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EMS providers look into expanding services

Posted: 24 Apr 2012 ?? ?Print Version ?Bookmark and Share

Keywords:outsourcing? manufacturing? design service?

Electronics manufacturing service (EMS) providers have increasingly shifted and are facing more intense competition, but have yet to recognize what really drives value and growth. However, only a few firms have figured out how to implement growth strategies while maintaining stakeholders' loyalty. Smart EMS providers are identifying the best practices gained through their experience to transfer it to other services. As OEMs come to understand the value their outsourcing partners bring to the table, they also are looking for better ways to influence EMS partners.

Manufacturing has been and will continue to remain the driving force for EMS outsourcing. In 2010, manufacturing services accounted for 83 percent of revenue. Still, EMS providers are trying to brand themselves as a complete solutions partner and a true extension of their customers' business.

Design services
Radical innovations, increasing convergence, high functionality, communication and new features are driving OEMs to seek a more strategic approach to product design. OEMs are starting to make greater use of EMS providers in design services. EMS providers bring a range of benefits to OEMs in terms of ensuring smooth product design transitions from prototype, ramp-up to volume manufacturing to faster time-to-market and comprehensive cost solutions.

The primary advantage, however, is that EMS providers have amassed a wealth of knowledge and best practices through their participation with vertically integrated customers. This gives OEMs in other verticals a better understanding of the product design and the innovation needed to remain competitive. For example, connected homes are expected to merge home automation, security, smart appliances, STBs, mobile phones and patient monitoring, among other technologies. As convergence occurs, EMS providers are expected to lead joint design efforts.

As product functionality becomes increasingly integrated, using EMS design services will become critical to the success of OEMs. EMS providers are incorporating the latest designs into their products, giving clients a competitive edge. Design services for EMS providers are projected to increase from 5.5 percent in 2010 to 15 percent by 2020.

Supply chain services
Another category that is expected to see increased demand is supply chain services. In 2010, these services represented 8.5 percent of revenue for EMS providers. Revenues are projected to reach 20 percent in 2020. Several factors are driving demand for supply chain services. For starters, EMS providers have a vast network of suppliers and are able to negotiate more aggressively and source components and raw materials at lower prices.

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