, significant purchasing doesn't occur until household income reaches approximately $4,500 per year income level. The number of Indian households earning $4,500 a year or more today is about 18 million, or slightly less than 100 million people." Over the next five years, that figure is expected to double, he said, with dramatic consequences for the consumption of electronic goods, including cellphones, televisions and refrigerators.

Another TFI study, titled Understanding the Value of Distributor Design Service, outlined a new and comprehensive methodology allowing component suppliers and distributors to measure ROI of their design support programs. "When design occurs in one geographical region, but then production volumes move to another, the traditional business model for paying for design services breaks down," said analyst Warren Miller. "The decoupling of design chain activities from the production volume orders through globalization has created the imperative to re-think design support for components -- both commodity and sole-sourced -- and how these services are paid for." TFI has developed a model establishing a common way to measure that value, he revealed.