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SAN FRANCISCO – Look out, America. Taiwan has its eyes set on yet another of your industries.

The island nation’s EMS companies grew 35% year-on-year in 2004, 15 points faster than U.S.-based EMS firms, Deutsche Bank reported this week. The gains came even as growth rates slowed for computers and motherboards – traditionally the meat and potatoes of Taiwan’s EMS market.

According to DB analyst Chris Whitmore, this is due in part to the “successful foray” of Taiwan-based vendors into handsets, consumer electronics and servers.

Among U.S. based firms, Flextronics is best-positioned to compete, DB says.

According to MIC, Taiwanese motherboard sales have decreased by 5% year-on-year, despite a global hike of 5% in desktops. Pricing pressure in motherboards has driven Taiwanese EMS firms to source other products, including handsets and servers noted DB, citing Wistron, Asustek and BenQ. Some have even debuted their own branded products.

Wistron forecasts server sales to rise 20% and game console sales 15 to 20% this year. Wistron’s sales rose about 50% last year. Asustek has jumped into notebooks, PDA phones and traditional EMS services. BenQ has traded its ODM status for designing, building and marketing its own handsets, TVs, and other consumer electronics. (BenQ's OEM products now makes up 37% the company’s revenue.) Tatung has launched several blade servers, tablet PCs and monitors. Hon Hai has debuted its Foxconn brand of motherboards and casings.

“We expect other Taiwanese to attack the server market aggressively over the next few years, utilizing low-cost manufacturing and extending existing motherboard design capability.” North American companies that could be affected include Sanmina-SCI, Solectron, Celestica and Benchmark, Whitmore said.

DB said that Flextronics’ design and low-cost strategy puts it in best position too compete. “We continue to believe that Flextronics is the best positioned U.S.-based EMS vendor for the next 3 to 5 years as technology hardware becomes increasingly commoditized and Taiwanese contract manufacturers continue to target the US-based EMS vendors' traditional end-markets,” wrote Whitmore.

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